DEP v. B&R Resources, LLC & R.F. Campola ( 2021 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Department of Environmental :
Protection, :
Petitioner :
:
v. : No. 291 C.D. 2020
: Argued: April 12, 2021
B&R Resources, LLC and :
Richard F. Campola, :
Respondents :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge (P.)
HONORABLE ANNE E. COVEY, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
JUDGE COHN JUBELIRER FILED: December 6, 2021
Section 3220(a) of the Act of February 14, 2012, P.L. 87 (2012 Oil and Gas
Act), requires an owner or operator of an abandoned gas well1 to plug the well “to
stop [the] vertical flow of fluids within the well bore.” 58 Pa.C.S. §3220(a). Aware
of this obligation since December 2011 and after stipulating as to this obligation in
2016, B&R Resources, LLC (B&R) and its sole director and managing member,
Richard F. Campola (Campola) (together, Respondents), took no action on
numerous notices of violation issued by the Department of Environmental Protection
1
An abandoned well is one “that has not been used to produce, extract or inject any gas,
petroleum or other liquid within the preceding 12 months,” where the “equipment necessary for
production, extraction or injection has been removed,” or “considered dry and not equipped for
production within 60 days after drilling, redrilling or deepening” but does not include a well that
is granted inactive status. Section 3203 of the 2012 Oil and Gas Act, 58 Pa.C.S. § 3203.
(DEP), requesting that B&R plug its abandoned wells (Wells). The Environmental
Hearing Board (EHB) ultimately found Campola personally liable for plugging all
the Wells, and in B&R Resources, LLC v. Department of Environmental Protection,
180 A.3d 812 (Pa. Cmwlth. 2018) (B&R I), this Court affirmed the determination
that Campola could be held personally liable but vacated and remanded for a new
determination on how many of the 47 Wells could have been plugged had Campola
“caused B&R to make reasonable efforts to plug the Wells.” Id. at 822. Upon
remand, after a hearing and a review of evidence of B&R’s financial resources, the
EHB answered this question in its February 14, 2020 Adjudication (2020
Adjudication), concluding Campola was personally liable for plugging 4 of the 47
Wells. DEP now petitions for review, arguing that the EHB did not properly apply
the standard set forth in B&R I when it limited Campola’s personal liability to only
four violations, did not issue factual findings that are supported by substantial
evidence, and did not comply with its obligations under article I, section 27 of the
Pennsylvania Constitution, PA. CONST. art. I, § 272 (Environmental Rights
Amendment or ERA).3
2
Article I, section 27 of the Pennsylvania Constitution provides:
[t]he people have a right to clean air, pure water, and to the preservation of the
natural, scenic, historic and esthetic values of the environment. Pennsylvania’s
public natural resources are the common property of all the people, including
generations yet to come. As trustee of these resources, the Commonwealth shall
conserve and maintain them for the benefit of all the people.
PA. CONST. art. I, § 27.
3
We have reordered the arguments for ease of discussion.
2
I. Background
A. Facts
Campola purchased B&R in 2011 and makes all operational decisions. B&R
I, 180 A.3d at 814-15. Between December 2011 and June 2015, DEP advised
Campola that numerous B&R wells, including the 47 Wells at issue, were abandoned
and had to be plugged. Id. at 814. DEP also asked Campola, at least once, for a
well-plugging schedule in accordance with 25 Pa. Code § 78.91(a),4 which would
bring the Wells into compliance. Campola did not provide any schedule, and B&R
did not plug the Wells or return them to production. DEP issued an Administrative
Order on June 22, 2015, finding that the Wells were abandoned, as owner/operator
B&R had to plug the Wells, and Campola was also liable for plugging the Wells
because he had “personally participated” in B&R’s failure to plug the Wells. Id.Respondents appealed the Administrative Order to the EHB.
B. The EHB’s 2017 Adjudication
4
This regulation states that
[u]pon abandoning a well, the owner or operator shall plug the well . . . unless one
of the following applies:
(1) [DEP] has granted inactive status . . . .
(2) The well is part of a plugging schedule that has been approved by [DEP]
and the operator is complying with the schedule, and the schedule takes into
account potential harm that the well poses to the environment or public health
and safety.
(3) [DEP] has approved the identification of the well as an orphan well . . . and
. . . has not determined a prior owner or operator received economic benefit
after April 18, 1979, from this well other than economic benefit derived only as
a landowner or from a royalty interest.
25 Pa. Code § 78.91(a).
3
Prior to an evidentiary hearing, the parties stipulated that the Wells were
abandoned, B&R was required to plug the Wells, and B&R had not done so. The
only remaining issue for the EHB to address, therefore, was whether Campola was
personally liable. At the evidentiary hearing, “Campola testified that he made a
business decision that B&R would spend its funds on its producing wells, on
bringing wells into production, and on other expenses, and that it would not spend
any funds to plug any of the Wells.” B&R I, 180 A.3d at 816 (emphasis added).
Also introduced was a letter from Campola to DEP, wherein Campola stated that
B&R was being singled out, asked that B&R be allowed to fix the problems without
DEP’s interference, “blam[ed] landowners, the laws of Pennsylvania and ‘sketchy
records’ at [DEP] for being [why B&R was] unable to turn on more wells,” and
indicated that “‘as to the violations, B&R [was] not in any position to plug wells at
th[at] time’” and that “B&R’s ‘intent was never to plug the [W]ells, but to produce
them.’” (2017 Adjudication at 15-16 (quoting DEP Ex. K, Reproduced Record
(R.R.) at 293a).) Respondents argued that Campola could not be liable under the
participation theory of liability, which can be used to impose personal liability on
individual officers of limited liability companies for violations of environmental
statutes based on their personal actions, because B&R did not have the financial
resources to plug the Wells. B&R I, 180 A.3d at 818-22; Kaites v. Dep’t of Env’t
Res., 529 A.2d 1148, 1152 (Pa. Cmwlth. 1987); (R.R. at 54a-56a, 78a-84a, 124a-
25a).
The EHB issued its 2017 Adjudication, finding Campola personally liable for
B&R’s failure to plug all 47 of the Wells and dismissing Respondents’ appeal. The
EHB observed that “Campola’s letter makes clear that he understood that failing to
plug the [W]ells was a violation, that he had no plans to plug any [W]ells, and that
4
he wanted to resolve the matters without the involvement of [DEP].” (2017
Adjudication at 16.) According to the EHB, however, notwithstanding Campola’s
request that B&R be able “to fix the problems without [DEP] interference,” “there
was no evidence presented that [] Campola fixed any of the problems or plugged a
single . . . Well,” which “support[ed] a finding that [] Campola intentionally
neglected to deal with the violations . . . .” (Id. at 18-19.) The EHB further rejected
the argument that Campola could not be held liable based on B&R’s lack of financial
resources, explaining that “[w]hile B&R [] had some financial difficulties, it also
had some financial resources that . . . Campola decided to spend for other purposes
rather than [to] correct the violations . . . .” (Id. at 20-21.) Finally, the EHB held
that, as sole member and managing member of B&R, Campola made all operational
decisions for B&R, including how to spend B&R’s funds, and had the authority and
duty to address the violations but took no action to do so. Respondents appealed the
2017 Adjudication to this Court.
C. B&R I
On appeal, Respondents argued that Campola could not be individually liable
because his only involvement in B&R’s failure to plug the Wells was his inaction,
and the EHB erred in relying on his role as sole member and manager to impose
liability. Respondents further argued that, to the extent Campola could be liable,
that liability had to “be limited to the number of wells that B&R could have plugged
if its resources had been used to plug the Wells.” B&R I, 180 A.3d at 817. This
Court rejected the first two arguments5 but found merit in the third because a limited
5
The Court held that a corporate officer’s intentional and knowing refusal to take action
can give rise to personal liability under the participation theory, which is what occurred when
Campola did not act on B & R’s obligation to plug the Wells despite knowing of that obligation.
