Pelican Refining

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RECEIVED USOC, WESTERN DISTRICT OF LA TONY R. MOORE CLERK �

DATE

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVISION

UNITED STATES OF AMERICA

CRIMINAL NO. 2:11-cr-00227 JUDGE HAIK

v.

PELICAN REFINING COMPANY, LLC

MAGISTRATE JUDGE HILL

PLEA AGREEMENT A.

INTRODUCTION

1.

Pursuant to Federal Rule of Criminal Procedure 11(c)(l)(C),this document contains

the complete Plea Agreement between the United States Attorney's Office for the Western District of Louisiana and the U.S. Department of Justice's Environmental Crimes Section ("United States'' or the "Government"), and Pelican Refining Company LLC (the "Defendant"). B.

OBLIGATIONS OF THE DEFENDANT

1.

The Defendant waives grand jury presentment of Counts 1-3, agrees that the Joint

Factual Statement that appears as Appendix I to this plea agreement is a true and accurate statement of its criminal conduct. The Defendant shall appear in open court and plead guilty to the Counts 1-J of the pending Criminal Bill of Information charging it with the following environmental crimes: Count 1:

The Defendant knowingly violated the Clean Air Act,in violation ofTith! 42, United States Code, section 7413(c)(1), by knowingly violating a pe:rmil: issued by the State of Louisiana Department of Environmental Quality for the Pelican Refinery in Lake Charles, Louisiana, during the period August 1 ,, 2005 through July 1,2006.

Count 2:

The Defendant knowingly violated the Clean Air Act,in violation ofTitle;: 42, United States Code, section 7413(c)(1), by knowingly violating a penni: issued by the State of Louisiana Department of Environmental Quality for tlw Pelican Refinery in Lake Charles,Louisiana,during the period July 2, 2006, through March 1, 2007.

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Count 3:

2.

Defendant knowingly and willfully obstructed justice in violation ofTitle 18, United States Code, section 1519, by knowingly and willfully making false statements, using false records, and concealing information in documents in a matter within the jurisdiction of the Executive Branch.

The Defendant shall appear at the plea and sentencing hearings through a duly

authorized representative acceptable to the Government. 3.

Defendant affirms and agrees that it is authorized to enter into this Agreement and

to bind itself, successors, and assignees to the terms of payment of the proposed criminal fine and the Environmental Compliance Plan attached hereto as Appendix II of this Agreement. At the time of signing of this P lea Agreement by the Defendant's representatives, Defendant shall provide the Government with a written statement of its owners certifying that the Defendant is authorized to enter into and comply with all terms ofthis Agreement. The written statement shall further identify and certify that the Defendant and Defendant's owners have authorized the undersigned representative to take these actions and that all formalities for such authorization have bet::n observed. 4.

The Defendant recognizes, through its authorized representatives, that the Unite:d

States has agreed not to prosecute all of the potential criminal conduct that it believes is established by the evidence as committed by the Defendant solely because of the promises made by the Defendant in this Plea Agreement. Accordingly, ifthe Defendant fails to comply with any provision of this Agreement, the United States may pursue all legal and equitable remedies available under the law, including charging uncharged violations. The Defendant understands and agrees that no such breach by it of any obligation under this Plea Agreement shall give rise to grounds for its withdrawal of its guilty plea. The Defendant understands and agrees that should any breach of this Agreement occur, the United States will have the right to use against the Defendant before any grand jury, at any trial, hearing or for sentencing purposes, any statements made by its employees and

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agents, and any information, materials, documents, or objects provided by the Defendant to the Government pursuant to this Agreement. 5.

Defendant' s plea will be tendered pursuant to Rule I l(c)(l)(C) of the Federal Rules of

Criminal Procedure. I f the sentencing Judge rejects this Plea Agreement, then Defendant will be given an opportunity to withdraw its Plea and any statements made by Defendants, through its employees, officers or representatives wil l be withdrawn from consideration. Defendant hereby waives any defense under any statute of limitations or the Speedy Trial Act for I 20 days and following the Court's rejections of this agreement except to the extent that such defenses existed at the date of the signing of this Plea Agreement. The Defendant stipulates that such a defense do,es not exist if a tolling agreement was in force, this paragraph extends that tolling agreement from signing ofthis Plea Agreement through withdrawal/non-acceptance and then adds another 120 day:s. 6.

In the event that Defendant's plea and this Agreement are accepted by the Court, the

Defendant waives any and all constitutional and non-jurisdictional defects, including venue and the statute of limitations for any charges set forth in the Bill of I nformation. The Defendant further waives any defense to any charges which it might otherwise have under any statute of limitations, pre-indictment delay, or Speedy Trial Act for one hundred and twenty (120) days following any breach of this Agreement or if its plea is withdrawn or not accepted, except to the extent that any such defenses existed as of the date of the signing of this Agreement. The Defendant stipulates that such a defense does not exist if a tolling agreement was in force at the time of signing. In essence, if such a tolling agreement was in force, this paragraph extends that tolling agreement from signing of this Plea Agreement through withdrawal/non-acceptance and then adds another 120 days.

7.

The Defendant knowingly waives all rights, pursuant to 28 U.S.C. § I291, or

otherwise, to appeal its conviction. The Defendant knowingly waives all rights pursuant to 18

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U.S.C. § 3 742, or otherwise, to appeal whatever sentence is imposed, except that the Defendant retains the right to appeal an imposed sentence to the extent that it exceeds the statutory maximum. C.

OBLIGATIONS OF THE UNITED STATES

I.

If t he Court accepts this Agreement pursuant to Federal Rule of Criminal Procedure

l l (c)(l )(C), and the Defendant completely fulfills all of its obligations and agreements under this Agreement, then the United States agrees that it will not prosecute the Defendant in the Western District ofLouisiana for any other offense, which is known to the Government at the time of the last Government's representatives' signing of the Plea Agreement, based on the investigation which forms the basis of the Criminal Bill oflnformation. Defendant understands and agrees that neither this paragraph nor this Plea Agreement limits the prosecuting authority of any sections of the Department of Justice (other than the U.S. Attorney' s Office for the Western District ofLouisiana and the Environm,�ntal Crimes Section), including the U.S. Attorney of any other judicial district or any other federal, state, or local regulatory or prosecuting authorities. Furthermore, this Plea Agreement does not provide or promise any waiver of any civil or administrative actions, sanctions, or penalties that may apply. This Agreement applies only·to crimes committed by the Defendant and has no effect on any proceedings against any other entity or individual not expressly mentione:d herein. D.

GENERAL PROVISIONS

I.

This Agreement does not l imit the right ofthe Defendant or the Government to advise

the Court or to speak at the time of sentencing or in connection with a pre-sentence investigation, consistent with the provisions set forth in this Plea Agreement and the Joint Factual Basis, and to provide the Court and the United States Probation Office with evidence of all relevant conduct and

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related information. The Government wil l advise the Court regarding the nature and extent of the defendant' s cooperation, if any, in the investigation and prosecution of this matter. 2.

The Defendant understands that the statutory penalties applicable to a corporate

Defendant for each felony count ofthe offenses to which it is entering pleas of guilty are as follows: a maximum fine of either Five Hundred Thousand ($500,000.00) dollars, or twice the gross pecuniary gain or loss resulting from the unlawful conduct, pursuant to 1 8 U.S.C. § 3 5 7 1 (c) and (d), a term of probation of five (5) years, pursuant to 1 8 U.S.C. § 3 5 6 1 (c)(l), and a special assessment ofF our Hundred ($400.00), pursuant to 1 8 U .S.C. § 30 1 3(a)(2)(B). The Defendant understands that, in addition to any other penalty, the Court may order the payment of restitution to any victim of the offenses pursuant to the provisions ofTitle 1 8, United States Code, Section 3 663. 3.

