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D&L Energy Appeals Shutdown of Injection Wells

D&L Energy Inc. has filed an appeal with the Ohio Oil and Gas Commission, asking it to overturn the Ohio Department of Natural Resources' (ODNR) decision to revoke six of the company's permits, deny three permit applications and order a halt to all temporary storage operations near Youngstown, after oilfield waste was illegally dumped into waterways near Youngstown in late January.

Meanwhile, court documents show that D&L's CEO, Ben Lupo, has so far entered "not guilty" pleas to a charge that he violated the federal Clean Water Act (CWA) by allegedly ordering an employee of Hardrock Excavating LLC to dump the waste into a storm drain that empties into an unnamed tributary of the Mahoning River (see Shale Daily, Feb. 19).

Michael Cyphert, an attorney with the Cleveland law firm Walter & Haverfield LLP, filed the appeal on D&L's behalf on Monday. The company argues that Richard Simmers, who serves as Chief of the ODNR's Division of Oil and Gas Resources Management, erred when he meted out the punishment against D&L because a Hardrock employee, not a D&L employee, allegedly performed the illegal dumping on Jan. 31.

"[Simmers'] order was issued after employees of another company, not D&L Energy, located at the same business address caused pollution, not through injection wells, but by releasing frac tank contents to a storm sewer," the company said. "Although other companies and their employees are the responsible parties, D&L Energy has voluntarily undertaken all cleanup requested by the state and federal on-site coordinators to remedy any pollution resulting from the actions of others at its own cost amounting to almost $1 million."

On Feb. 6, Simmers revoked D&L's permits to operate six saltwater injection wells in the state: Northstar Lucky No. 4, Northstar Collins No. 6 and Mohawk No. 7 in Mahoning County, Koontz No. 1 and Northstar United No. 2 in Trumbull County, and Parobek No. 2 in Ashtabula County. Simmers also denied D&L's permit applications for three additional saltwater injection wells -- two in Trumbull County and one in Mahoning County -- and ordered the company to immediately cease all injection well operations in the state. He also ordered D&L to halt all temporary storage operations at its Youngstown facility within 45 days.

Simmers' order states that the Jan. 31 incident "took place at the single address listed for a number of companies, including D&L Energy Inc., Mohawk Disposal Management LLC, Hardrock Excavating LLC and B&B Tanks. All of these companies are directly connected to Ben Lupo."

A grand jury in U.S. District Court for the Northern District of Ohio has indicted Lupo, Hardrock, and one Hardrock employee, Michael Guesman, with one count of violating the CWA, specifically that pollutants were discharged without a National Pollutant Discharge Elimination System (NPDES) permit.

Court records show that in mid-February, Lupo waived his right to a preliminary examination hearing. The three defendants in the case, United States of America v. Lupo et al (No. 4:13CR113), are scheduled to be arraigned at 9:30 a.m. on March 15, with Judge George Limbert presiding. Lupo, 62, is being represented by Joseph Gardner, an attorney based in Canfield, OH.

The indictment said the illegal discharges began on or around Nov. 1, 2012, and occurred "on numerous occasions" over the next several months. It alleged that Lupo ordered Guesman to empty the oilfield waste into the storm drain "only after no one else was at the facility and after dark."

According to the U.S. Attorney's Office for the Northern District of Ohio, the statutory maximum sentencing guidelines for violating the CWA for individuals is three years in prison, one year of supervised release and a fine of $50,000 per day of violation or $250,000, whichever is larger. For corporations, the statutory maximum is five years of probation and a fine of $50,000 per day of violation or $500,000, whichever is larger.

In a statement on Feb. 28, Ohio Attorney General Mike DeWine said the state would also pursue charges against Lupo and the other defendants. "We will continue to assist in the federal prosecution of this case, but we will also pursue with the ODNR any other violations of Ohio's environmental protection laws," he said. "This case is a reminder that we should look at making state law equal to federal law when it comes to protecting the waters of Ohio."

One year ago, D&L was at the center of another controversy after a dozen small earthquakes hit the Youngstown area. An investigation by the ODNR found that the earthquakes may have been caused by a Class II injection well in Youngstown owned by D&L (see Shale Daily, March 12, 2012; Jan. 5, 2012). The well remains offline and depressurized.

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