(Footnote continued on next page…)
5
liability company officer could be “liable for a statutory violation under the
participation theory only if there is a causal connection between [the officer’s]
wrongful conduct and the violation.” Id. Applying this standard to this situation,
we explained:
Because Campola is individually liable only for those violations to
which his conduct contributed, he can therefore be liable only for those
wells that B&R could have plugged if he had undertaken to bring B&R
into compliance with DEP’s directives.
The EHB did not find that there was any possibility that B&R could
have plugged all 47 of the Wells or even a high percentage of the Wells.
The EHB held only that B&R had “some financial resources that . . .
Campola decided to spend for other purposes rather than correct the
violations.” . . . Because there was no showing or finding that
Campola’s decision that B&R would not plug the Wells contributed to
the failure to plug all 47 Wells, the EHB’s ruling that Campola is liable
for all 47 cannot stand.
The EHB did not make any finding as to how many of the Wells
B&R could have plugged, if any, nor did it make sufficient factual
findings from which such a determination can be made. . . .
Remand to the EHB is therefore required for the EHB to adjudicate the
extent of Campola’s liability, if any.
Accordingly, we reverse the EHB’s dismissal of Campola’s appeal and
its holding that Campola is liable for B&R’s statutory obligation to plug
all 47 of the Wells. Because the EHB’s findings are insufficient, we
remand this matter to the EHB for additional findings of fact as to
how many, if any, of the Wells could have been plugged if Campola
had caused B&R to make reasonable efforts to plug the Wells and
for an adjudication of Campola’s liability in accordance with those
findings.
Second, we explained the EHB had not relied on Campola’s status as owner and manager, but on
its factual findings “that [Campola] knew of B & R’s obligation to plug the Wells,” made the
decision that B & R would not plug the Wells, and “had B & R spend its financial resources for
purposes other than complying with DEP’s directions . . . .” B & R I, 180 A.3d. at 821.
6
Id. at 821-22 (bold emphasis added).
D. The EHB’s 2020 Adjudication
On remand, the parties offered differing interpretations of the scope of the
Court’s remand instructions, neither of which the EHB accepted. According to the
EHB, the Court’s instructions did not allow it, as DEP argued, to make decisions
based on hypotheticals, such as entering into a plugging schedule or purchasing a
pipeline,6 or to find that most, if not all, of B&R’s income should have been used to
plug the Wells. Those instructions, the EHB held, also did not allow it to treat the
statutory obligation to plug the Wells as an “afterthought to other business
requirements,” and defer wholly to Campola’s business judgment, as Respondents
suggested. (2020 Adjudication at 11, 15.) Instead, focusing on the Court’s use of
the phrase “reasonable efforts,” the EHB explained it had to determine “what
constitutes a reasonable effort by B&R [], under [] Campola’s direction, to meet its
statutory obligation” given B&R’s financial resources. (Id. at 11.) The EHB settled
on a standard that considered whether the expenditures were actually made, whether
the expenditures were supported by documentation, and whether the expenditures
were “legitimate business expenses that B&R was required to expend in order to
remain in business.” (Id. at 15 (emphasis added).) The EHB then examined the
evidence of B&R’s financial resources and Campola’s actions that was presented at
6
The record shows that in 2015 the main purchaser of B & R’s gas, National Fuel Gas
Distribution Corporation (National Fuel), stopped operating its Q3 pipeline, which left B & R with
limited or no distribution for its gas. (R.R. at 1020a-22a.) B & R discussed purchasing the Q3
pipeline with National Fuel to keep it online, which Campola testified would cost between $70,000
and $80,000, but those discussions ended when DEP issued the Administrative Order. Campola
testified that there was no longer an option to purchase the line because he had to protect himself.
(Id. at 1022a.) He explained that, given the price of gas at the time, it would not have been a good
business decision to purchase the line because the expenses would have exceeded the revenues.
(Id. at 1024a.)
7
the prior hearing and the one-day evidentiary hearing on remand to determine how
many Wells B&R could have plugged had Campola’s wrongful conduct not
prevented B&R from doing so. (Id. at 12.)
The EHB incorporated its prior findings of fact from the 2017 Adjudication
and made the following additional findings. The relevant time period for reviewing
B&R’s finances is from August 2011, when Campola purchased B&R, to June 2015,
when DEP issued the Administrative Order. DEP’s financial expert, David Duffus,
and Respondents’ financial expert, William Beaufait, reviewed B&R’s finances and
calculated an annual book net loss for B&R, which was determined by subtracting
B&R’s total deductions from its total income. (2020 Adjudication, Findings of Fact
(2020 FOF) ¶¶ 5-6.) B&R’s annual book net losses were: $31,495 for 2011; $39,563
for 2012; $438 for 2013; $24,628 for 2014; and $19,703 for 2015, which resulted in
a total net book loss of $115,827. (Id. ¶¶ 7-8.) These calculations included
deductions for depreciation, expenditures that DEP labeled “discretionary,” and loan
or other payments made by B&R. The EHB took the total net book loss and then
reviewed each type of deduction to determine if any of those amounts “could have
been allocated to plugging wells had [] Campola directed that the company make a
reasonable effort to do so.” (2020 Adjudication at 13.)
The EHB began with the depreciation that B&R had taken over the relevant
time period, which was: $44,279 for 2011; $76,313 for 2012; $59,794 for 2013;
$42,195 for 2014; and $21,098 for 2015, for a total of $243,679. (2020 FOF ¶¶ 9-
12.) Concluding that depreciation constituted an accounting measure and not actual
cash expenditures, the EHB held that the depreciation of $243,679 should be added
back into B&R’s finances. When this was done, instead of a net book loss of
8
$115,827, there was no loss and an adjusted gain of $127,852. (2020 Adjudication
at 15.)
The EHB next examined B&R’s discretionary expenditures. Between August
2011 and June 2015, B&R paid $124,526 for pumper fees, $57,941 for line repairs,
$50,151 in legal fees, and $36,273 in catch-all expenses. (2020 FOF ¶ 13.) DEP
argued the discretionary expenditures should be added back into B&R’s financial
resources. Campola and Beaufait testified these expenditures were normal,
legitimate business expenditures that should not be added back into B&R’s financial
resources. While they described the pumper fees, line repair fees, and legal fees to
avoid a default judgment as being necessary to continue to operate B&R, other
expenses were generally described as being “business-related,” “ordinary, normal,”
or “helpful” to B&R’s operation. (R.R. at 54a-56a, 78a-84a, 124a-25a, 1008a-13a,
1020a-21a, 1099a-1100a, 1109a-10a, 1115a-18a, 1120a, 1123a-24a, 1129a, 3368a.)
