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Federal prosecutors seek prison time for ND oil operator who endangered water sources

BISMARCK — Federal prosecutors are seeking prison time for a man they say endangered drinking water sources by illegally operating an oilfield saltwater disposal well near Dickinson, N.D., and then attempting to cover up his environmental crimes.

But a defense attorney for Jason Halek argues in court records that probation and home confinement is the right punishment, referring to the situation as a permit violation.

Halek, of Southlake, Texas, is scheduled to be sentenced Monday, Nov. 27, in U.S. District Court in Bismarck after he pleaded guilty in April to three felony counts of violating the Safe Drinking Water Act.

The case involves a saltwater disposal well that Halek Operating continued operating in early 2012 even after state regulators ordered wastewater injections to stop because the well was not in compliance with environmental rules.

Prosecutors for the U.S. Department of Justice Environmental Crimes Section say in court documents that Jason Halek directed an associate to move a safety device within the well, known as a "packer," to deceive inspectors. He then covered up his illegal conduct with false statements and failed to fully comply with a grand jury's subpoenas, prosecutors say.

"In short, Halek willfully violated laws designed to protect the public's drinking water and, thereafter, took active steps to hide his criminal acts," prosecutors wrote.

Before Halek came to North Dakota, he was accused by the U.S. Securities and Exchange Commission of fraudulently selling investments in Texas oil and gas projects, raising $22 million from at least 300 investors nationwide.

Prosecutors allege that a judgment from the SEC requiring Halek to pay back his ill-gotten gains provided a motive for him to try to get rich quick in North Dakota at the expense of environmental laws.

"Halek's dire financial situation, along with his greed, and disregard for the law, drove his decision to illegally operate a disposal well in North Dakota and deceive government officials," prosecutors wrote.

Federal sentencing guidelines call for Halek to serve 24 to 30 months in prison, and federal prosecutors argue in court records that he should receive a high end of that range. The prosecutors also cite previous environmental violations with Halek's dealings in Texas.

Stephen Foster, trial attorney for the Environmental Crimes Section, declined to comment.

Defense attorney Alexander Reichert says in court records that prosecutors are attempting to "perform a character assassination" of Halek rather than sticking to the facts of the North Dakota case.

Reichert points out that, though there was potential for harm to the environment, no environmental damage occurred.

"It appears the United States is attempting to use Halek as its 'poster child' for the conduct that occurred in this case for 'general deterrence,'" Reichert wrote.

Reichert did not return two calls this week seeking comment.

Nathan R. Garber, Kalispell, Mont., who pleaded guilty in 2014 to federal charges related to the operation of the well, also will be sentenced on Monday. Federal prosecutors allege in court documents that Halek directed Garber to commit the violations.

Defense attorneys for Garber recommend in court documents a sentence of home confinement not exceeding four months, with work release privileges, in combination with probation and community service.

Garber also pleaded guilty to a criminal charge of violating the rules of the North Dakota Industrial Commission in state court and received a two-year suspended sentence and a $2,500 fine. Halek was not charged with a crime in state court.

The illegal injections of saltwater into the well posed significant risks to water sources, but state regulators are not aware of any contamination that occurred, said Lynn Helms, director of the Department of Mineral Resources.

Monday's sentencing hearing may pave the way for North Dakota regulators to plug and reclaim the abandoned well, Helms said. The state has requested but not yet received information from the Environmental Protection Agency investigation that might affect how the well is plugged, he said.

The state estimates it will cost $135,000 to plug and reclaim the well, court records say. Helms said he hopes restitution is ordered to cover those costs.

In 2012, the North Dakota Industrial Commission issued a civil complaint against Halek Operating and a $1.5 million fine. The commission has not been able to collect the fine, and Helms said he thinks it's unlikely the agency ever will. The state confiscated about $140,000 in bonds from Halek Operating.

The Halek case changed the way North Dakota regulators do background checks on new operators. Now, state regulators check for criminal history and investment issues for new operators, as well as a company's officers and directors, Helms said.

In 2010, when Halek Operating applied for a permit to drill in North Dakota, regulators only checked the operator's compliance record with North Dakota environmental rules, Helms said.

North Dakota also has since increased bond amounts for wells from $20,000 to $50,000 per well, in part due to the Halek case, Helms said. Bond amounts can be set even higher if regulators think the operator may be a risk.