By BRENDA J. LINERT
YOUNGSTOWN - Facing what court documents describe as "a series of unanticipated operational and market challenges," and possibly "improperly diverted funds," a local natural gas and oilfield waste disposal company whose owner is linked to illegal dumping filed for Chapter 11 bankruptcy on Tuesday.
A?sign points out the offices of D&L Energy in Youngstown.
D&L Energy and its wholly owned subsidiary, Petroflow, filed for Chapter 11 bankruptcy protection in U.S. District Court for the Northern District of Ohio. The filing says D&L projects revenues this year of $2.2 million, and expenses of more than $5.16 million.
The bankruptcy filing notes that after allegations that then-principal of D&L Energy Ben Lupo improperly directed the dumping of oilfield waste into a storm sewer, the "debtors were forced to incur substantial cleanup costs in order to comply with federal and state authorities and various environmental regulations."
The filing goes on to say that, amid the allegations Lupo resigned from the D&L as an officer and a director, he technically retained his 80.76 percent ownership interest in the stock certificates / voting trust certificates. The only two other shareholders are Lupo's wife, Holly Serensky-Lupo, with 4.24 percent, and Susan Faith of Girard, with 15 percent ownership.
The filing also notes that "during the cleanup process and the loss of good will, it has come to D&L's attention that Faith, Lupo or others may have improperly diverted funds of the debtors to other peripheral business entities owned or operated by one or more of these individuals for little or no consideration."
The court document notes the company has begun liquidating its interest in certain saltwater injection disposal wells, but costs for the cleanup and related litigation have led to the bankruptcy filing.
Among the 20 largest unsecured claims are at least three companies that helped in the process of cleaning the oilfield waste from storm sewers on D&L Energy's property at 2761 Salt Springs Road and nearby waterways.
Court documents indicate Tom's Sewer & Drain Service of Girard is owed $631,856; Sunpro Inc. of North Canton is owed $1.5 million; and Patriot Water Treatment in Warren is owed $52,635. Huntington National Bank also has a $1.3 million lien against D&L Energy.
An affidavit signed by D&L Energy president and CEO Nicholas Paparodis notes that since the development of hydraulic fracturing technology and the discovery of oil and natural gas reserves in the Marcellus and Utica Shale Plays, D&L has become involved in marketing and selling "deep rights" to its existing oil and gas leases.
In fact, Paparodis notes that in the last two years, D&L sold portions of its deep rights to various purchasers for more than $17 million, and still owns the rights to more than 17,000 acres of real estate. He estimated the value of those rights at about $2,300 per acre.
The proceeds from the sale were used for "various purposes, including payments of outstanding liabilities and reinvestment in other assets of D&L, such as saltwater injection / disposal wells."
The company is seeking protection from creditors, and plans to file schedules and statements within the next 14 days.
Several of the companies listed as creditors in the filing, including Patriot Water, Sunpro and Tom's Sewer & Drain Service, in recent weeks have filed lawsuits against D&L Energy and Lupo seeking payment to the past due invoices for the cleanup efforts. In their civil filings they noted fears that D&L Energy would file for federal bankruptcy protection before they could collect payment.
Lupo is facing criminal charges in U.S. District Court in connection to the illegal dumping. He and a former employee of Hardrock Excavating, Michael Guesman, are each charged with one count of violating the federal Clean Water Act. They have pleaded innocent to a federal indictment.