Applying its standard that considered whether these were “legitimate business
expenses that B&R was required to expend in order to remain in business,” (2020
Adjudication at 15), the EHB held that the pumper fees, which are paid to someone
to maintain and service the wells,7 and the line repair costs were necessary. It
reasoned that without the pumper’s services, B&R could not have continued to
produce the wells and generate income, and the line repairs were needed to prevent
gas leaks, which would result in less detriment to the environment and more gas to
sell. The EHB concluded that the legal fees were incurred because B&R “was
involved in litigation arising out of disputes with several of its lease holders and
7
Campola’s son acted as a pumper for B & R for part of the relevant time period, and,
therefore, some of the $124,526 was paid to him. The EHB found that the amount of pumper fees
paid during the relevant time period “were genuinely consistent with the fees paid by B & R . . .
prior to . . . Campola’s ownership of the company.” (2020 FOF ¶¶ 14-15.)
9
royalty owners.” (2020 FOF ¶ 17.) It held that “[g]iven the nature of the disputes,
the evidence [did] not convince [the EHB] that B &R [] had much choice but to
legally defend its interests,” it was reasonable to hire counsel to help, and there was
no evidence that the amounts charged were unreasonable. (2020 Adjudication at
16.) As for the catch-all expenses, which included items like office supplies, travel,
professional dues, and meals and entertainment, the EHB found they “were minimal
and in line with the amount and type of expenses incurred by a typical independent
oil and gas well company.” (2020 FOF ¶ 18.) Accordingly, the EHB concluded that
the discretionary expenditures were “legitimate business expenses that B&R [] was
required to expend to remain in business” and would not be added back. (2020
Adjudication at 15-16.)
The EHB next reviewed B&R’s loans and loan payments, as well as
transactions between B&R and Campola personally. B&R was liable to repay loans
to Cortland Bank, related to the purchase of equipment and evidenced by executed
loan documents, and to Kurt Latell, which was evidenced by a promissory note.
(2020 FOF ¶¶ 19-21, 24.) B&R paid $38,691 to Cortland Bank and $37,759 to Latell
between August 2011 and June 2015. (Id. ¶¶ 23, 26.) Campola personally received
funds in the amount of $23,020 and $10,856 from B&R in 2014 and 2015,
respectively, but there were no promissory notes or loan documents related to these
funds. (Id. ¶ 27.) Per the record, B&R received what appears to have been a loan
of $28,000 in 2011 from Select Energy, another company closely held by Campola,
which B&R repaid in 2013, for which there were no documents. (R.R. at 913a-14a,
946a-47a, 950a, 952a, 1066a-67a.) The record also shows that B&R borrowed more
than $210,000 in no-interest loans from Campola personally to pay the legal
expenses incurred in defending against the Administrative Order between September
10
2016 and August 2019, which were memorialized by loan agreements pledging
B&R’s equipment to Campola and providing no time limit for repayment. (Id. at
1466a-86a, 3318a-44a.) Campola testified that this was a good business decision
because B&R could deduct the legal expenses, B&R had an obligation to protect
Campola, and he had to protect himself. (Id. at 1043a, 1045a-46a.)
The EHB found that B&R’s loan payments to Cortland Bank and Latell were
legitimate expenses, supported by loan agreements, which B&R could not have
ignored without consequences. Therefore, those amounts would not be added back
into B&R’s financial resources. In contrast, the EHB found that the money Campola
received from B&R should be added because there were no loan agreements
supporting the assertion that these were standard business loans. (2020 Adjudication
at 17.) It reasoned that when B&R should have been complying with its statutory
obligations, Campola’s decision to take company funds “for his personal use was
wrongful conduct and did not constitute a reasonable effort to meet its obligations.”
(Id.) The EHB did not address the $28,000 transaction with Select Energy or DEP’s
assertion that B&R’s ability to borrow money, as demonstrated by the loans it
received from Campola to litigate this matter, should have been included in
determining B&R’s financial resources.
Based on the EHB’s review of B&R’s financial resources and transactions,
the EHB held that B&R had $85,2788 in funds available to plug the Wells, which
“Campola wrongfully directed away from [B&R complying with its] statutory
obligations.” (Id. at 18.) Dividing that amount by $18,500, which the parties
8
This number is derived from adding the $23,020 and $10,856 in funds Campola received
from B & R to the $127,852 adjusted gain after B & R’s depreciation was added back, and
subtracting $76,450, the amount B & R repaid in loans to Cortland Bank and Latell, from that
amount. Thus, $127,952 + $23,020 + $10,856 - $76,450 = $85,278.
11
stipulated was the average cost to plug a well, the EHB found that Campola
personally prevented B&R from plugging four of the Wells and that he would be
personally liable for those Wells. Accordingly, the EHB dismissed Campola’s
appeal as to those Wells and granted the appeal as to the remaining 43 Wells
identified in the 2015 Administrative Order. DEP thereafter filed a petition for
reconsideration based on the EHB’s failure to consider the $28,000 B&R received
and then returned to Select Energy. The EHB held that it did not fail to consider
those funds but considered and determined that no adjustment was warranted
because it was essentially a “wash” for both companies. (R.R. at 3452a-53a.) DEP
now petitions this Court for review.9
9
“This Court’s review of the EHB’s adjudication is limited to determining whether the
EHB violated constitutional rights or committed errors of law, or whether any necessary findings
of fact are not supported by substantial evidence.” B & R I, 180 A.3d at 817 n.2. Issues of law
are subject to this Court’s plenary, de novo review. Id. The “[r]esolution of conflicts in the
evidence and questions of witness credibility and evidentiary weight are within the EHB’s
exclusive discretion,” and “in determining whether substantial evidence exists, [this Court must]
view the record in the light most favorable to the party that prevailed before the EHB, and give
that party the benefit of all reasonable inferences that can be drawn from the evidence.” Id.
Substantial evidence is such “relevant evidence upon which a reasonable mind could base a
conclusion.” MKP Enters., Inc. v. Underground Storage Tank Indemnification Bd., 39 A.3d 570,
579 (Pa. Cmwlth. 2012).
12
II. Discussion
There is no dispute that the Wells are abandoned, that B&R has the statutory
obligation to plug those Wells, and that, after B&R I, Campola can be held personally
liable to the extent that his wrongful conduct caused B&R’s failure to comply with
its statutory obligations. The issues before the Court are whether: the EHB exceeded
the scope of B&R I’s remand instructions by reviewing Campola’s expenditures of
B&R’s resources or revising its prior disposition of Campola’s appeal; the EHB
erred in applying the legal standard set forth in B&R I by holding that only 4 of the
47 Wells could have been plugged had Campola caused B&R to make reasonable
efforts to comply with the statutory mandate that abandoned wells must be plugged;
the EHB violated the ERA; and, if any of the above occurred, a remand is required.
