The ‘huckster site’ and sheep were discovered by police carrying out a proactive search in Draperstown on Wednesday.
Chief Inspector Alan Hutton said a multi-agency operation, involving HMRC, DARD and PSNI, commenced following the discovery at Drumderg Road.
As a result, a 32-year-old man was arrested on suspicion of theft as well as possession of class B controlled drugs after a quantity of suspected herbal cannabis was also found.
He was later released on bail pending further enquiries.
Pat Curtis, National Oils Co-ordinator, HMRC, commented: “Yesterday’s joint activity has stopped illicit fuel entering the legitimate market, preventing further revenue loss and helping legitimate traders fight unfair competition.
“It is wrong that honest businesses should be undercut by criminals and those involved in making or selling laundered fuel.”
PSNI Chief Inspector Hutton added: “This operation shows our ongoing commitment to tackling all kinds of rural crime.
“I would ask anyone who knows anything about rural crime in their area to contact their local police on the non-emergency number 101.”