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Companies Deny Wrongdoing in 2013 Magnolia Oil Spill

3 min read

Two subsidiaries of Delek US Holdings Inc. of Brentwood, Tennessee, have denied wrongdoing in a federal lawsuit stemming from a 2013 oil spill that released more than 5,890 barrels of crude oil near Magnolia.

The U.S. Environmental Protection Agency and the Arkansas attorney general’s office, on behalf of the Arkansas Department of Environmental Quality, sued Delek Logistics Operating LLC and Sala Gathering Systems LLC in July. The lawsuit alleged the companies violated the Clean Water Act, citing a south Arkansas spill that released nearly double the amount of crude oil than was spilled weeks later from the Pegasus Pipeline in Mayflower.

Delek’s subsidiaries are facing fines of up to $1,100 per barrel of oil spilled. But if the spill was a result of “gross negligence or willful misconduct,” the fine could be up to $4,300 per barrel.

In its answer to the lawsuit, filed in U.S. District Court in El Dorado, Delek said the oil spilled after a suction strainer failed at a pump station and tank facility in Magnolia, but it denied any wrongdoing.

“Delek US does not comment on matters that are the subject of active litigation,” the company said in a statement to Arkansas Business last week.

The company warned investors in its 2017 annual report that the U.S. Department of Justice notified Delek Logistics in June 2015 that it was “pursuing an enforcement action on behalf of the EPA with regard to potential Clean Water Act violations” from the 2013 oil spill at its Magnolia Station. “We are currently attempting to negotiate a resolution to this matter with the EPA and the ADEQ, which may include monetary penalties and/or other relief,” the company’s filing with the Securities & Exchange Commission said.

The company also said it had experienced an oil spill near Fouke (Miller County) in April 2015.

The ADEQ told Arkansas Business last week that a pipeline burst, contaminating soil and nearby waters.

A May 2015 report by ADEQ said, “No amount of released oil could be given at the time.”

Delek’s Magnolia Station is an oil storage, transfer and pump station. Delek’s pipeline network moves oil from oil production and other facilities in southern Arkansas and northern Louisiana to the Magnolia Station.

From there, the oil is transported to a refinery in El Dorado, which is owned by an affiliate of Delek, according to the lawsuit.

Delek Logistics and Sala can monitor and control the Magnolia Station from a control center in El Dorado, the lawsuit said.

On March 8, 2013, operators in the El Dorado control center shut down one pump and started another one at the Magnolia Station.

“Sometime after this stop-start sequence, an underground strainer upstream of Pump No. 6 ruptured,” the lawsuit said. “The strainer was more than 60 years old, and at the rupture point, heavily corroded.”

Oil flowed out of the strainer and pooled in a small containment pond, the lawsuit said.

The oil spread out of the pond into a drainage ditch beyond the boundaries of the facility, and from the drainage ditch into an unnamed creek and then to the Little Cornie Bayou, the lawsuit said.

About 3.5 miles of the unnamed creek and Little Cornie Bayou were “impacted,” according to the suit.

The lawsuit also is seeking to penalize the companies up to $37,500 per day since Jan. 12, 2009, for not having a Spill Prevention, Control & Countermeasure Plan for the area where the spill of 10.4 million gallons of crude oil occurred.

In addition, the companies could face a $25,000-per-day penalty for violations of the Arkansas Hazardous Waste Management Act in connection with the removal of the contaminated waste.

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