We address these issues in turn.
A. Whether the EHB Exceeded the Scope of B&R I’s Remand Instructions
DEP first argues that the EHB did not comply with this Court’s remand
instructions when it reconsidered whether Campola’s conduct in directing funds to
pay for things other than plugging the Wells was wrongful, despite the EHB having
already made that determination in the 2017 Adjudication, which was upheld in B&R
I. Such redetermination, DEP maintains, violates the law of the case doctrine.
Respondents reply that because B&R I required a causal link between Campola’s
conduct and B&R’s failure to plug the Wells, a redetermination as to the nature of
Campola’s conduct was necessarily required. Therefore, Respondents assert the
EHB did not exceed the Court’s remand directive.
Pursuant to Pennsylvania Rule of Appellate Procedure 2591(a), upon remand
by an appellate court, a governmental unit “shall proceed in accordance with the
judgment or other order of the appellate court . . . .” Pa.R.A.P. 2591(a). “[I]t has
13
long been the law in Pennsylvania that following remand, [an administrative agency]
is permitted to proceed only in accordance with the remand order.” Commonwealth
v. Sepulveda, 144 A.3d 1270, 1280 n.19 (Pa. 2016). “Where a case is remanded for
a specific and limited purpose, issues not encompassed within the remand order may
not be decided on remand.” Levy v. Senate of Pa., 94 A.3d 436, 442 (Pa. Cmwlth.
2014) (internal quotation and citation omitted).
There can be no dispute that B&R’s conduct was wrongful and violated the
2012 Oil and Gas Act and that it is liable for those violations and that Campola, who
made the decisions regarding how B&R expended its funds, likewise engaged in
wrongful conduct by actively avoiding and resisting B&R’s known legal obligations
to plug the Wells. The EHB made this determination in 2017, which was upheld in
B&R I, and it is Campola’s wrongful conduct that exposes him to personal liability
under the participation theory. B&R I, 180 A.3d at 821-22. Evidence of Campola’s
refusal to ensure B&R’s compliance with Section 3220(a) is found in his own
testimony that B&R “would spend its funds on its producing wells, on bringing wells
into production, and on other expenses” and “would not spend any funds to plug
any of the Wells.” Id. at 816 (emphasis added) (citing Nov. 9, 2016, Hr’g Tr. at 52-
54, 70-71, 101-06, R.R. at 77a-79a, 95a-96a, 126a-31a). Additional evidence is
found in Campola’s letter to DEP, in which Campola made clear that B&R was not
intending to plug any Wells because it wanted to produce them, (R.R. at 293a), as
well as in the lack of evidence showing any effort by B&R to resolve any of the
violations, despite Campola’s request that he be allowed to do so without DEP’s
interference, (2017 Adjudication at 18-19).
In B&R I, this Court remanded the matter for the EHB to make “findings of
fact as to how many, if any, of the Wells could have been plugged if Campola had
14
caused B&R to make reasonable efforts to plug the Wells and for an adjudication of
Campola’s liability in accordance with those findings.” 180 A.3d at 822. While
these instructions did not call for the EHB to re-review Campola’s conduct to
determine if it remained wrongful, they necessarily required the EHB to review and
evaluate Campola’s expenditures of B&R’s funds to determine the number of Wells
for which Campola would be personally liable based on his decisions to spend
B&R’s funds elsewhere. Accordingly, the EHB did not violate the law of the case
or exceed this Court’s remand instructions when it reviewed Campola’s expenditures
to determine if he would be personally liable for plugging any of the Wells. Further,
to the extent DEP argues it was error for the EHB to change its disposition regarding
Campola’s individual appeal by now denying it as to four Wells and granting it for
the remaining Wells, this change was consistent with the Court’s directive and the
EHB’s liability determination that B&R could have plugged 4 Wells had Campola
caused it to make reasonable efforts.
We now turn to DEP’s arguments that the EHB erred in interpreting and
applying the standard set forth in B&R I in finding Campola personally liable for
plugging only four of the Wells.
B. Whether the EHB Applied the Proper Standard in Determining B&R’s
Financial Condition
DEP argues that while B&R I directed the EHB to make findings regarding
B&R’s financial ability to plug the Wells, the opinion was silent as to what standard
should apply. DEP asserts that the standard the EHB should have applied was the
corporate financial inability standard as described in CST, Inc. v. Mark, 520 A.2d
469, 472 (Pa. Super. 1987). To meet this standard, DEP argues, the officer must
establish that “the corporation is unable to avail itself of a business opportunity” by
showing that the corporation’s “financial inability [] amount[ed] to insolvency to the
15
point where the corporation is practically defunct.” Id. at 471-72 (citation omitted).
Using this standard, DEP argues, encourages companies to work with DEP to resolve
statutory violations and encourages corporate officers to make reasonable efforts in
order to avoid personal liability. DEP asserts that, when this standard is applied
here, Respondents did not prove that B&R was actually insolvent and, therefore,
financially unable to plug the Wells.
Alternatively, DEP argues that the standard the EHB applied, which did not
add back any funds used for allegedly legitimate business expenses, guts the
participation theory because it allows a corporate officer to avoid liability simply by
showing that the expenses directed to be paid in lieu of complying with the
corporation’s statutory obligation were reasonable and typical. Under the EHB’s
standard, DEP asserts, expenses like business lunches or a new car take precedence
over statutory compliance without the ability to obtain recourse from the officer who
made that decision. Such a standard would enable a corporate officer, as Campola
testified here, to decide not to spend funds on remedying statutory violations, but to
spend funds only on the business and still avoid personal liability.
Respondents argue the actual insolvency standard is inconsistent with the
Court’s instructions on remand, which required only reasonable efforts on the part
of Campola and B&R.10 According to Respondents, CST is distinguishable, has
never been used in an environmental matter, should not be used here, and, therefore,
there was no error in the EHB not applying it here. Respondents further assert that
10
Respondents argue that DEP did not raise the “actual insolvency” standard before the
EHB and, therefore, that argument is not preserved for appellate consideration. As DEP points
out in its reply brief, it asserted this standard for measuring B & R’s financial inability in various
briefs filed on remand. (R.R. at 467a-71a, 586a, 600a.) Therefore, we will not find this issue
waived.
16
the EHB’s decision and standard is otherwise consistent with B&R I, which required
only reasonable efforts.
We agree with Respondents that the EHB did not err in not applying CST here.
CST involved whether a corporation’s vice president breached his duty of loyalty to
the corporation by taking a business opportunity for himself. 520 A.2d 469-70. The
vice president argued there was no breach because the corporation was financially
unable to avail itself of the opportunity and, due to that financial inability, he
properly could accept the opportunity for himself. Id. at 472. The Superior Court
rejected this argument, holding that while “financial inability of a corporation to take
advantage of a corporate opportunity is a defense for corporate officers . . . charged
with liability for taking an opportunity,” this “financial inability must amount to
insolvency to the point where the corporation is practically defunct.” Id. (quoting
18B Am. Jur. 2d Corporations § 1790 (1985)). Because the vice president had not
proven that the corporation was insolvent, the Superior Court affirmed the finding
that the vice president had seized a corporate opportunity from the corporation. Id.
