Company hasn't paid $1.5M state fine for ND oil wastewater violation; feds now investigating

It's been two years since state regulators touted a record $1.5 million fine against a company for illegally dumping 20,000 barrels of toxic liquid and threatening drinking water supplies near a large western North Dakota city, and little has changed. The now-dissolved company is under federal investigation, the penalty is unpaid and the affected site is still contaminated.

Environmental groups are calling for more federal oversight of North Dakota's exploding energy development, saying that the state has done practically nothing to penalize the company and that the illegal dumping near Dickinson wouldn't have happened if state regulators were required to do due dillgence. A simple Internet search would have revealed that the company's owner had a criminal past long before wells were drilled in North Dakota, they say.

Meanwhile, state officials say the Stark County site doesn't pose a threat to drinking supplies, and that the entire fine may never be collected. Court records show that federal officials have been investigating the incident since at least November, when a search warrant was issued to inspect the site.

Authorities in late July 2012 fined Halek Operating ND LLC of Dickinson for putting drinking water at risk by illegally dumping more than 800,000 gallons of salty, oilfield wastewater into a former oil well and then attempted to cover up the crime.

Administrative Law Judge Allen Hoberg called it "among the most egregious violations ever pursued" by state regulators, resulting in the state's largest regulatory penalty. It was the first time anyone had been prosecuted for breaking those laws, and regulators said it sent a strong message about the state's stance on protecting the environment.

U.S. Attorney Timothy Purdon confirmed this week that the Environmental Protection Agency, the U.S. Justice Department and the U.S. Attorney's office are conducting a federal criminal investigation into Halek Operating and its owner, Jason Halek, 40, of Southlake, Texas. Purdon declined to comment further.

Telephone calls by The Associated Press to a listing for Halek at his home in Texas were not answered this week.

Halek had been under the scrutiny of North Dakota regulators for an improper cleanup of an oil leak near Dickinson in 2011. The company faced more than $588,000 in fines but was ordered to pay less than 10 percent of that.

And a year earlier, Halek was ordered to pay $26.6 million in a scheme that bilked investors in a Texas energy project, according to David Peavler, associate regional director for the Securities Exchange Commission in Fort Worth. That hasn't been paid either, Peavler said.

Halek also has been charged in a subsequent scheme that alleges he and others also swindled investors, and a trial on those charges likely will occur next year, Peavler said.

North Dakota Attorney General Wayne Stenehjem said it's doubtful the state will ever collect the entire fine assessed to Halek Operating, but that it is trying. The state has recovered two $20,000 bonds posted by Halek to date, he said.

"The key thing is this guy is not doing business again in North Dakota and that's a good thing," Stenehjem said. "We are not going to tolerate this."

Stenehjem said the state did not pursue charges against Halek at the time because "we just didn't feel we had enough proof against him personally."

Background checks are not required for people who apply for drilling permits in North Dakota. Sierra Club spokesman Wayde Schafer says they should be: "A bad player somewhere else is probably going to be a bad player here. Those aren't the companies we want in North Dakota because the potential for harm is so great."

Halek's oil well where the illegal saltwater was dumped was a "dry hole" when it was drilled in about four years ago — a rarity in North Dakota. State and industry officials say 99 percent of rigs in the Bakken formation hit oil.

Companies commonly dispose of the oil production byproduct by injecting it in an approved underground facility. Halek admitted illegal dumping in court records but said that his company had transferred ownership to Executive Drilling when the most egregious infractions occurred and therefore wasn't at fault. Executive Drilling President Nathan Garber, whom authorities say ordered the dumping, was later fined $2,500 and given two-year suspended jail term.

The cleanup, which will be paid for with oil company fees, is on hold until after the federal government completes its investigation, officials said.

Don Morrison, executive director of the Dakota Resource Council, an environmental-minded landowner group, says it's time the federal government has a role in regulating the state's oil business, especially given the unpaid fine.

"In reality, it was barely a slap on the wrist and it sent a clear message what companies can get away with in North Dakota," he said.