Applicability of Sentencing Guidelines.

The Defendant understands and

acknowledges that, at sentencing, the Court is required to consider the United States Sentencing Guidelines, together with the other sentencing goals set forth in Title 1 8, United States Code, Section 3 553(a). Defendant understands and acknowledges that the United States Sentencing Guidelines, including Chapter Eight that provide guidance for the sentencing of corporate defendants, must be considered by the Court, except that pursuant to U.S.S.G. §§ 8C2. 1 and 8C2. 1 0, the United States Sentencing Guidelines which pertain to the sentencing of organizations do not determine the fine range in cases involving environmental and obstruction crimes, including the making of false statements, and the use of false writings. Instead, the fine is to be determined undt:�r 1 8 U.S.C. §§ 3 553 and 3 5 7 1 . All other sections of Chapter Eight of the Sentencing Guidelines that are applicable to corporate defendants are applicable to this case, including provisions for probation and community service.

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4.

Sentencing Agreement. Pursuant to Rule 1 1 (c)( 1 )(C) ofthe Federal Rule ofCriminal

Procedure, and in return for the complete fulfillment by your client of all ofits obligations under this agreement, the Government and the Defendant agree that the sentence to be imposed by the Court includes a total monetary penalty consisting ofTwelve Million Dollars ($ 1 2,000,000.00) plus the mandatory special assessments discussed below. The parties agree that the sentence should be imposed as follows: a.

Criminal Fine: Ten Million Dollars of the total monetary penalty shall be designated as criminal fine.

b.

Mandatory Special Assessment: The Defendant shall pay a special assessment of Four Hundred Dollars ($400.00) for each count of conviction. The total amount of special assessments is One Thousand Two Hundred Dollars ($ 1 ,200.00). The specific special penalty assessments are set forth in paragraph 5 below.

c

Two Million Dollars ($2,000,000.00) of the total monetary penalty shall be paid as organizational community service pursuant to §SBI .3 of the Federal Sentencing Guidelines and in furtherance of satisfying the sentencing principles provided for under 1 8 U.S.C. §§ 3 5 5 3 (a), 3 5 63 (b)(l2). Defendant agrees that it shall not seek a tax benefit or tax deduction for the payments in any jurisdiction. Defendant further agrees that it is prohibited from using the fact of the payments in any public relations, marketing, or advertising activity. The recipients of these payments shall only expend these funds for defined projects, purposes, and obj ectives that are geographically confined within the borders, including adjacent state waters, of the following Louisiana Parishes: Acadia, Allen, A voyelles, Beauregard, Calcasieu, Cameron, Catahoula, Concordia, Evangeline, Grant, Iberia, Jefferson Davis, Lafayette, LaSalle, Natchitoches, Rapides, Sabine, St. Landry, St. Martin, St. Mary, Vermilion, Vernon, and Winn (collectively, "Southwest Louisiana"). Upon sentencing, the defendant shall deliver the two million dollar sum, in the form of a cashi�r' s or certified check from a U.S. bank, to the United States District Court C lerk of Court. The Clerk shall then promptly distribute the funds to each recipient, such funds to be used for projects and expenditures as set forth below: Community Service:

Through the Clerk of Court, the defendant shall make a payment of One Million Dollars ($I,OOO,OOO) to the National Fish and Wildlife Foundation ("NFWF"), a congressionally chartered nonprofit corporation established by I6 U.S.C. § 3 70 1 to further domestic and international conservation efforts. The delivery address for the payment is National Fish and Wildlife Foundation, c/o Timothy DiCintio, 1 1 33 I 5th Street

National Fish & Wildlife Foundation.

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NW, Suite 1 1 00, Washington, DC 20005. The $ 1 , 000,000 shall be allocated according to this paragraph for four separate projects: (I) NFWF Project One. For Project One, an allocation of $425,000 shall be used exclusively for the establishment and maintenance of an air quality monitoring system in Southwest Louisiana that shall detect, quantify, and analyze releases and emissions of hydrogen sulfide, benzene, toluene, ethylbenzene, xylene, and, to the extent feasible, other hazardous air pol lutants. The monitoring system shall record samples at the highest possible frequency for the funds available. The system shall be focused on monitoring releases and emissions from oil refineries and other crude oil processing, production, transport, and storage facilities. The system shall be designed to aid in enforcement activities and in determining impacts on human health, environmental quality, forestry, agriculture, and aquaculture. The system shall be fully operational for at least four years. (2) NFWF Project Two. For Project Two, an allocation of $ 1 25,000 shall be used exclusively for an ongoing and comprehensive analysis of the monitoring data obtained from Project One in conjunction with publicly-available information from LDEQ, EPA, Louisiana State Pol ice, and other government agencies, as well as private sources, regarding documented emissions, leaks, releases, spills, permit deviations, and complaints in order to describe and quantify any l inks between air monitoring data and these other types of information. In addition to the establishment and quantification of links, if any, the analysis should be designed to aid in enforcement activities and in determining impacts on human health, environmental quality, forestry, agriculture, and aquaculture.

(3) NFWF Project Three. For Project Three, an allocation of$225,000 shall be used exclusively for research and analysis of the environmental fate, environmental impact, human health impact, mitigation of negative human health effects, and remediation of environmental damage (including habitat restoration) due to benzene, toluene, ethylbenzene, and xylene releases and emissions in Southwest Louisiana, with a primary focus on such releases and emissions originating from oil refineries and other crude oil processing, production, transport, and storage facilities. (4) NFWF Project Four. For Project Four, an allocation of$225,000 shall be used exclusively for research and analysis of the environmental fate, environmental impact, human health impact, mitigation of negative human health effects, and remediation of environmental damage (including habitat restoration) due to hydrogen sulfide releases and emissions in Southwest Louisiana, with a primary focus on such releases and emissions originating from oil refineries and other crude oil processing, production, transport, and storage facilities.

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Louisiana State Police Emer&ency Services Unit.