DEP asserts the EHB should have applied this strict standard because it would
encourage corporate decision makers to work with DEP to resolve the issues and/or
make those individuals take reasonable steps to resolve the violation in order to
avoid individual liability. However, DEP has not cited, and this Court has not found,
any cases that have applied this standard outside the narrow legal issue involved in
CST. Accordingly, we cannot say the EHB erred by not extending CST’s standard
to this legal situation, given the Court’s remand instructions in B&R I.
It is apparent from our decision in B&R I that the Court did not intend the
application of a standard like that used in CST for determining Campola’s liability.
In finding merit in Respondents’ arguments in B&R I that Campola could not be
17
liable to plug Wells that B&R did not have the financial resources to plug, we
explained that Campola’s decisions not to have B&R plug the Wells and to use its
financial resources for other purposes would “only have a causal effect if B&R had
an ability to plug those Wells.” B&R I, 180 A.3d at 821. However, because the
EHB had “held only that B&R had some financial resources that [] Campola decided
to spend for other purposes rather than [to] correct the violations” and did not make
findings as to how many Wells B&R could have plugged, we remanded for it to
make findings “as to how many, if any, of the Wells could have been plugged if
Campola had caused B&R to make reasonable efforts to plug the Wells.” Id. at
822 (second emphasis added) (internal quotation marks omitted). B&R I thus
instructed the EHB to use a standard of reasonable efforts on the part of Campola
and B&R to determine Campola’s liability. That standard did not link Campola’s
liability to whether B&R was insolvent and incapable of plugging any of the Wells,
but to the reasonable efforts that could have been taken given B&R’s finances.
Based on the standard established in B&R I, there was no error in the EHB not
applying the standard in CST.
DEP also argues that the legitimate business expense standard the EHB
utilized would gut the participation theory of liability which ties into DEP’s next
argument – that the EHB did not properly apply the reasonable efforts standard set
forth in B&R I in finding Campola personally liable for only four Wells.
C. Whether the EHB Properly Applied the Reasonable Efforts Standard in
Determining Campola’s Liability and Made Findings of Fact in Support
of its Determination that were Supported by Substantial Evidence
DEP argues that the EHB erred in applying the reasonable efforts standard as
described in B&R I because the EHB should have considered all of the reasonable
efforts available to B&R, which included: entering into a well-plugging schedule,
18
which had been offered to B&R and would have been a reasonable effort under
Kaites, 529 A.2d 1148; not spending all of its funds on discretionary expenses that
did not address the violations; or using its considerable ability to borrow money from
Campola to meet its statutory obligations. At oral argument, DEP maintained that
the reasonable efforts standard should require at least some attempt or effort to come
into compliance and the record here shows that Campola made no attempt or effort
to have B&R comply with its statutory obligations. Relatedly, DEP asserts that the
EHB’s findings that the discretionary expenditures were legitimate business
expenses that the EHB used to determine B&R’s financial ability are not supported
by substantial evidence because not all of those expenses were necessary for B&R’s
continued operation.
Respondents argue that B&R I’s directive was clear and unambiguous that the
EHB was required to examine B&R’s actual finances and see how many Wells could
be plugged if reasonable, not extraordinary or hypothetical, efforts were made.
According to Respondents, the EHB properly did not consider hypothetical
scenarios proposed by DEP, such as a well-plugging agreement, into which B&R
would not have had the financial ability to enter. Further, Respondents assert, Kaites
does not support DEP’s arguments, the discretionary expenses paid were reasonable
and necessary for B&R to continue its operations, and the decision to borrow money
from Campola for this litigation was likewise reasonable and necessary and should
not be considered in analyzing B&R’s financial resources. As to the substantial
evidence challenge, Respondents argue that the credited evidence supports the
EHB’s considered conclusion that B&R’s financial resources would have only
supported plugging four Wells.
19
B&R I directed the EHB to make “findings of fact as to how many, if any, of
the Wells could have been plugged if Campola had caused B&R to make
reasonable efforts to plug the Wells.” 180 A.3d at 822 (emphasis added). While
the Court in B&R I did not define what constitutes “reasonable efforts,” the term has
been used in case law, which guides our analysis.11 Preliminarily, we note that
“reasonable efforts” is an objective standard that evaluates one’s actions “to
determine whether [the person] exhibited those qualities of attention, knowledge,
intelligence and judgment which society requires of its members for the protection
of their own interests and the interests of others.” Cappelli v. York Operating Co.,
Inc., 711 A.2d 481, 485 (Pa. Super. 1998) (citation omitted) (internal quotations
omitted).12 This is measured by what a reasonable person would do “under the facts
and circumstances presented in a particular case.” Id. In situations involving a
statutory violation, the reasonable person standard may be tied to what “might
reasonably be expected of a person of ordinary prudence, acting under similar
circumstances, who desired to comply with the law.” PA-JICIV § 13.240,
Subcommittee Note (quoting Hayes v. Hagemeier, 400 P.2d 945, 949 (N.M. 1963))
(emphasis added) (internal quotations omitted). While the standard is an objective
one, “[i]t is sufficiently flexible . . . to take into account difference[s] between
persons and their capacity to meet certain situations and the circumstances
11
The term “reasonable efforts” has been used interchangeably with the term “reasonable
diligence.” See, e.g., Appeal of Edge, 606 A.2d 1243, 1246-47 (Pa. Cmwlth. 1992) (holding that
a party suffering a loss due to a breach of contract “has a duty to make reasonable efforts to mitigate
that loss” which requires the exercise of “reasonable diligence”); Cappelli v. York Operating Co.,
Inc., 711 A.2d 481, 485 (Pa. Super. 1998) (stating that “[r]easonable diligence is . . . a reasonable
effort”) (citation omitted).
12
Although not binding on this Court, decisions of the Superior Court may be considered
for their persuasive value when addressing analogous issues. Lerch v. Unemployment Comp. Bd.
of Rev., 180 A.3d 545, 550 (Pa. Cmwlth. 2018).
20
confronting them at the time in question.” Cappelli, 711 A.2d at 485 (citation
omitted) (alteration in original); see also In Interest of C.K., 165 A.3d 935, 942 (Pa.
Super. 2017) (recognizing that the use of the word “reasonable” to modify the word
“efforts” means there are some “practical limitations to such efforts”).
