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Breaking: Authorities Say Heating-Oil Firms Sold Diluted Fuel; Lawsuits Filed

Frank Lovece in Building Operations on March 21, 2013

New York City, Manhattan, Brooklyn

March 21, 2013

City, state and federal authorities on March 12 raided the delivery company Statewide Oil and Heating in Brooklyn, The New York Times said today, and four interrelated companies that deal in waste oil: County Oil Company and J.B. Waste Oil Company in Astoria, Queens; New York Oil Recovery Corporation in Brooklyn; and Paradise Heating Oil in Ossining, N.Y.

On Friday, two real-estate concerns — Madison Management of Queens and The Related Companies affiliate Carnegie LP — sued Hess Corp., one of the world's largest energy companies, alleging it colluded to sell heating oil diluted with used automobile oil and other waste products and sold it as No. 4 or No. 6 heating oil, reported Crain's New York Business. Then on Monday, three firms who own a residential building in Inwood and two office buildings in midtown Manhattan, respectively, sued the fuel-oil distributor Castle Oil Corp., alleging similarly, the magazine said.

The Oil Companies Respond

"We reject the allegations of the suit," a spokesman for Hess told Crain's. "We'll defend vigorously against it. It is our policy not to blend heating oil with used oil, and require independent contract carriers to abide by that policy, and we received written assurances to that affect."

He continued, "Any blending done by carriers would be a breach of that contract. We intend to investigate this matter and would consider using other carriers while this issue is being resolved."

Castle Oil also denied the charges. "Every day the laboratory at our bulk plant in The Bronx does an analysis of the product leaving the terminal," Michael Meadvin, senior vice president and general counsel, told the magazine. "Everything coming out of the terminal complies with the legal specifications of the product involved. It's all 100% legal."

Lawyers for Statewide and for County Oil and its related companies denied wrongdoing and told the Times they were cooperating with the inquiry.

Waste oil contains hazardous materials such as metallic residue from engine parts, which can damage boilers and the environment. "Boilers set up for 4 or 6 operation can burn the stuff," Michael Scorrano, managing director at the energy-services company En-Power Group, told Habitat. "The problem is that because the oil is not necessarily uniform, the boilers won't burn as efficiently and may be subject to smoking and sooting. The problem long term is if there's a lot of stuff in the waste stream, like metal parts or other things not strained out, you cold see clogging of he filters, the fuel liens and the nozzles that could affect operation of the boiler itself. The fuel lines would have to be cleaned and the tank cleaned with a higher frequency."

The civil suits claims the oil companies combined varying percentages of waste oil at a third-party site and hired a delivery company to bring the tainted fuel to buildings.


Updated March 22 to add Scorrano comment.

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