Through the Clerk of Comi, the defendant shall make a payment of Five Hundred Thousand Dollars ($500,000) to the Louisiana State Police Emergency Services Unit ("ESU"), which is a specialized unit of the State Police with responsibility for response, mitigation, and remediation of hazardous material incidents. The payment address is Louisiana State Police Emergency Services Unit, Department of Public Safety, 79 1 9 Independence Blvd., Baton Rouge, LA 70806, ATTN: Capt. Taylor Moss, Account Code No. LSP Hazardous Materials 4629 EPA. The payment to ESU shall be considered as a payment with specific conditions of use as contemplated by Article VII, Section 9(A)(l) of the Louisiana Constitution. The $500,000 payment shall be for the exclusive use of the ESU exclusively for the acquisition, purchase, lease, contracting for, maintenance, calibration, testing, transport, staging, or storage of specialized equipment and gear ("SEG"). Such SEG shall be limited to include only detection equipment, air samplers, chemical analyzers, hazmat suits, other personal protective clothing and equipment (non-ballistic), respirators and breathing equipment, SCBA equipment, suitports, decontamination pods/stations, mobile labs, hazmat trailers, airlocks, robots, evidence collection and analysis equipment, absorbents, containment equipment, vapor recovery units, air scrubbers, filters, pumps, bioremediation equipment, and cleanup equipment. The term "SEG" includes associated supplies and consumables. For a period of five years after sentencing, the aforementioned SEG shall be used exclusively for detection, testing, chemical analysis, investigation, cleanup, response, mitigation, or remediation of spills, leaks, emissions, or releases of toxic or hazardous materials that constitute, or could foreseeably lead to, air pollution in Southwest Louisiana. The ESU shall spend at least $250,000 of the payment within 24 months of sentencing. None of the $500,000 shall be used for any vehicle (except a vehicle that is specifically designed for pollution incident response or cleanup).. firearm, gasoline, diesel fuel, or to pay for the salary, benefits, or overtime of a Louisiana state employee. Through the Clerk of Court, the defendant shall make a payment of Five Hundred Thousand Dollars ($500,000) to the Louisiana Environmental Trust Fund ("ETF"), a fund established by Louisiana Re-vised Statute 3 0:20 1 5 to ensure the protection, conservation, and replenishment of the natural resources of Louisiana. The payment address is Louisiana Environmental Trust Fund, Louisiana Department of Environmental Quality, Off1ce of Management and Finance, P. 0. Box 4303, Baton Rouge, Louisiana 70821 -4303, ATTN: Denise Stafford, Fiscal Officer. The payment to ETF shall be considered as a payment with specific conditions of use as contemplated by Article VII, Section 9(A)(l) of the Louisiana Constitution and Louisiana Revised Statute 3 0:201 5(C)(5). The $500,000 payment shall be for the exclusive use of the Louisiana Department of Environmental Quality exclusively for detection, response, testing, investigation, public notification, mitigation, remediation, leasing or acquiring SEG (see definition of "SEG" above), staging or maintaining SEG, and training for spil ls, releases, emissions, or leaks of toxic or hazardous materials that constitute, or could foreseeably lead to, air pollution in Southwest Louisiana Environmental Trust Fund.

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Louisiana. None of the payment shall be used for any vehicle (except a vehicle that is specifically designed for pollution incident response or cleanup), firearm, gasoline, diesel fuel, or to pay for the salary, benefits, or overtime of a Louisiana state employee. For each of the above recipients and for each project, the entire payment must be utilized within 60 months of sentencing. Other than the parameters set forth in this section, the U.S. Department of Justice exercises no control over how the payments are to be utilized. However, acceptance of the payment constitutes the recipient's understanding and acceptance of the terms of this Plea Agreement concerning community service payments. Moreover, each recipient must provide the U.S. Attorney' s Office in Lafayette, Louisiana, the U.S. Probation Office in Lafayette, Louisiana, and the Department of Justice Environmental Crimes Section with five sets of written reports describing in detail how the funds have been utilized and the results achieved. The first five reports are annual reports that shall be delivered, respectively, within 1 4 months, 26 months, 3 8 months, and 50 months of sentencing. The fifth report shall be a final report that shall be delivered within 62 months of sentencing. This paragraph 's reporting requirement is separate from and additional to the Government's explicit encouragement that the results achieved should be published in peer-reviewed scholarly journals. If the community service payments result in any publication, the particular payment recipient shall immediately transmit two copies of such publication to the three recipients o f the annual reports. This paragraph only applies to NFWF, it does not apply to the ESU or ETF . If, for som(: unforeseen and extraordinary circumstance, the entire payment cannot be entirely utilized within 60 months of sentencing, the payment recipient shall, within 6 1 months of sentencing, provide detailed reasons for the delay and a written plan to finish the project. In such a case, the payment recipient shall diligently work to fulfill the purposes of the payment conditions and obj ectives with the remaining available funds. In addition, the annual reporting requirement shall continue as an ongoing requirement until the payment has been completely exhausted. d.

Defendant further agrees that if the terms of this Rule II (c)(l)(C) Plea Agreement are accepted by the Court, that the special assessments, and $2 Million in community service payments shall be paid on the day of sentencing. The remaining $ 1 0 Million ($ 1 0,000.000.00) in criminal fines shall be paid in increments of $2 Million per year for each of the five years of probation starting one year from the date of sentencing. Payment is to be made in the form of a check payable to "United States District Court Clerk." The community service amount shall also be made payable to the "United States District Court Clerk." The Clerk shall then forward the funds to the community service payment recipients. Fine payments shall be marked "Fine" and include the case number, and the community service payment shall be marked "Community Service Payment" and include the case number. The payment address for the fines is United States District Court Clerk, 3 00 Fannin Street, Suite II67, Shreveport, LA 7 1 1 0I. Unless otherwise ordered by the Court, any portion of the criminal fine unpaid on the day of sentencing shall accrue interest at the rate specified in 1 8 U.S.C. § 36I2(f)(2). Notwithstanding any other provision of I8 U .S.C. § 3 6 1 2,

Payments:

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the Defendant agrees that interest shall start to accrue on any unpaid balance on the day following sentencing. Otherwise, the provisions regarding collection, interest, and penalties set for in 1 8 U.S.C. §§ 3572(h), (1), and 3 6 1 2 shall apply. Furthennore, Defendant agrees to secure payment of the amount owed. Specifical ly, Oscar Wyatt, the sole owner ofNucoastal Refining & Marketing Company LLC, a Fifty percent (50%) owner of the Defendant, agrees to personally guarantee payment of the remaining $ 1 0 Million plus interest. Accordingly, on or before the day this Plea Agreement is entered in Court, Oscar Wyatt will provide a secured interest to the United States in real property/properties valued at $ 1 0 Million or more, as demonstrated by a certified appraiser's appraisal(s) and lien(s), together with adequate title insurance to demonstrate that the property/properties are free of any liens or any restrictions that would cause a hindrance to forfeiture of said property if required under the terms of this agreement. Defendant's obligations to make timely payments under D.4. of this Agreement and Oscar Wyatt' s personal guarantee of the payments shall be independent obligations of both the Defendant and Oscar Wyatt and each shall in no way depend upon or be contingent of the sale of any assets, business, stock, or any other financial transaction. Furthermore, notwithstanding the schedule for payments set forth herein, Defendant and Oscar Wyatt each further agree that all payments owed under this Agreement will be paid in full as soon as possible and within thirty (30) days of the sale of the Defendant, Pelican Asphalt, and/or the sale of the Pelican Refinery and/or Pelican Asphalt, Nucoastal Refining and Marketing or the Channdview Facility. e.

Defendant wil l be placed on organizational probation for the maximum period of five (5) years from the date of sentencing pursuant to 1 8 U.S.C. § 3 5 6 1 (c)(l) and U.S.S.G. §§ 8Dl. 1 and 8D l .2. The terms of probation shall include the following specific provisions, in addition to the Court's standard conditions:

Probation:

( 1 ) No Further Violations. Defendant agrees that it shall commit no further violations of federal, state or local law, and shall conduct all its operations in accordance with the occupational safety and environmental laws of the United States. (2) Payments. Payment in full ofthe monetary amounts set forth herein including all special assessments, fines and restitution, and community service. (3) Bannin�. Upon signing this Plea Agreement, any and all operations at the Pelican Refinery will be conducted under the oversight of an outside and independent environmental consultant acceptable to the United States. Upon the Court's acceptance of this Plea Agreement at sentencing and until tennination of probation, Defendant will be banned from any and all operations at the refinery unless it is in full compliance with all applicable environmental and safety laws and regulations and after the development, and implementation of a comprehensive environmental and safety compliance program approved by the United States which includes quarterly environmental and safety audits by an outside and independent firm acceptable to the United States and review of the audits and implementation of all environmental and safety measures by a Court-appointed 10

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monitor proposed by the Defendant and acceptable to the United States. The Defendant shall submit any proposed environmental and safety compliance program to the government for review within thirty (30) days of the entry of this Plea Agreement; the United States shall review any such submission and provide comment to the Defendant within thirty (30) days of receipt; and the Defendant shall submit a final proposed plan within thirty (30) days of receipt of the government's comments and at least thirty (30) days prior to sentencing. The banning and environmental compliance requirements of this Plea Agreement apply to the Defendant and all related entities, including parent and subsidiary companies and those that own the Pelican Refinery, and all third-party operators. 5.