In determining whether a person has engaged in reasonable efforts, courts
have looked at many factors, including the affirmative actions taken by the person
and whether the actions resulted in harm. For example, in C.K., the Superior Court
found a local agency did not make reasonable efforts toward family reunification
when it failed, without explanation, to identify a proper therapist and properly
communicate with therapists, which resulted in months’ long delays in a family
receiving court-ordered therapy. 165 A.3d at 942-44. In other cases, courts have
focused on the affirmative steps a person took to make themselves aware of
information needed to protect their interests. For instance, in Cappelli, the Superior
Court examined whether the plaintiffs in personal injury actions exercised
reasonable diligence in discovering that the company that had investigated air
quality at their workplace was negligent in doing so, thereby contributing to the
progression of their illness, such that the running of the statute of limitations on their
claims would be tolled pursuant to the discovery rule. The Superior Court concluded
that reasonable minds could differ and, therefore, reversed the grant of summary
judgment in the defendant’s favor. Cappelli, 711 A.2d at 488. Specifically, the
Superior Court found the plaintiffs sought medical advice and complained to their
employer, who hired the defendant to investigate. Id. Even after being assured by
the defendant that the air qualify was acceptable, the Superior Court noted that the
plaintiffs continued to complain until the employer hired another company, which
found there were contaminants in the air. Id. Accordingly, the Superior Court held
21
the issue should have gone to the jury to resolve. In contrast to Cappelli, the plaintiff
in Cochran v. GAF Corporation, 666 A.2d 245, 249-50 (Pa. 1995), waited four years
before taking any steps to obtain legal or medical help to ascertain the cause of his
lung cancer and was found, as a matter of law, to have not exercised reasonable
efforts or diligence.
Perhaps most useful in ascertaining the meaning of “reasonable efforts” are
cases that involve the duty to take reasonable attempts to mitigate damages, which
is essentially what B&R I required by framing the issue as how many Wells B&R
could have plugged had Campola caused B&R to take such efforts to mitigate the
statutory violations. In those cases, “[r]easonableness ‘is to be determined from all
the facts and circumstances of each case, and must be judged in the light of one
viewing the situation at the time the problem was presented,” and the fact finder’s
decision of reasonable efforts is entitled to deference if it is supported by the
record. Prusky v. ReliaStar Life Ins. Co., 532 F.3d 252, 259, 261, 263 (3d Cir.
2008). There, the Third Circuit upheld the finding that plaintiffs had not reasonably
mitigated their damages where the record showed that their passive allocation of the
funds at issue was not comparable to their prior, more risky investment strategies.
Id. at 261, 263.
However, actions that continue the wrongful conduct are not efforts that
should be considered reasonable. Marion v. Bryn Mawr Tr. Co., 253 A.3d 682, 705
(Pa. Super. 2021). In Marion, an investment company, which had been involved in
a Ponzi scheme, challenged its receiver’s efforts to mitigate damages as being
unreasonable where the receiver withdrew certificates of deposit (CDs) early to pay
the investment company’s investors. The investment company argued that the
receiver should not have liquidated the CDs prematurely, which resulted in penalties,
22
but held on to the CDs and delayed returning the investors’ money. The Superior
Court rejected this plan because “it was dependent upon continuing some of the same
wrongful actions committed.” Id.Based on our review of the law, it appears that “reasonable efforts” requires
evidence that a person took affirmative action and acted diligently in an effort to
prevent harm and protect the person’s interests, as well as those of others. While the
person is not required to engage in “undue risk, expense, burden, or humiliation[,]”
Prusky, 532 F.3d at 259, they must act as a reasonable person, who desires to comply
with the law, would act under the particular facts and circumstances involved. Thus,
the person’s actions should not simply continue the same wrongful conduct. Marion,
253 A.3d at 705. We now turn to the application of this standard.
1. The Well-Plugging Schedule
DEP first maintains that the reasonable efforts that the EHB should have
considered included Campola having B&R enter a well-plugging schedule with
DEP. It argues that entering into such an agreement would have been like the
consent agreements entered into by the corporate officer in Kaites, who was later
found not personally liable under the participation theory. Doing so, DEP argues,
would have resolved all the violations pursuant to Section 78.91(a) of its regulations,
25 Pa. Code § 78.91(a).
In Kaites, the corporate officer was not personally liable for environmental
violations of the company under the participation theory because there was no
“positive proof” of wrongful conduct or intentional neglect or misconduct by the
officer where the officer had entered into consent agreements with DEP and
attempted, unsuccessfully, to resolve the environmental issues. 529 A.2d at 1151-
52. Certainly, as in Kaites, Campola entering, or negotiating, a well-plugging
23
schedule agreement with DEP, would have been a reasonable effort to plug the
Wells. However, an agreement is not the only example of a reasonable effort, and
the existence of an alternative mitigation strategy does not establish that the strategy
used was unreasonable. Marion, 253 A.3d at 702. The only mention of a well-
plugging schedule is a single sentence in B&R I’s recitation of the facts. Id. at 815.
In conclusion, although entering into or attempting to enter into a well-plugging
agreement would have been a reasonable effort, we cannot say that the EHB erred
in reviewing the established financial aspects of this matter.
2. “Purely Discretionary” Expenditures
DEP next argues that the EHB erred by not including in its reasonable efforts
determination the amounts that Campola should have directed B&R to use to remedy
the violations rather than on what DEP characterizes as purely discretionary
expenditures, which include the pumper fees, line repairs, legal fees, and other
business expenses (catch-all expenses). Related with this argument is DEP’s claim
that the EHB’s findings that these expenditures were legitimate business expenses,
and consistent with B&R’s reasonable efforts to comply with Section 3220(a), are
not supported by substantial evidence where there was no evidence that those
expenses were required to B&R’s ongoing operation.
The EHB examined whether the discretionary expenses were “legitimate
business expenses that B&R was required to expend in order to remain in
business.” (2020 Adjudication at 15 (emphasis added).) To the extent the EHB’s
standard focuses on expenses that were “required to [be expended] in order [for
B&R] to remain in business,” (id. (emphasis added)), it comports with the
reasonable efforts standard. This allows the business to remain operational so it can
generate funds that can then be used to meet its statutory obligations.
24
However, the reasonable efforts standard also requires evidence that the
corporate officer took affirmative action and acted diligently in protecting the
interests of others and that simply continuing the same wrongful conduct does not
equate to reasonable efforts. Marion, 253 A.3d at 705. This is particularly true when
there is risk of environmental harm. In such situations, the courts have recognized
that even businesses in financial trouble have an obligation to comply with
environmental laws. In re Jager, 609 B.R. 156, 161 (Bankr. W.D. Pa. 2019) (stating
“environmental obligations imposed by law must be complied with, and a debtor
may not evade or avoid environmental compliance”); see also Penn Terra Ltd. v.
Dep’t of Env’t Res., 733 F.2d 267, 277-78 (3d Cir. 1984) (holding Pennsylvania
could enforce state environmental laws against a business so as to prevent future
harm, notwithstanding the existence of an automatic stay due to the business having
filed a bankruptcy petition). A statutory obligation cannot be ignored in favor of a
business’s use of its finances for purposes other than remaining in business.
Allowing otherwise or applying this standard to give deference to all of a corporate
officer’s decision-making would swallow the participation theory of liability and/or
sanction a decision to increase profits to the detriment of the business’s legal
obligations. It would be analogous to accepting the investment company’s argument
in Marion that the receiver had to continue the unlawful actions in order to have
made reasonable efforts, which does not comport with a standard that is based on
what a reasonable person, who desires to comply with the law, would do. Thus,
there must be evidence to support the finding that the expenditures were actually
required for B&R to remain in business and not simply a continuation of the
wrongful conduct. Marion, 253 A.3d at 705.
25
With these principles in mind, we turn to the EHB’s findings regarding
particular discretionary expenditures and whether those findings are supported by
substantial evidence.
