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PA Supreme Court Accepts PA Environmental Defense Foundation Appeal Of Ruling On Gas Drilling Revenue Transfers To Pay DCNR, General Fund Expenses

The PA Supreme Court recently accepted a PA Environmental Defense Foundation appeal of a July 29 Commonwealth Court ruling the Foundation said ignored a 2017 opinion of the PA Supreme Court saying revenue from natural gas drilling on State Forest had to be held in trust under the Environmental Rights Amendment to the Constitution and only used for conservation purposes.

PEDF has been ordered to submit a brief on the issues to the PA Supreme Court by January 28.

Commonwealth Court ruled that $67.6 million of the shale gas drilling revenue generated from bonus and rental payments in 2009 and transferred to the General Fund to balance the state budget were not part of the trust under the application of a 1947 state law, not the constitution.

The lower Court did say $135.3 million in drilling revenues were part of the trust in the transfers made in 2009.

Commonwealth Court was ruling on motions of summary judgment when it issued its July decision.

In its jurisdictional statement supporting its request for appeal to the PA Supreme Court, PEDF said, among other questions the Court should address is-- “In spite of the Supreme Court admonition to the Commonwealth Court in determining the purpose of the bonus and rental payments to be consistent with the Commonwealth’s constitutional duty as trustee “to negotiate and structure leases in a manner consistent with its Article I Section 27 duties.”, and, “Consequently, oil and gas leases may not be drafted in ways that remove assets from the corpus of the trust or otherwise deprive trust beneficiaries of the funds necessary to conserve and maintain the public natural resources.”, the Court found that the Commonwealth is entitled to keep the money from bonuses and rentals, regardless of production, because DCNR did not structure or draft the leases in an attempt to remove rents and bonuses from the corpus of the trust.”

In an earlier statement on the Commonwealth Court ruling, John E. Childe, the attorney for PEDF, said, “One of the basic principles of trust law is that it is the duty of the trustee to protect the corpus of the trust for the benefit of the people, not the trustee. Interpreting the leases of the trustee to provide that the trustee receives the income from leases in the form of bonus and rental payments belies this principle.

“The Supreme Court in PEDF II recognized this fact, stating that the “Commonwealth, as trustee, has the constitutional obligation to negotiate and structure leases in a manner consistent with its Article I Section 27 duties,” said Childe. “Oil and gas leases may not be drafted in ways that remove assets from the corpus of the trust or otherwise deprive the trust beneficiaries (the people, including future generations) of the funds necessary to conserve and maintain the public natural resources.”

Click Here for a copy of the PEDF jurisdictional statement in support of its request for appeal.

Part Of Ongoing Legal Challenges

This appeal is one of a series of ongoing legal actions by the PA Environmental Defense Foundation to challenge transfers of gas drilling revenues from DCNR’s Oil and Gas Lease Fund as unconstitutional under the Environmental Rights Amendment.

In addition to the 2009 and 2010 transfers out of the Oil and Gas Lease Fund to balance the state budget, transfers were made from the Fund to pay for DCNR operating expenses in almost all the budget since then-- $69.774 million in FY 2019-20, $48.7 million in FY 2018-19, $11.2 million in FY 2017-18, $31.9 million in FY 2015-16, $62.5 million in 2014-15, $16.1 million in FY 2012-13 and $15 million in FY 2011-12.

Since the June 2017 decision by the PA Supreme Court, the PA Environmental Defense Foundation has been filing follow-up motions and other petitions before Commonwealth Court and the PA Supreme Court seeking to enforce the 2017 decision.

On August 12, the PA Environmental Defense Foundation appealed a July 29 Commonwealth Court ruling the Foundation said ignore the 2017 opinion of the PA Supreme Court saying revenue from natural gas drilling on State Forest had to be held in trust under the Environmental Rights Amendment to the Constitution and only used for conservation purposes. Click Here for more.

On July 17, the PA Environmental Defense Foundation filed a petition for declaratory relief with Commonwealth Court asking the Court to block yet more transfers from DCNR’s Oil and Gas Lease Fund to pay for DCNR operating expenses in the FY 2019-20 budget consistent with the 2017 PA Supreme Court decision, and starting a new line of challenge. Click Here for more.

Through January 2018, more than $1.1 billion from the sale of public natural resources has been used to fill gaps in the state budget through transfers to the General Fund or to pay for agency operating expenses. In addition, $69.774 million was diverted from the Oil and Gas Lease Fund in the FY 2019-20 budget.

The 2017 decision by the PA Supreme Court declared provisions in the 2009 and 2019 Fiscal Code requiring the transfer of $478 million from the Oil and Gas Lease Fund to the General Fund unconstitutional and a violation of the public trust provisions under the Environmental Rights Amendment-- Article I, Section 27-- to the state constitution.