The Parties fully and completely understand that this Plea Agreement is submitted to

the Court pursuant to Federal Rule of Criminal Procedure 1 l(c)(l)(C). The Parties agree that Chapter 8 of the United States Sentencing Guidelines Manual governs this case with regard to any payment of restitution, community service, and probation. The provisions of U.S.S.G. §8C2.2 and U.S.S.G. §8C2.9 do not apply to counts for which the applicable guideline offense level is determined under Chapter Two, Part Q (Offenses Involving the Environment). For such cases, § 8C2. 1 0 (Determining the Fine for Other Counts) is applicable. U.S.S.G. §8C2. 1 0 in turn, directs the Court to apply the provisions ofTitle 18, United States Code, §§ 3553, 3572 to determine the appropriate fine. 6.

This Agreement shall bind the Defendant, all successors-in-interest, if applicable, and

all successors and assigns. This Agreement shall apply to all faci lities which the Defendant owns, operates, mans, and all vessels owned, manned or operated by the Defendant during the period of probation identified in Attachment 1 to the ECP that is itself attached hereto as Attachment A. The Defendant shall provide to the Court, U.S. Probation Office, and the undersigned representatives of the U.S. Attorney's Office and the Environmental Crimes Section of the U.S. Department of Justice with thirty (30) days advance notice of any of the following: any corporate name changes; any purchase or sale of assets; any purchase, sale or reorganization of entities related to the defendant; any other change impacting upon or affecting this Agreement or 11

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defendant's compliance with any term of this Agreement. No change in name, corporate or individual control , business reorganization, change in ownership, merger, change in legal status, sale or purchase of assets, or similar action shall alter the defendant's responsibilities under this Plea Agreement. The Defendant understands and agrees that it shall not engage in any action to seek to avoid the obligations and conditions set forth in this Plea Agreement. 7. This Agreement is the complete and only agreement between the parties. No promises, agreements or conditions have been entered into other than those set forth in this Agreement. This Agreement supersedes prior understandings, whether written or oral. This Agreement cannot be modified other than in a written memorandum signed by the parties or on the record in court.

IGNACIA S. MORENO

STEPHANIE A. FINLEY

ASSISTANT ATTORNEY GENERAL

UNITED STATES ATTORNEY

ENVIRONMENT & NATURAL

WESTERN DISTRICT OF LOUISIANA

RESOURCES DIVISION U.S. DEPARTMENT OF JUSTICE

By:

L�/11 � /� rd A. Udell Senior Trial Attom:!y Environmental Crimes Section U.S. Department ofJustice

�M Christopher Hale Trial Attorney Environmental Crimes Section U.S. Department of Justice

-

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As an authorized representative of defendant Pelican Refining Company LLC, I have read this Agreement and carefully discussed every part of it with Pelican Refining Company's criminal defense counsel and with the owners of the Pelican Refining Company. I understand the terms of this Agreement, and I voluntarily agree to those terms on behalf of Pelican Refining Company LLC. Defendant's attorneys have advised me of the rights, possible defenses, Sentencing Guideline provisions, and of the consequences of entering into this Agreement. No promises or inducements have been made to Pelican Refining Company LLC other than those contained in this Agreement. No one has threatened or forced Pelican Refining Company LLC in any way to enter into this Agreement.

��

Authorized Representative PELICAN REFINING COMPANY LLC Defendant

I am Pelican Refining Company LLC's criminal defense attorney. I have carefully discussed every pai1 of this Agreement with the owners and the authorized representative of Pelican Refining Company LLC. Further, I have fully advised the authorized representatives of Pelican Refining Company's rights, of possible defenses, of the Sentencing Guidelines' provisions, and of the consequences of entering into this Agreement. To my knowledge, the decision of Pelican Refining Company LLC to enter into this Agreement is an informed and voluntary one.

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Dated:

·

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v

Carl Parker Defense Counsel to PELICAN REFINING COMPANY LLC

I am Oscar S. Wyatt, Jr.. Through my company, Nucoastal Refining and Marketing Company LLC, I have a fi fty percent (50%) ownership interest in Pelican Refining Company LLC. I have read and understood this Agreement. I have agreed to the banning provisions set forth above and hereby agree to be bound by the terms set forth herein. I also have agreed to provide security for fine and interest payments that are required of the Defendant. I understand that these obligations are set forth in paragraph D.4 generally and more specifically in subparagraph D.4.d. I understand my obligations under these provisions, and with my sig u� affiJ.ed bel , I reby agree to their terms. �� Dated: � 0 ar yatt, Jr.

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I am Oscar Wyatt's attorney. I have explained to him the obligations set forth in this Plea

Agreement.

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? -,//! I Dated: ---++--�� --7���?-----

Attorney for Oscar S. Wyatt, Jr.

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MINUTES OF SPECIAL MEETING OF THE MEMBERS OF PELICAN REFINING COMPANY, LLC

(a Louisiana limited liability company) July 28,2011 This Special Meeting of the Members (the "Meeting") of the Members of PELICAN REFINING COMPANY, L.L.C., a Louisiana limited liability company (the '·'Company"), convened on Thursday, July 28,2011 at 3355 West Alabama, Suite 575, Houston, Texas 77098. The following Members were represented, by phone or in person, at the Meeting: NuCoastal Refining and Marketing Company ("NuCoastal") and Bayoil (USA) Limited ("Bayoil"). Collectively, the Members present and voting at the Meeting represented 100% of the Company's member interest. The following Member representatives were present in person at the Meeting: M. Truman Arnold, NuCoastal Frank Spagnoletti, Bayoil With a quorum of the Members duly noted and no protest of any defective notice of the Meeting by
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RESOLVED that Don C. Nelson, an independent attorney, be and is hereby authorized and directed to be the "Authorized Representative" of the Company and he is hereby directed to execute the Plea Agreement and the Joint Factual Statement for and on behalf of the Company and to take such other steps as may be necessary to enter the plea for and on behalf of the company in open court and to execute any related documents required by the Court. The company acknowledges that Don C. Nelson is acting solely as an Authorized Representative and is not and has not been an employee or officer of the Company. RELSOLVED that the Company take all such actions as may be necessary to comply with the terms of the Plea Agreement. RESOLVED further that Don C. Nelson provide a copy of these minutes to the DOJ, the Company's attorneys and to each Member of the company. There being no further business, upon motion moved and seconded the meeting was adjourned. Respectfully Submitted

�

ruman Arnold

�

�

D s1gnated Secretary of Pehcan Refinmg Company, L.L.C. Special Meeting of Members