The EHB found that the expenditures on pumper fees and line repair fees met
this standard and, therefore, excluded them from its calculation of B&R’s available
finances. These findings are supported by substantial evidence. Campola testified
the pumper fees were necessary because the pumper is responsible for checking the
wells to determine if they are leaking, repairing the wells, and charting the wells’
production, and, without this work, the wells’ compressors would stop working and
B&R would be without natural gas to sell. (R.R. at 988a-91a; 2020 FOF ¶¶ 14-15.)
He explained that, without a pumper, B&R would have been unable to generate
revenue. (R.R. at 991a.) Campola also testified that line repair costs were incurred
to prevent the loss of natural gas to the environment and ensure that the produced
gas could be sold. (R.R. at 1007a-08a; 2020 FOF ¶ 16.) Such testimony constitutes
substantial evidence that supports the EHB’s findings that these expenses were
legitimate and were “required to [be expended] in order [for B&R] to remain in
business,” (2020 Adjudication at 15 (emphasis added)), and, as such, should not be
added back into B&R’s finances.
As for B&R’s legal expenses, the EHB again found that these were “required
to [be expended] in order [for B&R] to remain in business.” (Id. (emphasis added).)
Specifically, the EHB found that B&R “was involved in a number of legal disputes
with royalty holders and lease owners” and did not have “much choice but to legally
defend its interests and that it was reasonable for it to hire legal counsel to assist it
in doing so.” (Id. at 16 (emphasis added).) However, Campola’s testimony reflects
that only some of the legal fees appear to have been related to maintaining producing
26
wells or from litigation against B&R that sought to terminate the lease of a
producing well and have B&R plug the well, remove all of the pipeline, regrade and
replant grass and trees, which Campola indicated would cost “close to a hundred
thousand dollars,” money damages, and potentially prevent access to four producing
wells. (R.R. at 54a-59a, 64a-65a, 78a-79a, 83a-84a, 101a-03a, 124a-25a, 210a,
1008a-10a; 2017 Adjudication FOF ¶¶ 26, 28-29.) To the extent that Campola’s
testimony reflects the payment of legal fees for these reasons, it constitutes
substantial evidence that supports the EHB’s finding. But Campola also testified
that legal fees were expended by B&R to commence litigation against landowners
seeking to obtain access to additional wells to bring those wells online or other
business purposes, like purchasing the Q3 line. (R.R. at 81a-84a, 1008a-10a, 1020a-
21a, 3368a; 2017 Adjudication FOF ¶¶ 26, 28-29.) Beaufait’s testimony did not
consider whether any of the legal fees had to be paid to ensure B&R’s continued
operation. (R.R. at 1099a-1100a, 1115a-16a.) Rather, Beaufait testified that they
were reasonable expenses because they were “helpful” and “ordinary, normal
expenses” in the industry. (Id. at 1117a-19a.) Accordingly, the evidence does not
support the EHB’s findings that all the legal expenses were “required to [be
expended] in order [for B&R] to remain in business,” (2020 Adjudication at 15
(emphasis added).)
Campola’s testimony regarding the expenditure of funds on legal fees to
protect B&R’s legal rights in existing producing wells, thereby allowing it to
continue to bring in revenue, and to defend B&R from default judgment that could
cost $100,000 and loss of access to producing wells constitutes substantial evidence
that those expenditures were required for B&R “to remain in business,” (id.), thereby
allowing it to make money to perform its statutory obligation to plug the Wells.
27
Thus, those amounts should not be added back into B&R’s finances. However, the
same cannot be said for Campola’s causing B&R to expend fees to expand B&R’s
business interests, rather than on remedying the known, ongoing statutory
violations, by commencing litigation against landowners to bring wells online or
inquiring about purchasing a gas line. There was no evidence to support the finding
that these expenditures were required for B&R to remain in business and, therefore,
Campola did not cause B&R to make reasonable efforts to plug the Wells when he
directed the expenditure of these funds elsewhere. Because the EHB found that all
of the legal fees should be excluded, it is necessary to remand this matter to the EHB
to calculate the legal fees that were expended to protect B&R’s legal rights in
existing producing wells and to defend B&R from default judgment and exclude
only those amounts from B&R’s financial ability to plug the Wells. The remaining
legal fees shall be added back into B&R’s finances and used to calculate how many
more Wells B&R could have plugged.
As for the catch-all expenses, the EHB found that they were “required to [be
expended] in order [for B&R] to remain in business.” (Id. (emphasis added).)
Unlike Campola’s detailed testimony regarding the necessity of the pumper and line
repair fees to B&R’s continued ability to operate, his testimony about these general
business expenses simply described what the expenses were and that they were
“business-related.” (R.R. at 1010a-13a.) Even Campola’s expert, Beaufait, testified
that his review did not consider whether the expenditures were “indispensable” to
B&R’s continued operation, only whether they were “ordinary” or “normal” in the
industry or “helpful.” (Id. at 1115a-16a, 1118a, 1120a, 1123a-24a.) This testimony
does not support the EHB’s findings that these expenses were “required to [be
expended] in order [for B&R] to remain in business,” (2020 Adjudication at 15
28
(emphasis added).) The EHB further chose not to include the catch-all category
because it “involved generally small amounts.” (Id. at 16.) However, small amounts
add up. Indeed, the $36,273 spent on the catch-all expenses could have been used
to plug one of the Wells, and, with $727 more, a second Well. As the EHB’s findings
are not supported by substantial evidence, Campola did not use reasonable efforts
when causing B&R to expend funds for purposes that were not required for B&R to
remain in business while ignoring B&R’s statutory obligation to remedy its
violations of the 2012 Oil and Gas Act.
3. B&R’s Ability to Borrow Money
Finally, DEP asserts the EHB erred in not considering B&R’s proven ability
to borrow funds as reasonable efforts that Campola could have caused B&R to use
to remedy the violations rather than pay for Campola’s own legal defense in this
matter. Respondents do not dispute that Campola directed B&R to borrow funds to
defend Campola from personal liability for the violations but argue that this decision
was reasonable and necessary and should not be considered in analyzing B&R’s
financial resources.
The EHB was tasked on remand to determine “how many, if any, of the Wells
could have been plugged if Campola had caused B&R to make” reasonable efforts
“to plug the Wells.” B&R I, 180 A.3d at 822. Although the EHB addressed loans
from B&R to Campola, finding that those amounts should be added back into B&R’s
financial resources, it did not consider B&R’s ability to borrow more than $210,000
from Campola for this litigation to determine whether those efforts should have been
used to remedy the violations. (2020 Adjudication at 17; R.R. at 1466a-85a, 3318a-
44a.) Rather, the EHB found that these transactions were “standard business loans”
29
and, therefore, did not consider their impact on B&R’s financial ability. (2020
Adjudication at 17 & n.9.)
Campola may have reasonably directed B&R to borrow money to defend both
B&R and, by extension, Campola against the violations initially, because those loans
would be necessary for protecting B&R from liability and allowing B&R to remain
in business. However, the parties stipulated in November 2016 that B&R was
required to plug the Wells under the 2012 Oil and Gas Act and had not done so.
