Dep't of Envtl. Prot. v. B&R Res., LLC

270 A.3d 580

DEPARTMENT OF ENVIRONMENTAL PROTECTION, Petitioner

v.B&R RESOURCES, LLC and Richard F. Campola, Respondents

No. 291 C.D. 2020

Commonwealth Court of Pennsylvania.

Argued April 12, 2021

Decided December 6, 2021

Reargument Denied January 27, 2022

Publication Ordered January 31, 2022

Kayla A. Despenes, Assistant Counsel, Meadville, for Petitioner.

James V. Corbelli, Pittsburgh, for Respondents.

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge (P.), HONORABLE ANNE E. COVEY, Judge

OPINION BY JUDGE COHN JUBELIRER

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 (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

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

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. , 108 Pa.Cmwlth. 267, 529 A.2d 1148, 1152 (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 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 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.

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...