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NUCOASTAL REFINING & MARKETING COMPANY MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS This Special Meeting of the Board of Directors of NuCoastal Refining & Marketing Company (the "Company") was held on July 28, 2011 at 3355 West Alabama, Suite 500, Houston Texas 77098. Those present, in person or by phone, were Oscar S. Wyatt and M. Truman Arnold, constituting all of the Directors of the Company. Also present were Richard Watson who was designated as Secretary of the Meeting and Carl Parker and Don C. Nelson. It was noted that the Company owns fifty percent of the member interest of and Mr. Wyatt asked Mr. Arnold to chair the meeting.; The meeting was called to order and Mr. Parker explained the draft of the Plea Agreement and Joint Factual Statement (the "Plea Documents") that is proposed for Pelican Refining Co., LLD ("Pelican") to enter into to resolve the current investigation being conducted by the Department of Justice ("DOJ") and Environmental Protection Agency ("EPA"), the requirement to approve Pelican's execution and compliance of the Plea Documents and to approve the designation of Pelican's "Authorized Representative" to execute the Plea Documents (copy attached). The following motion and resolutions were duly made and seconded and passed by the affirmative vote of the Directors. The following are the statement and resolutions so approved: RESOLVED that the Company hereby consents and approves the appointment of Don C. Nelson, an independent attorney, to act as "Authorized Representative" of Pelican to execute the Plea Documents and to take all further actions as may be necessary to finalize the agreement of Pelican with the DOJ and EPA. RESOLVED further that the Company further ratifies Pelican's agreements to comply with the terms of the Plea Documents and hereby evidences its authorization, as a Member of Pelican, for Pelican to enter into the Plea Documents and for the Authorized Representative to execute those documents for and on behalf of Pelican. IN WITNESS WHEREOF, the undersigned, being the designated. Secretary of the Company, for the above meeting, hereby states that the above are the minutes of the meeting of the Board of Directors of the Company on July 28,2011.

d C. Watson, Desi nated Secretary

Case 2:11-cr-00227-RTH-CMH Document 5 Filed 10/12/11 Page 17 of 17 PageID #: 27

ATTORNEYS AT LAW

401 LOUISIANA STREET, 8Tu FLOOR HOUSTON, TEXAS 77002 TEUIPHONE 713.653.5600

FAX 713.65: .5656

July29,2011 As Trustee of Bayoil (USA) Limited, a Member of Pelican Refining Company LLC, and pursuant to paragraph 3 of the Plea Agreement between the U.S. Department of Justice's Environmental Crimes Section and Pelican Refining Company LLC, I certify that Bayoil (USA) Limited has authorized Pelican to enter into and comply with the terms of the Plea Agreement, and further that Bayoil (USA) Limited has authorized independent attorney Don C. Nelson to execute the Plea Agreement as well as the Joint Factual Statement, and all formalities for such authorization have been observed.

SPAGNOLETTI & CO.

FIS:dst

Case 2:11-cr-00227-RTH-CMH Document 5-1 Filed 10/12/11 Page 1 of 3 PageID #: 28 RECEIVED USDC, WESTERN DISTRICT OF LA TONY R. MOORE, CLERK

DATE

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u.s.oe ment of Justice United States Attorney ......!.

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA

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UNITED STATES OF AMERICA

*

Lake Charles Division

*

Criminal No. 2: 11-CR-00227

*

v. PELICAN REFINING COMPANY,L.L.C.

*

Judge Haik

*

Magistrate Judge Hill

AFFIDAVIT OF UNDERSTANDING OF MAXIMUM PENALTY AND CONSTITUTIONAL RIGHTS

I, Don C. Nelson, authorized corporate representative for PELICAN REFINING COMPANY,L.L.C., the above named defendant,having been first duly sworn and placed under oath by the Clerk or his Deputy of the United States District Court, state that I have been advised and personally addressed by the Court as to the nature of the charges against PELICAN REFINING COMPANY,L.L.C., and,having been furnished a copy of the charges,hereby state that I understand the charges and that the Court has addressed me personally as to the maximum possible penalty that may be imposed against PELICAN REFINING COMPANY,L.L.C.,as follows: PENALTY:

The maximum punishment for each of Counts 1-2,violations of the Clean Air Act, 42 U.S.C. § 7413(c)(4),and Count 3,Obstruction of Justice, 18 U.S.C. § 1519, is

a

fine of up to $500,000 or up to twice the gross pecuniary gain or loss pursuant to 1 g U.S.C. § 3571,and restitution,and a term of probation of up to five (5) years,and

a

$400.00 per count special assessment fee. I,Don C. Nelson,authorized corporate representative of PELICAN REFINING COMPAN'{ L.L.C. further state that I understand and the Court has addressed me personally at the arraigmnenl: proceeding as to:

Case 2:11-cr-00227-RTH-CMH Document 5-1 Filed 10/12/11 Page 2 of 3 PageID #: 29

1. The right to be represented by counsel of the company's choice, or if the company cannol: afford counsel, the right to be represented by Court-appointed counsel at no cost to the company. 2.

The right to have the charges against the company presented to a Grand Jury fo:·

indictment. 3. The right to have a jury trial with twelve jurors who must all agree as to the compcmy':;; guilt in order to convict. 4. The right not to be required to testify against the company, or at all, if the company doe:;; not so desire. 5. The right to confront and cross-examine witnesses against the company and the right to have compulsory process to require witnesses to testify. 6. The right to plead guilty or not guilty. I, Don C. Nelson, authorized corporate representative of PELICAN REFINING COMPANY, L.L.C., realize that by pleading guilty the company will stand convicted of the crimes charged and thereby waive the company's privilege against self-incrimination, the company's right to jury triaL, the company's right to confront and cross-examine witnesses, and the company's right of compulsory process. I, Don C. Nelson, authorized corporate representative of PELICAN REFINING COMPANY, L.L.C., further state that the company's plea in this matter is free and voluntary, and that it has been made without any threats or inducements whatsoever from anyone associated with the State o:· United States Government, and that the only reason the company is pleading guilty is that it is in facl. guilty as charged. The Court has given the company the opportunity to make any statement desired.

Case 2:11-cr-00227-RTH-CMH Document 5-1 Filed 10/12/11 Page 3 of 3 PageID #: 30

Sworn to and subscribed before me this

I Z �day of October, 2011, in Open Court

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Lafayette, Louisiana.

DON C. NELSON Authorized Corporate Representative For Defendant PELICAN REFINING COMPANY, LL.C.

WITNESS: CARL PARKER Attorney for Defendant

CLERK OR DEPUTY CLERK OF COURT

Case 2:11-cr-00227-RTH-CMH Document 5-2 Filed 10/12/11 Page 1 of 3 PageID #: 31

liECEIVED USDC. WESTERN DISTRICT OF LA TONY R. MOORE, CLERK

DATE .

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVISION *

UNITED STATES OF AMERICA

CRIMINAL NO. 2:11-cr-00227

* *

vs.

JUDGE HAIK

* *

PELICAN REFINING COMPANY,L.L.C.

MAGISTRATE JUDGE HILL

1. ELEMENTS OF OFFENSE CLEAN AIR ACT, TITLE V PERMIT VIOLATION

[42 U.S.C. § § 7661a(a) and 7413(c)(l)] Title 42,United States Code,Sections 7661a(a) and 7413 (c)(l) makes it a crime for anyom: to knowingly operate a major stationary source in violation of a Title V operating permit issuecl under Subchapter V of the Clean Air Act. In order to find you guilty of this crime, a jury would have to be convinced that the: Government has proved each of the following beyond a reasonable doubt: First:

That the refinery you operated was a major stationary source;

Second:

That you knowingly operated this major stationary source; and

Third:

That such operation was in violation of one or more conditions set forth in

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Title V operating permit issued under Subchapter V of the Clean Air Act. 2. ELEMENTS OF OFFENSE OBSTRUCTION OF JUSTICE

[18 U.S.C. § 1519] Title 18,United States Code,Section 1519 makes it a crime for anyone to knowingly make false entries in documents with the intent to impede,obstruct,or influence the proper administration of a matter within the jurisdiction of an agency of the United States.

