Levying the largest civil penalty ever -- $1.5 million -- for an oil and natural gas violation, the North Dakota Industrial Commission (NDIC) last Wednesday found a small operator, Halek Operating ND LLC, guilty of violating state standards for disposing of salt water, a byproduct of oil production, in an injection well.
The record-setting penalty comes following a complaint filed against Halek last year by NDIC's Lynn Helms, director of the state Department of Mineral Resources (DMR), which oversees the oil/gas industry. A DMR spokesperson confirmed the record penalty against Halek but declined to go into detail on a still-pending criminal case the state has brought against Nathan Garber, CEO of Executive Drilling, which purchased Halek's targeted wellsite last year.
Garber and his Executive Drilling allegedly bought the well where the violations occurred some time in January-February 2012. "That is why the civil case flows into the criminal case, and we cannot say anything about the criminal case because it is still pending and may result in a jury trial," the DMR spokesperson told NGI's Shale Dailyon Monday.
The criminal case was filed by the state in a district court in Stark County, ND, as an extension of the now concluded civil case that was originated by Helms' complaint filed with the NDIC July 12, 2012. The complaint found Halek had an improper salt water disposal well, and it was used by the operator after it was ordered to stop its use.
"They then tried to modify the well, allegedly trying to hide any of the improper injections," the DMR spokesperson said. "That is what the civil case was about. There was no settlement; the $1.5 million is what Halek has been fined."
The Environmental Defense Fund (EDF), which monitors practices in many of the major shale plays around the country, praised Helms and the NDIC's handling of the case, attributing the large penalty to Helms' leadership "in taking the necessary steps quickly to protect the water resources of North Dakota."
An EDF spokesperson said that criminal penalties ultimately may be appropriate because "gross violations of public trust should be met with zero tolerance."
In ordering the $1.526 million civil penalty, the NDIC said both the evidence and Halek's admissions proved the violations. "The evidence further shows that these are egregious violations causing considerable risk of contaminating underground sources of drinking water in North Dakota." Further, the three-member commission said there was "some evidence" that Halek continued to be involved in the well's operations after its Jan. 23, 2012 purchase agreement to sell the well to Garber at Executive Drilling.
At that point, the NDIC had not approved the transfer of the ownership to Garber, although the commission found that Halek allowed Garber to take over operations prior to the approval to do so.
NDIC is made up of three statewide elected leaders in North Dakota: Gov. Jack Dalrymple, Attorney General Wayne Stenejem, and Agricultural Commissioner Doug Goehring.