Attorney General James and Governor Hochul Announce $2 Million Penalty Against Company That Unlawfully Operated Oil Wells

James Lee Ordered to Plug Hundreds of Oil Wells That
Jeopardized Drinking Water in Steuben and Cattaraugus Counties

Decision Includes Largest-Ever Financial Penalty Imposed for Well-Plugging Violations 

NEW YORK – New York Attorney General Letitia James and Governor Kathy Hochul today announced a $2 million judgment in a lawsuit against James R. Lee and his corporate affiliates for flagrant violations of the state’s oil and gas well regulations and endangering communities in Steuben and Cattaraugus counties. Lee and his companies were ordered by a State Supreme Court judge to pay the penalty — the largest financial penalty imposed in an oil and gas well case — and to bring his oil wells into full compliance with state laws. For years, Lee and his companies did not properly plug the wells they operated, which posed a significant danger to drinking water supplies and of releasing methane in the areas surrounding the wells.  

“This is a crucial win for our efforts to protect New York’s air and water. These unlawfully operated oil wells threatened drinking water for countless families in the Southern Tier and Western New York and posed significant harms to the environment,” said Attorney General James. “This case should make it clear that New York will stand up to anyone that threatens the health of our communities or our natural resources. I am grateful to Governor Hochul, Commissioner Seggos, and our partners at DEC for their partnership in stopping polluters and protecting the people.” 

“My administration is laser focused on taking decisive action in order to protect drinking water in communities across the state, and the record financial penalty announced today is a major victory for New York,” said Governor Hochul. “We remain steadfast in our efforts to hold accountable anyone who jeopardizes the health and safety of New Yorkers. I thank Attorney General Letitia James for her partnership in taking action to protect the public health and environment in Steuben and Cattaraugus counties.”

“This judgment is a significant day of reckoning for Lee and his companies after years of blatant disregard for New York state’s stringent requirements at hundreds of oil well sites in Steuben and Cattaraugus counties,” said DEC Commissioner Seggos. “I thank Attorney General James, her team, and my staff for their tireless work to bring this persistent violator to justice. This precedent-setting case demonstrates that New York state will leave no stone unturned in aggressively pursuing polluters and holding them accountable for the damage they wreak on our environment and communities.”

For many years, Lee and his shell corporate affiliates — Lee Oil Company, Inc., Whitesville Producing Corporation, Whitesville Production Corp., Allegro Oil & Gas Inc., and Allegro Investments Corporation — owned or operated hundreds of oil wells in Steuben and Cattaraugus counties. These unlawful operations were the subject of numerous enforcement actions brought by the Office of the Attorney General (OAG) and DEC. After failing to follow environmental laws and properly plug more than 400 of the wells, OAG and DEC filed a lawsuit against Lee and his companies to force them to comply including properly plugging their wells, as well as to pay penalties for their longstanding and flagrant violations. 

The court ruled in favor of OAG and DEC in their case against Lee, and determined that: 

  • Defendants failed to plug more than 400 oil wells;
  • Defendants failed to submit over 10 years of required annual reports for the wells;
  • Defendants failed to file required DEC Organizational Reports for the well operators;
  • Defendants failed to provide adequate financial security intended to ensure the wells’ plugging;
  • James Lee is personally liable for the penalty and for bringing the wells into compliance and is not shielded by his defunct corporate affiliates; and
  • Responsibility to plug the wells can pass on to successor owners of the affected mineral property.

The $2 million penalty was imposed on Lee and his corporate affiliates, based in part, on the fact that the state proved Lee benefitted financially — by at least $1 million — by failing to comply with the state’s environmental law and remitting judgments against them. In its decision, the court found that Mr. Lee and his companies have violated these laws for years and have ignored the state’s repeated attempts to bring Mr. Lee and his companies into compliance.  

Unplugged oil and gas wells pose serious threats to drinking water supplies and the overall environment. Several of Lee’s wells have already discharged oil to surrounding waters and pose ongoing public health threats. Additionally, these wells can emit methane, a potent greenhouse gas that greatly contributes to climate change.  

The court said its decision needed to carry a strong message to discourage other well operators from considering abandoning their own obligations at oil and gas wells around New York state and leaving taxpayers to pay for their plugging. The decision also establishes important real property law precedent that may be used to require owners of properties with unplugged wells to fully comply with the state’s well plugging requirements. 

The DEC will continue to provide rigorous oversight of Lee’s wells and work to ensure the court’s order is followed by bringing all wells into compliance. Mr. Lee has claimed an inability to pay for the plugging, but DEC will seek to recover assets he has that may be used to fulfill the obligations imposed by the judgment. 

The matter was handled by Assistant Attorneys General Meredith Lee-Clark and Brian Lusignan, supervised by Senior Counsel for Enforcement Andrew Gershon and Bureau Chief Lem Srolovic of the OAG Environmental Protection Bureau. The Environmental Protection Bureau is a part of the Division for Social Justice, which is led by Chief Deputy Attorney General Meghan Faux and overseen by First Deputy Attorney General Jennifer Levy. For DEC, the matter was handled by Office of General Counsel Attorney David Keehn, with support from Division of Mineral Resources Section Chief Ted Loukides, supervised by Lisa Wilkinson and Scott Crisafulli, with DEC's Deputy Commissioner and General Counsel Thomas S. Berkman.