D&L Energy Inc. likely has avoided having to pay up to $37,500 a day in penalties to the U.S. Environmental Protection Agency that might result from failure to meet Monday’s deadline to file a progress report on the cleanup of the oil-field waste spilled Jan. 31 into a Mahoning River tributary.
That’s because U.S. Bankruptcy Judge Kay Woods ordered Friday that Enviroscience, the Stow-based environmental consulting firm that oversaw the cleanup, must complete and deliver the report to the federal EPA on Monday and that D&L will pay it $10,000 immediately for that service.
Ben Lupo, 62, of Poland, who owns 81 percent of D&L, has pleaded innocent to a criminal charge that he violated the federal Clean Water Act by ordering the discharge of brine and oil-based drilling mud into a storm drain flowing into the river’s tributary near D&L’s Salt Springs Road headquarters in Youngstown.
Citing the high cleanup cost and decreased business stemming from post-spill reputation damage, D&L filed for Chapter 11 reorganization bankruptcy protection Tuesday.
“It’s very crucial that we’re not subjected to $37,500 in fines on a daily basis,” testified Nicholas C. Paparodis, D&L’s president, during a daylong initial hearing in the case before Judge Woods.
D&L said in a court filing that imposition of such civil penalties would have “a devastating effect” on its continued operations.
“We’re the solution here — not the problem,” Bruce Lowe, Enviroscience’s lawyer, told the judge. “My client didn’t cause this problem, but the debtor [D&L] asked us to fix it,” he said, adding that his client seeks only to be treated fairly during the bankruptcy.
Enviroscience had quit working for D&L last week because of D&L’s nonpayment of Enviroscience’s invoices and said it would not complete the 500- to 600-page report unless its bills were paid, according to James Krejsa, Enviroscience executive vice president.
D&L owes Enviroscience $123,000, according to a list of creditors that accompanied D&L’s bankruptcy filing.
For monies owed for work performed before the bankruptcy filing, D&L will be paid in the same manner as the unsecured creditors, and any additional monies it is owed after that date will be treated as an administrative claim to be paid by the bankruptcy estate, said Kathryn A. Belfance, D&L’s Akron lawyer.
Belfance told the judge D&L has assets of $50 million and liabilities of $10 million, and that she expects all creditors will be paid in full.
Krejsa testified that the report to the EPA is 50 percent to 60 percent complete and that his firm’s staff could perform the 40 to 50 man-hours of work needed to complete it over this weekend.
Krejsa said his firm and D&L had an informal arrangement under which Enviroscience would bill D&L every Friday and D&L was to pay each bill early the following week.
Paparodis testified that last month’s temporary restraining order barring D&L from selling its assets, which came from Judge John M. Durkin of Mahoning County Common Pleas Court, prevented D&L from paying its bills.
That order came in response to a lawsuit by Sunpro Inc., a North Canton environmental cleanup company, to which D&L owes $1.5 million.
D&L owes another cleanup company, Tom’s Sewer and Drain Service Inc. of Girard, $631,856; and Huntington National Bank has a $1.3 million lien against D&L.
Founded in 1986, D&L has 18 employees, 580 operating oil and gas wells in Northeast Ohio and northwest Pennsylvania and 21,000 acres under oil and gas drilling leases.
On Feb. 6, the Ohio Department of Natural Resources ordered D&L to cease all injection-well operations statewide and storage operations at the company’s headquarters.
In other actions Friday, Judge Woods issued orders barring utilities from disconnecting service to D&L and allowing D&L to meet its employee benefit costs and its $35,000 biweekly payroll. Utility bills total $3,960 monthly, D&L said in a court filing.
The next scheduled bankruptcy court hearing in this case will be at 10 a.m. May 14.