By Andrew J. Hawkins, Crain News Service
NEW YORK (March 19, 2013) — A major New York gas and fuel company has been accused by a group of building owners of selling heating oil contaminated with used car engine oil, according to a lawsuit filed in Manhattan court on March 18.
Castle Oil Corp., which describes itself as "the New York metropolitan area's largest independent fuel oil distributor," allegedly dispensed heating oil mixed with waste oil to at least three separate Manhattan commercial and residential buildings, according to the plaintiffs.
In the civil complaint, the landlords claim that not only did Castle violate the law prohibiting the use of waste oil in the heating of buildings; it also scammed the buildings' owners by selling them a useless product.
Castle Oil vehemently denied the charges. "Every day the laboratory at our bulk plant in the Bronx does an analysis of the product leaving the terminal," said Michael Meadvin, senior vice president and general counsel. "Everything coming out of the terminal complies with the legal specifications of the product involved. It's all 100-percent legal."
The plaintiffs are three limited liability companies that own and operate commercial and residential properties in Manhattan: a 68-unit apartment building at 615 W. 183rd St., and two office buildings at 307 W. 38th St. and 498 Seventh Ave.
Robert F. Kennedy Jr., an environmental lawyer and son of the slain political leader, is among the attorneys representing the plaintiffs. He is the chief prosecuting attorney for Riverkeepers, an environmental advocacy organization.
The plaintiffs allege that over an unspecified period of time, Castle engaged in a scheme they refer to as "the blend game" in which used engine oil was mixed with heating oil, and then fraudulently sold to the victims as No. 4 and No. 6 heating oil for between $1.50 and $4 per gallon. Only one delivery, of 3,000 gallons, made on Nov. 12, 2012, is cited in the complaint.
Castle would purchase waste oil from an unnamed company that collects the substance from gas stations, garages and oil-burner services throughout the northeast, the suit alleges. The company would then blend the used oil with unused heating oil without first re-processing the material as required by law. In New York, only pure distillate, residual oil, re-refined oil or a blend may be used as heating oil. The building owners said Castle failed to re-process the waste oil before selling it.
"In New York City, only pure distillate, residual oil, re-refined oil, or a blend thereof may be used as heating oil," the plaintiffs write. "Even if oil is re-refined for use as heating oil, it is criminal for sellers of No. 4 and No. 6 to misrepresent the composition of the oil they sell or to fail to disclose that the oil they sell has been reclaimed (used and filtered) or re-refined."
Waste oil contains a number of hazardous materials—like metallic residue from engine parts that can damage commercial boilers and become harmful to the environment. Moreover, waste oil has little, if any market value, the plaintiffs said. Castle was said to have charged the victims between $1.50 and $4 per gallon of heating oil, a total amount they are looking to reclaim as part of the lawsuit.
In late 2011, the Bloomberg administration announced plans to phase out the use of No. 4 and No. 6 heating oil in order to improve air quality and cut down on building pollutants.
"It's basically smoke and mirrors," Castle Oil's Mr. Meadvin said. "Castle makes 108,000 deliveries a year. They are objecting to one delivery made in 2012 to one building; that is the only building they bring into issue. They don't have any lab test results. They don't have anything to support their accusations."
Castle, which started 80 years ago as a coal delivery company, operates two marine terminals with 40 million gallon fuel capacity and barge and ocean liner offloading capabilities, and more than 100 fuel delivery and service trucks.
Castle President Mauro Romita states on the company's website that "it is the policy of Castle Oil Corp. to provide the highest possible quality of products and services to satisfy customer needs and requirements."
Reporter Jeremy Smerd contributed to this article, which appeared in Crain's New York Business magazine, a New York City-based sister publication of Tire Business.