Case 2:11-cr-00227-RTH-CMH Document 5-2 Filed 10/12/11 Page 2 of 3 PageID #: 32

In order to find you guilty of this crime, a jury would have to be convinced that the Government has proved each of the following beyond a reasonable doubt: First:

That you knowingly made false entries in documents, specifically a false and misleading statement in deviation reports submitted to the Louisiana Department of Environmental Quality;

Second:

That the false entries were made with the intent to impede, obstruct,. and influence the proper administration of a matter; and

Third:

That such a matter was within the jurisdiction of an agency of the United States. 3. VENUE

[18 U.S.C. § 3237(a)] If the case were to proceed to trial, the Government would also have the burden of proving proper venue - that is the Government would have to prove by a preponderance of the evidence that the offense was begun, continued, or completed in one of the Parishes that make up the Westem District of Louisiana.

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DON C. NELSON

Authorized Corporate Representative For Defendant PELICAN REFINING COMPANY, L.L.C.

DATE

CARL PARKER Attorney for Defendant 1315 Nueces Street Austin, TX 78701-1721 Telephone: (512) 474-2304

-2-

Case 2:11-cr-00227-RTH-CMH Document 5-2 Filed 10/12/11 Page 3 of 3 PageID #: 33

United States Attorne 800 Lafayette Street,

·te 220

Lafayette, LA 70501-7206 Telephone: (337) 262-6618

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/ RICHARD A. UDELL

DATE

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Senior Trial Attorney Environmental Crimes Section U.S. Department of Justice Post Office Box 23985 Washington, D.C. 20026-3985 Telephone: (202) 514-2701

/O -12 CHRISTOPHER HALE

DATE

Trial Attorney Environmental Crimes Section U.S. Department of Justice Post Office Box 23985 Washington, D.C. 20026-3985 Telephone: (202) 514-2701

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Case 2:11-cr-00227-RTH-CMH Document 5-3 Filed 10/12/11 Page 1 of 9 PageID #: 34

t�ECEIVED

:

..;�oc WESTERN DISTRICT OF LA TONY R. MOORE, CLE K IJATE

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVISION

UNITED STATES OF AMERICA

CRIMINAL NO. 2:11-cr-00227 JUDGE HAIK

v.

PELICAN REFINING COMPANY, LLC

MAGISTRATE JUDGE HILL

JOINT FACTUAL STATEMENT

The United States of America and the Defendant,Pelican Refining Company, LLC ("'PRC"),hereby agree (i) that this Joint Factual Statement is a true and accurate statement of the Defendant's criminal conduct,(ii) that it provides a sufficient basis for the Defendant's plea of guilty to the charges in the above-captioned matter and as set forth in the Plea Agreement signed this same day, and (iii) had this matter proceeded to trial,the United States would have provt�n the facts contained in this Joint Factual Statement beyond a reasonable doubt. The Defendant further agrees that this document does not represent the totality of facts and evidence that could have been brought against it,but instead consists of a summary sufficient to support the charges. 1. At all relevant times,PRC operated the Pelican Refinery, a crude oil and asphalt refining facility located in Lake Charles,Louisiana. PRC was owned in equal shares by Nucoastal Refining & Marketing Company LLC and Bayoil USA Limited. In accordance with the principles of respondeat superior, vicarious liability,and collective knowledge, the Defendant agrees that criminal liability is premised on the acts and omissions of its agents, officers,and employees,who acted within the scope of their agency and employment,for the benefit of the PRC. 2. At all relevant times, refinery operations at the Pelican Refinery were regulated by Part 70 Title V operating permits,a program set up by the federal Clean Air Act and its regulations. Operation of the Pelican Refinery was authorized only under the terms and conditions of the Permit,which details the specific point sources,emissions limits, pollution prevention equipment, and processes of the facility. Knowingly operating a refinery in violation of a Title V permit is a felony pursuant to 42 U.S.C. § 7413(c)(l). Moreover,under Part 70 of Title 40 of the Code of Federal Regulations,the state of Louisiana administers the bulk of the federal Clean Air Act-regulated activities in the state. The Louisiana Department of Environmental Quality ("LDEQ") approved a transfer of the refinery's Title V Permit that had been originally obtained by PRC's predecessor. LDEQ then subsequently renewed the Permit at PRC's request. PRC's Vice-President was PRC's designated point of contact and signatory D:>r Pelican Refinery's LDEQ Permit.

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3. Pelican Refining Company did not operate according to industry best practices, nor did it adhere to basic safeguards in corporate organization and governance that would be expected for refineries that operate in the United States. For example, PRC operated without a company budget or an environmental budget. PRC did not have an environmental department, nor did it have an environmental manager, regulatory specialist, or anyone tasked with complying with environmental regulations. There was insufficient safety equipment at the facility, and employees, at best, received minimal training on the use of that equipment. PRC contracted at least three different firms to advise it regarding environmental matters. None of these outside consultants were responsible for, nor did they provide adequate resources for assuring environmental compliance prior to the execution of a federal search warrant of the refinery in November 2007. 4. From approximately August 2005, through December 2006, the Pelican refinery processed crude oil only sporadically. Processing involved the heating of crude oil to distill various hydrocarbon groups or "cuts." In order to comply with the Permit and detect and mitigate the release of harmful pollutants into the ambient air, the facility was required to utilize certain key pollution prevention equipment. However, as detailed further below, this equipment was either not functioning, poorly maintained, improperly installed, improperly placed into service and/or improperly calibrated, such that there were releases of pollutants into the atmosphere and at the refinery. 5. In 2005 and 2006, the Pelican refinery processed "sour" crude that had high concentrations of hydrogen sulfide, also known as "H2S." Hydrogen sulfide ("H2S") is a highly toxic and flammable gas inherent to sour crude refining. H2S is classified as an "extremely hazardous substance" pursuant to 42 U.S.C. § 1 1 002(a)(2). Louisiana has classified hydrogen sulfide as a Class 111 toxic air pollutant (acute and chronic toxin). H2S is colorless and flammable. It has a characteristic odor of "rotten eggs" at low concentrations. Refinery workers reported smelling H2S as well as having their personal H2S monitors "go off" from time-to-time. PRC had no procedure to record, track, report, or mitigate H2S releases. At higher concentrations H2S paralyzes the sense of smell so that its odor is no longer perceived. At very high concentrations it paralyzes the respiratory center of the brain so that the exposed individual] stops breathing, and loses consciousness and dies unless removed from exposure and resuscitated. It is not known whether there was any injury to any person. Crude oil also contains benzene, toluene, ethylbenzene, and xylene (collectively known as "BTEX"). These compounds are each listed as hazardous air pollutants and extremely hazardous substances. Louisiana has classified benzene as a Class I toxic air pollutant (known and probable carcinogen), ethylbenzene and xylene as Class II toxic air pollutants (suspected carcinogen and known or suspected human reproductive toxin), and toluene as a Class III toxic air pollutant (acute and chronic toxin). Sources of H2S and BTEX emissions at the Pelican Refinery included the main refinery stack, leaks at pipes and joints, the barge loading dock, and tanks with roofs that were improperly certified and fitted and which also failed. -2-