B&R did not pursue its appeal, resulting in its dismissal. (2017 Adjudication at 11-
12); B&R I, 180 A.3d at 815-16. At that time, B&R’s liability was no longer
contested. Rather, the only disputed issue became Campola’s personal liability.
Since then, Campola has caused B&R to borrow more than $210,000 from
Campola, and have B&R pledge its assets to Campola as collateral, to defend
Campola alone. Respondents claim that B&R had a duty to defend Campola, and
Campola testified that the loans made business sense because B&R could deduct the
legal expenses. (R.R. at 1045a.) Campola’s testimony does not support the EHB’s
determinations that these loans were “standard business loans” that were necessary
for B&R remaining in business. (2020 Adjudication at 15, 17 & n.9.) Moreover,
had Campola directed B&R to use this proven borrowing power to remedy the
violations, which would be necessary for B&R to come into compliance with the
2012 Oil and Gas Act, avoid liability (even if only partially), and remain in business,
it would have been difficult for DEP to have established Campola’s wrongful
conduct, similar to Kaites, or that Campola had not caused B&R to make reasonable
efforts to plug the Wells. In short, it appears that Campola was willing to direct
B&R to borrow money and pledge its assets when it was necessary to protect
Campola personally but not when it was necessary for B&R to satisfy its legal
30
obligation to remedy its statutory violations by plugging the Wells. While these
loans were from Campola to B&R and were supported by documentation, unlike the
payments from B&R to Campola that the EHB added back into B&R’s finances,
these loans, like those payments, were for Campola’s personal benefit.
Accordingly, it was error for the loans made after B&R’s liability was no longer at
issue not to have been included in B&R’s financial ability to plug the Wells under
the reasonable efforts standard, and we remand for the EHB to recalculate how many
more Wells B&R could have plugged had these amounts been put to that purpose.13
III. Conclusion
In sum, the EHB concluded, without factual support in the record, that the
expenses and loans it was excluding from its consideration were, respectively,
“required to [be expended] in order [for B&R] to remain in business,” or were
simply “standard business loans.” (2020 Adjudication at 15, 17 & n.9 (emphasis
added).) That the record lacks evidence to support all of these exclusions speaks to
whether the EHB erred as a matter of law in applying the reasonable efforts standard
to determine how many Wells, if any, for which Campola could be personally liable
under the participation theory. Although the EHB disagreed with Campola that
“B&R[’s] plugging obligation [w]as a[n] . . . afterthought to [B&R’s] other business
requirements” as being “inconsistent with the law in Pennsylvania,” (id. at 11), the
EHB nonetheless deferred to Campola’s prioritization of B&R’s “other business
requirements” without requiring substantial evidence that would support such
13
DEP also argues that the EHB’s calculation of B & R’s financial resources as excluding
the $28,000 B & R received from Select Energy is not supported by substantial evidence.
Respondents contend the EHB properly rejected DEP’s Select Energy arguments, as there was no
financial impact as a result of that transaction. The record reveals that B & R received money
from Select Energy and repaid those amounts to Select Energy, (R.R. at 913a-14a, 952a-53a,
1066a, 1082a-83a), confirming, as the EHB held in its reconsideration decision, that the transaction
had no financial impact.
31
deference. It similarly deferred to Campola’s prioritization of B&R’s ability to
borrow substantial amounts in order to defend Campola personally, rather than for
remedying B&R’s statutory obligations, without requiring evidence that showed
such prioritization was “required . . . in order [for B&R] to remain in business,”
(id. at 15 (emphasis added)), which would have supported the EHB’s finding that
such loans were “standard business loans” that should have been excluded. Such
deference, in the absence of supporting substantial evidence, to the business
judgment of a private individual running a private business to the detriment of the
environmental health of the Commonwealth guts the participation theory of liability,
particularly where, as here, that private individual makes it clear that the individual
had no intention of spending funds to make the private business comply with its
known environmental obligations. In granting such deference, the EHB essentially
treated the continuation of the unlawful conduct as a reasonable effort thereby
allowing Campola to avoid liability based on the unlawful acts themselves.
Ultimately, a business’s obligation to comply with environmental laws to prevent
future harm may not be evaded or avoided even where that business is in financial
trouble, Penn Terra Ltd., 733 F.2d at 277-78; In re Jager, 609 B.R. at 161, an
obligation that Campola disregarded in his direction of B&R’s business.
Accordingly, in applying the reasonable efforts standard set forth in B&R I,
the EHB erred in not adding back into B&R’s finances the funds that Campola used
to pay the catch-all costs, which the record did not support were necessary to
maintain and service B&R’s currently producing wells, the legal fees that were not
necessary to protect B&R’s legal rights in currently producing wells or to defend
B&R against litigation, or amounts borrowed by B&R that were not necessary to
defend B&R but were used to defend Campola personally. Because the amount of
32
B&R’s legal expenses must be calculated in light of our conclusion, we must remand
the matter for the EHB to do so. Once those calculations are made, they, along with
amount in loans Campola caused B&R to take to defend Campola alone, should be
added into B&R’s financial resources and used to calculate how many additional
Wells could have been plugged had Campola directed their use to remedy the
violations of the 2012 Oil and Gas Law.
Although DEP asks the Court not to remand but to make these calculations
itself, and while this Court would prefer not to delay these proceedings, it is well
settled that the EHB, not this Court, is the fact finder. B&R I, 180 A.3d at 817 n.2.
Therefore, the calculations necessary to redetermine B&R’s financial ability to plug
the Wells, and Campola’s personal liability are for the EHB to perform in its role as
fact finder, a role this Court will not usurp. Accordingly, we vacate the EHB’s Order
and regretfully remand for the EHB to make these new calculations to ascertain how
many more Wells could have been plugged and to determine Campola’s personal
liability, in accordance with our opinion.14
_____________________________________
RENÉE COHN JUBELIRER, Judge
14
Based on our disposition on this basis, we do not address DEP’s Environmental Rights
Amendment arguments, Wertz v. Chapman Township, 741 A.2d 1272, 1274 (Pa. 1999) (“It is
axiomatic that if an issue can be resolved on a non-constitutional basis, that is the more
jurisprudentially sound path to follow.”), except to hold that DEP did not waive those arguments
as Respondents assert. A review of the record reveals that DEP raised the applicability of the
Environmental Rights Amendment in its briefs on remand. (R.R. at 469a, 599a, 662a-63a, 3405a.)
Further, it was not until the 2020 Adjudication that the EHB utilized the legitimate business
expense standard to determine Campola’s personal liability. Therefore, DEP could not have raised
this issue before that decision and, as such, we will not find the issue waived.
33
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Department of Environmental :
Protection, :
Petitioner :
:
v. : No. 291 C.D. 2020
:
B&R Resources, LLC and :
Richard F. Campola, :
Respondents :
ORDER
NOW, December 6, 2021, the Order of the Environmental Hearing Board,
entered in the above-captioned matter, is VACATED. This matter is REMANDED
in accordance with the foregoing opinion.
Jurisdiction relinquished.
_____________________________________
RENÉE COHN JUBELIRER, Judge