The Ohio Oil and Gas Commission ruled Friday that D&L Energy shared responsibility in its sister company’s decision to dump tens of thousands of gallons of oil field waste into the Mahoning River in January.
D&L went before the commission in May to argue against a decision made by Richard J. Simmers, chief of the Ohio Department of Natural Resources’ Division of Oil and Gas Resources Management. Simmers in February revoked six injection-well permits, denied applications for three others in the state and suspended D&L’s waste storage and disposal business.
That decision came after a state and federal investigation revealed that Ben W. Lupo, the former owner of D&L, instructed an employee of Hardrock Excavating — a company that Lupo also owned — to dump a mixture of oil and brine down a storm drain at the companies’ shared headquarters on Salt Springs Road in Youngstown.
The waste made its way into a tributary that fed into the Mahoning River. Lupo and his employee, Michael P. Guesman, both were charged with violating the Clean Water Act. They have since pleaded not guilty.
The commission, an independent body of review that hears arguments against decisions made by ODNR’s Division of Oil and Gas Resources Management, released its 26-page ruling after nearly a month of deliberations. The decision to uphold the division’s decision and permanently revoke D&L’s operating permits essentially terminates the company’s business in Ohio’s waste disposal industry.
D&L will have the opportunity to appeal the commission’s ruling to Franklin County Common Pleas Court, but it is unclear if it will do so. Michael A. Cyphert, the attorney who represented D&L during the hearing, could not be reached to comment late Friday.
Since it first appealed ODNR’s decision in March, D&L argued staunchly that it could not be held responsible for Hardrock’s actions, even though both companies were owned by Lupo at the time.
But the commission found otherwise in its ruling — one that was met with little surprise from lawmakers, environmentalists and the oil and gas industry.
“The law is clear; the responsible party is the owner,” said Jack Shaner, senior director of legislative and public affairs for the Ohio Environmental Council. “We’re thrilled with the decision, and we expected it. Let this send shock waves throughout the industry to show that any scofflaws will be held accountable.”
The commission based its decision on three factors.
First, it determined that Lupo had a basic corporate responsibility in the actions of both Hardrock and D&L.
“Mr. Lupo also authorized this dumping to occur on property owned by D&L Energy,” the commission wrote. “Therefore, this decision would not have been taken lightly. Mr. Lupo cannot feign ignorance of his responsibilities to D&L Energy in authorizing such a dumping to occur on D&L’s property.”
Second, D&L had asserted that its injection business could not benefit financially from dumping down a storm drain the material with which it makes money. Injection wells generate money by disposing of oil field waste for operators.
But the commission poked a hole in that argument and deemed it baseless by pointing out that the material dumped was heavy and laden with sediment that required costly treatment before injection or disposal.
“The dumping of oil-based muds into the storm sewer allowed D&L to dispose of mud-laden water without compromising the capacities of its injection wells,” wrote the commission. “[This] allowed D&L to dispose of this material without the effort and expense of drying out, treating, transporting and depositing this material at a landfill facility.”
Finally, the commission also found that customers never dealt independently with the multiple companies working under the same ownership at D&L’s headquarters on Salt Springs Road. Commission members drew a strong link between the operations of each. Shawn Bennett, a spokesman for the oil and gas industry outreach group Energy InDepth, commended Friday’s decision and said he was not at all surprised by the commission’s findings.
“At the end of the day, this shows that our current regulatory structure works,” he said.
Hardrock did not choose to appeal the division’s decision to revoke its brine-hauling permits.
D&L manages and operates 580 oil and gas wells throughout Ohio and Pennsylvania, but its operations and profitability have been severely curbed since the dumping incident.
In April, the company filed for bankruptcy, and the commission also revealed Friday that D&L was delinquent in paying required brine-disposal fees to the state at the time the hearing took place. It also failed to submit its annual report in 2012, which violates state law.
“It’s the right and correct thing to do — it’s a responsible decision. If Senate Bill 46 is passed, it would give this more backing,” said state Sen. Joe Schiavoni of Boardman, D-33rd, referring to legislation he’s co-sponsoring to increase dumping-related penalties. “That will provide stable ground against future perpetrators. I’m glad [the commission] did what they did.”