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6. The Pel ican refinery stored crude oil in tanks with floating roofs that go up and down with the volume of petroleum inside the tank. The floating roofs have seals around the perimeter. The purpose of the sealed floating roofs was to prevent pollutants, including volatik organic compounds and H2S, from escaping. At the time the refinery was purchased by PRC, Tank 1 1 0- 1 6 had a failed roof. PRC filed a lawsuit and obtained a settlement based upon the undisclosed failure of the tank roof. In October 2005, the owner ofNucoastal Refining & Marketing Company notified the refinery manager at the time that oil would be arriving at the facility and directed that it should be placed in Tanks 55- 1 7 and 1 1 0- 1 6 since other tanks were in use with oil that the owner of BayOi l USA Ltd had helped to arrange. The refinery manager refused to do so based on the grounds that the roof had failed and that fi ll ing the tanks with oil would be unlawful. The refinery manager resigned, and a new refinery manager was not hired until January 2006. On or about October 1 3, 2005, after a contractor refloated the roofofTank 1 1 0- 1 6, PRC introduced and caused the introduction and storage of sour crude oil, a volatile organic liquid that also contained Hydrogen Sulfide, into Tank 1 1 0- 1 6. In fi lling the tank, PRC violated the C lean Air Act because it did so: (a) without first repairing holes, tears, and other openings in the seal or the seal fabric ofTank 1 1 0-1 6' s primary and secondary seals so that these conditions no longer existed before filling and refilling; (b) without properly determining the gap areas and maximum gap widths between the primary and secondary seals and the tank wall within 60 days; and (c) without notifying LDEQ or the EPA at least 7 days prior to filling. On or about December 1 2, 2005, the repaired roof ofTank 1 1 0- 1 6 failed again. PRC ' s Vice-President was notified of the' failure at the time. No one reported the roof fai lure to LDEQ or EPA as required. On December 1 3, 2005, LDEQ conducted an inspection of the facility and found that the roof had failed and that oil was pooled on top. LDEQ instructed that the oil must be remov�:d from the tank. Instead of the required timely removal, the oil was removed from the tank by processing. The removal was not accomplished within 45 days as required, nor prior to the inspection on March 1 , 2006, by LDEQ and EPA which found crude oil still remaining in the tank. An e-mail from the new refinery manager to the PRC Vice-President on March 23 , 2006, advised him that the tanks had stil l not been emptied. The prolonged storage of sour crude in Tank 1 1 0- 1 6 resulted in an unlawful release of H2S and BTEX into the environment. 7. Another Clean Air Act violation occurred with the placement of high H2S asphalt in Tank 80-02. Tank 80-02 was not permitted to release any H2S into the atmosphere. On or about August 1 9, 2007, PRC received a load of high-sulfur, PG 64-22 asphalt. The load of approximately 3 9,438 barrels nearly fi lled half of Tank 80-02. Tank 80-02 was a conical roof tank that was vented to the air. Even though the asphalt was in a liquid phase while in the tank, because the asphalt was heated, H2S accumulated in the tank's head space and escaped through the vents into the atmosphere. 8. In addition to the tank v iolations, PRC violated the Clean Air Act by failing to properly use, maintain, or repair the refinery' s pollution prevention equipment. For example, the caustic scrubber is a large device that is designed to remove H2S by spraying a caustic solution over off gas produced by the distillation unit. In order to determine whether the scrubber was removing a sufficient quantity of H2S, the outflow was measured by a continuous emissions -3-

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monitoring system or "CEMS." Neither the caustic scrubber nor the CEMS worked as required by the Title V permit. The operations log indicates that the caustic scrubber was "bypassed" without obtaining a variance from LDEQ. At one point repairs were made after the scrubber was determined to be corroded. The CEMS was supposed to record the level of H2S on a circular paper chart for each day. However, the circular chart indicated that the levels were always "0" even when the facility was processing sour crude. Lower level managers informed upper management in2005 that both systems were not working properly and required repairs. In addition, LDEQ and EPA discovered both of these permit violations during an unannounced inspection of the refinery on March 1 , 2006. Even so, the facility processed crude oil in2005 and 2006, and operated for brief periods in April and August of2006, without (i) the use and proper use of caustic to treat and remove non-condensable toxic pollutants, including H2S, from gases produced during the refining process, without (ii) the use and proper use of a continuous monitoring system to monitor H2S concentration in the refinery fuel gas, and without (iii) the use and proper use of calibration and maintenance of the continuous monitoring system. 9. The last piece of pollution prevention equipment on the production l ine was the process flare. The flare was designed to burn off gasses at a high enough temperature such that any remaining H2S would be chemically converted to sulphur dioxide (S02). The process flare is also a safety device since it provides for the safe combustion of potentially explosive chemicals. The flare was not continuously functioning properly between at least approximately October2005 and January 2007. The primary problem was that the pilot light at the top of the flare stack was not always working. This allowed the flame to blow out during storms or high winds. The flame is not visible during the day, so daylight processing would continue unless anomalies were d iscovered in a circular chart used to display flare temperature levels or an alarm was heard that was supposed to sound if the pilot light was out; neither of these two indicators were operated properly. Because the caustic scrubber and CEMS were not working or not working properly, the failure of the flare created the potential that any H2S not flared off would escape into the ambient air. There were instances when the flare went out during processing. A regular and routine practice was for PRC employees to re-light the flare with the use of a flare gun. The flare gun and flares were regularly purchased at Walmart in the fall of2005 and in 2006 so that PRC employees could re-light the flare when it went out. PRC employees also turned up the flow of natural gas to the stack in an attempt to keep the flame going. PRC managers at the re1inery informed upper management on multiple occasions of the problems with the process flare and that a flare gun was being used to light the flare when it would go out. On multiple occasions, including approximately November 2005 and July 2006, PRC's Vice­ President asked the employees to obtain repair estimates for the flare. However, upper management did not approve the estimates and told the refinery employees that there was insufficient money to make the needed repairs. LDEQ conducted a site visit on December 13, 2005, and during deployment of an infrared "Hawk" camera, observed vapors coming from the flare stack while the flare was unlit, although the makeup of the vapors was not identified. PRC's Vice-President and other management received an internal document summarizing in a page the results of the inspection. This document states that after LDEQ found the flare not operating, it was subsequently ignited with the use of a flare gun. The problems with the process -4-

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flare were also cited by LDEQ as a permit violation in a report of an inspection that took place on March 1 , 2006. As a result, PRC knowingly operated the Pelican refinery without the use and proper use and continuous operation of a process flare at all times when emissions might have been vented. The faci lity continued to operate sporadically, despite the failure to replace the pilot light for the flare until January2007. 1 0. Another avenue for releases into the ambient air came from the barge loading dock portion of the facility. PRC, in its permit application, which was later approved by LDEQ, certified it would utilize carbon beds to scrub for volatile organic compounds at the loading dock when product was loaded and offloaded. However, Pelican never installed carbon beds at the barge loading dock, although in some instances it rented a portable scrubber to accomplish the same purpose. Four volatile organic compounds are benzene, ethylbenzene, toluene, and xylene ("BTEX"). Each of the BTEX compounds are "hazardous air pollutants" pursuant to the Clean Air Act. On certain occasions, with PRC Vice-President's knowledge, PRC uti lized neither carbon beds, nor a portable scrubber at the loading dock, thus resulting in emissions of BTEX into the ambient air. Both a refinery manager and the Vice-President signed and submitted deviation reports to the LDEQ that falsely stated: "A contractor is currently working on building a treater system that will have carbon canister controls." These false statements obstructed the government. 1 1 . Nearby residents complained to PRC and to the LDEQ about odors emanating from