The Court said, “On their face, these amendments lack any indication that the Commonwealth is required to contemplate, let alone reasonably exercise, its duties as the trustee of the environmental public trust created by the Environmental Rights Amendment.

“To the extent such payments are consideration for the oil and gas that is extracted, they are proceeds from the sale of trust principal and remain in the corpus. These proceeds remain in the trust and must be devoted to the conservation and maintenance of our public natural resources, consistent with the plain language of Section 27.”

The PA Supreme Court remanded the case to Commonwealth Court for further proceedings consistent with the 2017 decision.

Since then, PEDF has been filing briefs and motions updating the Court on further actions taken that they believe are also unconstitutional according to the 2017 decisions. Those motions and petitions include--

-- January 2020: The PA Environmental Defense Foundation filed an amended lawsuit in Commonwealth Court asking the Court to direct the Department of Conservation and Natural Resources to manage State Forests consistent with its trustee responsibilities under the state constitution's Environmental Rights Amendment. Click Here for more.

-- February 2019: A brief submitted by PEDF challenged the transfer and proposed of monies from environmental funds in from the Oil and Gas ($61.291 million), Keystone Recreation, Park and Conservation Fund ($10 million), Environmental Stewardship $30 million) and Hazardous Sites Cleanup funds by Gov. Wolf. Click Here for more.

-- May 2018: Petition for declaratory relief asks Commonwealth Court to declare 2017 amendments to the Fiscal Code eliminating DCNR’s Oil and Gas Lease Fund and making and proposing $96 million in money transfers from the Fund unconstitutional. Click Here for more.

-- May 2018: Filed a motion with Commonwealth Court asking that $383 million in bonus and lease payments from natural gas drilling on state forest land be protected and spent only in accordance with the public trustee requirements of the PA Supreme Court’s 2017 decision. Click Here for more.

-- January 2018: PEDF filed an amended petition for Extraordinary Jurisdiction with the PA Supreme Court asking that Court to take over all the issues raised by the Supreme Court’s June 20 decision declaring the use of DCNR’s Oil and Gas Fund to balance the state budget unconstitutional, since Commonwealth Court said it would not in a January 8 ruling. Click Here for more.

-- December 2017: PEDF filed an addendum to its petition with Commonwealth Court challenging the provisions of the Fiscal Code bill enacted in October transferring monies from the Oil and Gas Lease Fund to DCNR and the Marcellus Legacy Fund asking that they be declared unconstitutional because they were made with no regard for the public trust under the constitution’s Article I, Section 27 Environmental Rights Amendment. The addendum says now over $1.1 billion earned from the sale of natural resources from state forests is now at stake in this case. Click Here for more.

-- July 2017: PEDF submitted its detailed brief to Commonwealth Court asking the Court to declare unconstitutional the transfer of $61 million from the Oil and Gas Lease Fund to pay, in part, to finance the general operations of the Department of Conservation and Natural Resources. Click Here for more.

-- July 2017: PEDF filed two motions asking Commonwealth Court to declare the 2017-18 General Fund budget bill unconstitutional because it transfers over $61 million from the Oil and Gas Lease Fund to finance the general operations of the Department of Conservation and Natural Resources. Click Here for more.

-- July 2017: PEDF filed a motion with Commonwealth Court asking the Court to determine if $383 million in Shale gas upfront and lease payments remains in the public trust to be used only for conservation purposes. Click Here for more.

-- June 2017: PA Supreme Court issued an opinion declaring the 2009 and 2010 Fiscal Code and other amendments diverting $478 million from DCNR’s Oil and Gas Fund to the General Fund unconstitutional because there was no evidence the General Assembly considered the use of the funds in its role as public trustee for natural resources under the Environmental Rights Amendment to the state constitution. Click Here for more.

For more information on this case, visit the PA Environmental Defense Foundation website. Questions should be directed to John E. Childe, 717-743-9811 or send email to: childeje@aol.com.

Visit DCNR’s Natural Gas Management webpage for more information on natural gas drilling on State Forest land.

For more information on this case, visit the PA Environmental Defense Foundation website. Questions should be directed to John E. Childe, 717-743-9811 or send email to: childeje@aol.com.

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Related Articles - PEDF Actions:

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PA Environmental Defense Foundation Urges DCNR To Manage Drilling In State Forests Consistent With The Environmental Rights Amendment Court Decision

PA Environmental Defense Foundation Advises DCNR Proposal To Replace State Forest Lost To Gas Drilling Does Not Meet Its Obligations As A Public Trustee

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PA Supreme Court Declares Law Diverting Oil & Gas Lease Funds To General Fund Unconstitutional

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