Hey everyone. It has been an exciting week for me, starting my internship at the UNDP. Lots of great people there working on some of the most pressing issues facing the world today (and looking forward into the future).

As for the blogging schedule, it will be as follows: Transparency Thursday, Friday Economic Outlook, Saturday Conflict Watch. No more sports analysis for now, as I need a little personal time, and I feel that quality unbiased sports analysis is readily available from a number of sources.

Also, between all the topics covered here at NN, sports was always the one that didn’t really fit in with the rest. Maybe one day I’ll get back to it, and certainly if there is an important enough story in sports it can crack the Transparency Thursday rotation, but for the foreseeable future that will be the schedule.

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Back to the story at hand; a recent report from the NYT highlighted a criminal suit brought against some of New York’s biggest heating oil providers for illegally “cutting” heating oil with recycled or waste oil. “…companies that in recent years have sold tens of millions of gallons of oil to New York City and New York State for schools, housing complexes, universities, hospitals and other buildings.”

“As part of the criminal investigation, the authorities on March 12 raided at least five heating oil businesses in and around the city, including a delivery company and several businesses that deal in waste oil and some that are licensed to recycle it.”

“The businesses that were raided last week as part of the criminal investigation included Statewide Oil and Heating in Brooklyn — a company that is among several that deliver oil for Hess and that until 2011 delivered for Castle — 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.

During the raids, investigators from several state, city and federal agencies — some wearing bright yellow head-to-toe protective suits — tested oil and seized computers, reams of records and other materials, carting away more than 100 boxes of documents from one company alone, according to officials and people briefed on the matter.”

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The criminal case coincides with a civil case brought against two of New York’s largest private heating oil providers: “Several commercial and residential building owners filed the two lawsuits, seeking class-action status. One accuses Castle Oil Corporation, which describes itself as the largest independent fuel oil distributor in the metropolitan area, of defrauding customers by mixing its fuel with waste oil. The other accuses Hess Corporation, among the world’s leading energy companies, of delivering fuel oil blended with waste oil to its customers, but one of the lawyers who brought the suit said in court last week that Hess might have been victimized by a trucking company or companies that it hired to deliver oil.”

“Last year alone, Castle sold more than 20 million gallons of No. 4 and No. 6 fuel oil — the grades burned in older furnaces — to New York City agencies, an official said. The lawsuit claims it was mixed with waste oil, like motor oil that has been used and discarded, sludge residue from commercial boilers and other used oil and lubricants.”

“But Castle, in its court papers, argued that the lawsuit’s contention that it mixed its fuel with waste oil was based on a single test of one delivery that it made last year out of 108,000, and that the suit provides no details on who conducted the test or how it was performed.”

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Selling recycled waste not only is cheating customers by selling them an inferior product, it also poses significant health and environmental risks:

“Burning waste oil in furnaces could present a significant environmental hazard, and if the accusations that the companies cut their fuel are correct, it would mean that dangerous amounts of toxic pollutants had been released into the atmosphere, experts said.”

“Robert F. Kennedy Jr. — a senior lawyer for the Natural Resources Defense Council, the president of Waterkeeper Alliance and one of the lawyers who brought the lawsuit against Castle — said the environmental impact of the company’s actions were stark.

‘Basically, that company has turned every boiler or furnace that it services into a toxic-waste incinerator, ’Mr. Kennedy said in an interview. ‘When you burn waste oil, there is a tremendous amount of not only benzene, toluene and xylene, which are known carcinogens, but in addition, there is an inventory of heavy metals that are extremely toxic, including mercury, lead, arsenic, cadmium, antimony and zinc.’”

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First, I would like to address Castle’s claim that the suit “was based on a single test of one delivery that it made last year out of 108,000”. The way I see it, there are only two possible scenarios which make sense here.

A)     There was a false positive on this one test, meaning Castle is indeed being wrongfully accused.

B)      Castle has been mixing in recycled / waste oil into their heating oil—systematically. It makes little sense that one shipment would be “cut”, as the oil is likely processed in huge quantities.

Of course this is all speculation until more details come back on the failed test. But is logical to assume either none of the oil is cut or all of it is.

Secondly, we will address the difference in the two cases. Presumably, the civil case is brought based on evidence that these 2 companies (Castle and Hess) had been involved in the process of selling “cut” oil to private customers. Whoever purchased the oil would have to bring a civil suit against the private companies. If enough people were affected, the case could turn into a “class-action lawsuit”.

In a criminal case, the government brings action against a party.  If cut oil was sold to schools or other public institutions, then it would be a crime against society as a whole. The criminal case makes sense as the victim in this case would be the government and ultimately the taxpayers. Add in the elements of environmental and healthcare concerns, which are regulated by the government, and a strong criminal case begins to form.

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These two cases are both in early phases, so we will have to stay posted to see what comes of them. There are moral and ethical, as well as legal implications for misleading customers. The negative publicity from even being under investigation is likely already hurting these companies. Factoring in potential health and environmental degradation, it would not be surprising if ultimately these companies were forced to pay huge fines. Additionally, I would not be surprised to see stricter industry oversight in the future.

As the price of oil has risen, it seems the quality from some providers may be going down. All the most reason for people to consider more environmentally friendly and transparent forms of energy, such as geothermal and solar.