the Pelican Refinery. For example, LDEQ visited the facility September 12, 2005, after a nearby resident complained of a strong distillate smell on the morning of September 1 1 , 2005, and that he had experienced a headache and nausea as a result. An LDEQ representative spoke with the then-refinery manager who stated a barge was in fact loading at the dock at the same time the resident experienced physical symptoms. The refinery manager did not disclose to LDEQ that a reading of high reading of H2S (85 1 parts per m illion) had been detected at the loading dock. The refinery manager contacted PRC's Vice-President and told him of the citizen complaint which Jed to the LDEQ visit. A citizen also complained to LDEQ on October 1 5, 2005, after sh1;: and her husband b<;:came nauseated from unusual odors. 12. In June 2006, the second refinery manager quit. No new refinery manager was hired until after federal agents with the Environmental Protection Agency Criminal Investigation Division served search warrants at PRC's corporate headquarters and PRC refinery in November 2007. In the interim, the operations manager reported directly to PRC ' s Vice-President. In an email dated August 1 4, 2006, the operations manager wrote an email to the Vice-President: "I have been looking over the 39 count Jist of DEQ/EPA violations that were given to us by [LDEQ]. There are many items that need to be done for us to be in compliance. I talked to [Pelican's environmental consultant] about this[.] He told me that the fines that we are already facing might-might not be increased by restarting of the vacuum unit. [Pelican's environmental consultant] said that He will be out of the office but gave me his cell in case we might want to talk to him concerning this." The operations manager advised "if we as a company put forth a good faith effort to try and get in compliance it would help us in the long run with the DEQ, who -5-

Case 2:11-cr-00227-RTH-CMH Document 5-3 Filed 10/12/11 Page 6 of 9 PageID #: 39

can really give us hell and cost us a ton of money if we ignore them." The operations manager also warned upper management that "it would be extremely difficult to come up with a good excuse for not fixing the mechanical items on as to why we have not addressed the mechanical items on the l ist that need to be corrected here at the refinery after being down so long." Despite this warning, upper management was involved in restarting the facility at the end of August 2006, when problems such as the CEMS monitor and flare remained uncorrected. 1 3 . PRC provided false information to the State of Louisiana and the State of Texas concerning the sale of asphalt as set forth below. PRC sold asphalt within programs established by the State of Louisiana and the State of Texas. I n both states, PRC asphalt was sold to suppliers under the State approved programs for use on highways constructed with federal highway grants. I n both states, PRC was required to certify that the asphalt that was being produced met the State' s specifications. This was done by submitting documentation showing the analysis of a sample of the asphalt that was on hand to sell, and by providing the State authorities with a quart size sample of the asphalt itself. The laboratory results tested various qualities of the asphalt to assure that it was the particular type authorized for sale. The factors included, among others, tests for flash point, viscosity, and ductility. Once purchased, asphalt from Pelican was typically mixed with asphalt from other sources before being used in highway projects. It was also subj ect to further testing. If the asphalt did not meet specifications, it could not be sold or used. It is not known whether any asphalt was ever rej ected on the job site in Louisiana or Texas. 1 4. In Louisiana, Pelican received a laboratory number from the Louisiana Department of Transportation and Development once the State verified the quality of the sample submitted. The approval would allow Pelican to ship the amount that had been certified to be in a tank at that time. However, in certain instances, Pelican's lab submitted an analysis that was performed on asphalt that was not in the tank, but rather was created in the lab itself. A "lab blended" sample was also sent to Louisiana without disclosing that it was not actually from a tank. Lab blended asphalt samples of asphalt grade PG 70-22 were sent to Louisiana, and the asphalt that was sold was actually blended in trucks. This was because Pelican lacked serviceable tanks in which to make the asphalt. The form used to submit the certificate of analysis had a box indicating the tank sampled which was either left blank, or contained a false tank number. For example, a form dated October25, 2007, submitted by the Defendant to the State of Louisiana Department of Transportation and Development indicated that a sample had been successfully tested of 1 90,000 gallons. On October 3 1 , 2007, the asphalt facilities manager received a laboratory number from the Louisiana authorizing the sale of 1 90,000 gallons of PG 70-22 asphalt from tank 5-36. In other instances, where the asphalt sold did originate from tanks, there: were other irregularities such as selling product that had been altered after it had been certified and without re-certifying the asphalt. 1 5 . In Texas, Pelican submitted analysis of asphalt along with samples for the State to test. However, there were instances where false paperwork and samples were submitted to Texas. For exampl e, there were instances where Texas received a lab blended sample rather than -6-

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a sample of asphalt existing in any tank. One reason that this was done was that the analysis of what was in the tank failed the test in some respect and thus could not be sold without modification and additional testing. The sample was modified and submitted to the State as reflective of what was on hand, when at the time, there had been no modification of the contents of the tank. In other instances, Texas was sent an old sample from a stockpile that the asphalt facilities manager maintained in his office. The old saved samples were examples of passing grades of asphalt. They were then submitted to Texas with a certificate of analysis with false information indicating the date sampled and the date tested. The approval given by Texas would allow PRC and PRC Asphalt to sell the approved product for a month before a new test and sample was required to be submitted. Old quart samples of asphalt that had been drawn and tested months before were submitted to Texas along with an analysis which, while accurate for what was in the can, actually had been performed at a prior point in time when the sample was taken. 1 6. In pleading guilty, the Defendant acknowledges that it violated its Title V Permit as set forth herein during the period including August2005 through 2006. Defendant further acknowledges that there were releases of hazardous air pollutants including H2S, benzene, ethylbenzene, toluene, and xylene from the Pelican refinery in Lake Charles, Louisiana, and that it negligently released and caused the release into the ambient air extremely hazardous substances. The Defendant further acknowledges that its negligence in overseeing operations at the refinery and fai ling to provide adequate funding for environmental compliance were a proximate cause of the releases and associated risks and failure to comply with permit requirements.

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Case 2:11-cr-00227-RTH-CMH Document 5-3 Filed 10/12/11 Page 8 of 9 PageID #: 41

I have read this Joint Factual Statement and have carefully discussed every part of it with counsel for the Pel ican Refining Company, LLC. I hereby stipulate that the above Joint Factuail Statement is true and accurate to the best of my knowledge, and that had the matter proceeded to trial, the United States would have proved the same beyond a reasonable doubt. I am authorized under the principles of corporate and business association law to bind the Defendant to the foregoing Joint Fa�tual Statement.

Dated

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Don C. Nelson Authorized Corporate Representative Defendant Pelican Refining Company, LLC

I am counsel for Pelican Refining Company, LLC. I have carefully discussed every part of this Joint Factual Statement with my client's corporate representative. To the best of my knowledge, it is a true and accurate factual statement and provides a sufficient factual basis for charges set forth in the Bill of lnformation and Plea Agreement.

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Carl er Counsel for Defendant

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Case 2:11-cr-00227-RTH-CMH Document 5-3 Filed 10/12/11 Page 9 of 9 PageID #: 42

IGNACIA S. MORENO

STEPHANIE FINLEY

ASSISTANT ATTORNEY GENERAL

UNITED STATES ATTORNEY

ENVIRONMENT & NATURAL

WESTERN DISTRICT OF LOUISIANA

RESOURCES DIVISION U.S. DEPARTMENT OF JUSTICE

By:

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chard A. Udell Senior Trial Attorney Environmental Cnmes Section U.S. Department of Justice

�· ,

·�

hristopher Hale Trial Attorney Environmental Crimes Section U.S. Department of Justice ·

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