EPA pursuit of pollution fines reaches 13 years

June 17, 2012 - 12:05 PM

LOUISVILLE, Ky. (AP) — A former businessman owes the U.S. Environmental Protection Agency $1.5 million for polluted oil wells in western Kentucky, in one of the largest penalties the agency has ever handed down.

Thirteen years later, the agency is still trying to get him to pay up.

Peter E. Jolly, 70 and now living in Cocoa Beach, Fla., has repeatedly cited poverty and illness and delayed court hearings while only paying $3,000 of his tab.

The former Owensboro businessman describes himself as "beyond broke," living on Social Security payments and not much else. Jolly refuses to pay, in part he says, on principle and in part because of a lack of resources.

"They spent well over a million dollars to collect something I don't have the money to pay," Jolly told The Associated Press in a phone interview.

The EPA disagrees and its lawyers accuse him of hiding his money "through a network of shadowy business affiliations, continually creating corporations and moving assets."

The fines arose from underground injection mines in Hancock County in western Kentucky. The method, also known as enhanced recovery, involves shooting water, steam or some other substance into an oil or natural gas well and using the pressure to push up some of the remaining oil and gas.

It can be profitable when oil gets above $60 a barrel, said David Dismukes, associated executive director for the Center for the Center for Energy Studies at Louisiana State University in Baton Rouge, La. As of Thursday, a barrel of oil was selling for about $83.

"After a time, a well becomes old, it needs a little oomph," Dismukes said. "This will let you go in and recover another 10 to 15 percent from the wells."

The wells become an environmental hazard when they cross paths with an aquifer that supplies drinking water. If the well isn't properly sealed and maintained, it can leak dirt, oil and gas into the water.

"Once it's contaminated, you can't clean it up," said Melissa Heath, an attorney for the EPA in Atlanta who originally pursued Jolly. "It's there forever."

In Jolly's case, his companies started working wells in the 1980s that had been productive from the 1920s through the 1950s. By 1992, the EPA informed Jolly that his wells weren't in compliance with the Safe Water Drinking Act.

The EPA charged Jolly and his companies with failing to properly care for the wells and cap them once production was finished, as well as not documenting how the wells were being monitored.

Jolly, who also listed a Las Vegas address for a time, did not respond to the EPA then, nor would he discuss the specifics of his case with The Associated Press. Instead, he dissolved the company in question, JAF Oil, after bringing it out of bankruptcy. He told a judge he sold all the assets, including the oil wells, for $1 to Strategic Investments — a company federal attorneys say Jolly controls.

The EPA levied the penalties against Jolly and his companies in 1999, after a federal judge ordered him to stop all production at his western Kentucky wells unless the EPA authorized it.

Assistant U.S. Attorney Joseph Ansari sought Jolly's phone records, saying in a motion that the oilman has been using "a shadowy network of business affiliations," in the form of companies such as "Aladdin Oil Corp." and "Snake Oil Corp.," since the fines were levied.

Jolly started with JAF Oil in California in 1977 and eventually became the sole owner. A records search by The Associated Press found Jolly involved with at least a half dozen businesses, including Energy Capital Inc., El Capitan & Pyle LLC, Montana Resources LLC, and Strategic Investments Inc., in at least three states: California, Nevada and Kentucky. Many of the companies bear names similar to other businesses, but do not appear to be associated with them.

"Basically, Pete Jolly has been operating under a number of corporations and he's slid assets between them," said Heath, the EPA attorney.

In court records and in an interview, Jolly denied owning some of the companies, while saying he sold others before any trouble began.

There are no official records, but the legal fight to collect from Jolly, who owes $500,000 and his two companies who owe equal amounts, has gone on longer than Heath can remember in more than two decades with the EPA.

"This was a pretty major penalty," Heath said. "This was a major case for this program. That's why we've pursued it so vigorously."

When backed into a legal corner, Jolly, who generally works without an attorney, has turned to delay as a tactic, frequently claiming a lack of funds to travel to court or that an illness prevents him from appearing. In a case in federal court in Owensboro in May, Jolly claimed that a "severe financial condition," as well medical treatments, would prevent him from attending a hearing on a disputed oil lease.

Judges in Kentucky and Nevada, though, have cut Jolly no slack, dismissing his claims and, at times, scolding him in rulings.

In 1999, U.S. District Judge Joseph McKinley of Owensboro upheld the EPA's penalties against Jolly and his companies, found Jolly's strategy of delaying, not responding to and blustering in other court filings "inexcusable."

"He did nothing," the judge wrote. "It is hard for the court to have any sympathy for Mr. Jolly."

Jolly, though, said he doesn't want sympathy. Instead, he wants the federal government to leave him alone.

"You punch them out, you go to jail. You shoot them, you go to jail," Jolly said. "How do you beat them? That's the hard part."

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