On July 21, the PA Supreme Court issued a decision again declaring unconstitutional the transfer of monies from DCNR’s Oil and Gas Fund-- derived from natural gas drilling in State Forests-- to the General Fund to balance the state budget and fund agency operations.

The Court said in its decision, “...we hold that the income generated from the revenue streams at issue must be returned to the corpus as a matter of trust law.”

The total amount of funding under the sections of the Fiscal Code declared unconstitutional and that the Court said should be returned to the corpus is an estimated total of $383 million.

This decision overturns a 2020 Commonwealth Court Court ruling.  Read more here.

The legal challenge was brought by the PA Environmental Defense Foundation and follows a 2017 ruling by the PA Supreme Court also declaring the transfers unconstitutional.  Read more here.

John Childe, attorney for the PA Environmental Defense Foundation, issued this statement on the Court's Opinion--

“The Supreme Court Opinion issued today, identified by the Court as PEDF IV,  affirms our belief that all funds from the oil and gas leases, including the royalties, bonus and rental payments, are part of the public trust, and must be used to conserve and maintain the public natural resources, including our State Forest.

“This decision ends the four year battle against the Governor over the use of the bonus and rental payments, which have amounted to over $500,000,000.00 over the past 10 years.

“The opinion does not mean that money must be paid back. Only going forward it must be used for conservation purposes, and not used for the general fund.

“Today's opinion finally ends the twelve year battle PEDF has waged to stop degrading our State Forest for revenue from oil and natural gas reserves to supplement the general fund.

“The Supreme Court PEDF IV Opinion today reverses the decision of the Commonwealth Court finding that Article I Section 27 allows the Commonwealth to lease our state forest for income.

“It reaffirms that the Commonwealth's role regarding our public natural resources is that of trustee.

“It reaffirms that the Commonwealth has no proprietary interest in those resources.

“And, it reaffirms that any decision the Commonwealth makes regarding the uses of our State Forest must be based on protecting the rights of the people to the clean air and preservation of the natural, scenic, historic and aesthetic value of our public natural resources.”

The PA Supreme Court said--

“We find that the Commonwealth Court’s holding is at odds with our decision in PEDF II, principles of private trust law, and the plain language of the ERA [Environmental Rights Amendment].

“As explained in this opinion, we agree with the Commonwealth Court that all three revenue streams at issue qualify as incomes generated from trust assets.

“However, the viability of the Commonwealth Court’s holding turns on its erroneous conclusion that the ERA created successive beneficiaries in the form of life tenants and remaindermen with entitlement to income.

“Another remand is unnecessary, however, as the record is now sufficiently developed and based upon that record we hold that the incomes generated under these oil and gas leases must be returned to the corpus.

“As a result, we reverse the decision of the Commonwealth Court.”

The Court also said--

“We rejected the Commonwealth’s averment that revenues generated from the sale of

trust assets may be redirected to general budgetary matters (i.e., non-trust purposes) on the theory that the ERA was silent on that point.

“We stated that argument was “plainly inaccurate, as Section 27 [Environmental Rights Amendment] expressly creates a trust, and pursuant to Pennsylvania law in effect at the time of enactment, proceeds from the sale of trust assets are part of the corpus of the trust.” Id. at 933.”

The Court concluded--

“We conclude that the bonus payments, rentals and penalty interest qualify as income and not the sale of trust assets. Since the ERA does not create an entitlement to income in the beneficiaries, the revenue generated from these Marcellus Shale leases must be returned to the corpus to benefit all the people.

“Accordingly, we hold that the income generated from the revenue streams at issue must be returned to the corpus as a matter of trust law.

“As a result, Sections 1604-E [$60 million] and 1605-E [$180 million], as well as Section 1912 [$143 million] of the Supplemental General Appropriations Act of 2009, are facially unconstitutional.”

Click Here for a copy of the opinion.

Reactions

Chesapeake Bay Foundation Pennsylvania Executive Director Shannon Gority had this comment on the decision--

“It is clear by this ruling, that legislators and the Governor need to do better at protecting the Constitutional right that Pennsylvanians have to clean water. With roughly 25,800 miles of our rivers and streams harmed by pollution, it is past time for our elected officials to invest in clean water.

“The Commonwealth has a legacy of inadequate financial and technical investments in our environment and the General Fund budget for 2021-22 is yet another missed opportunity. Available federal American Rescue Plan money could have been used to restore and protect Pennsylvania’s rivers and streams, improve the productivity of farms, and reduce nuisance flooding in our communities.

“All of this while it still isn’t clear how the state will close the more than $320 million annual shortfall  needed to achieve its Clean Water Blueprint by 2025. Our General Assembly has a duty to act this Fall to fix that problem.

“We applaud the message sent by the state Supreme Court that, when considering filling budget gaps, elected leaders should keep their hands off of conservation funding.

“We also suggest a more hands-on approach by the Commonwealth in living up to its commitment to clean water that is critical to the health, wellbeing, and quality of life of all Pennsylvanians.”

John Arway, former Executive Director of the Fish & Boat Commission, had this comment on the Court decision--

“John Childe has been driven by the passion so many of us share for the Commonwealth’s natural resources and has proven his point about what our predecessors meant as the government acting as the trustee for these resources.

“Unfortunately I expect that political gamesmanship will now kick in and DCNR’s general fund budget will be proportionately reduced to offset the requirement of this decision.

“The Marcellus boom days are behind us and the money was spent for political favors in disguise of doing public good.

“Who knows what lies ahead but John’s persistence and this decision leaves no doubt that the profits derived from the exploitation of public resources on public lands need to go back to to compensate the public trust.

“Kudos to John and PA Environmental Defense Foundation for following through to the end with this lawsuit and continuing on with others. The big question is who will follow as the watchdog for the future?”

NewsClips:

-- PG/Laura Legere: Millions In State Forest Gas Lease Spending Ruled Unconstitutional By PA Supreme Court

-- TribLive: PA Supreme Court: Money From State Forest Drilling Cannot Prop Up State Budget

-- Bloomberg Law: PA Oil Money Slated For Conservation, Not General Fund

Related Articles:

-- Chesapeake Bay Foundation-PA: Applauds PA Supreme Court Ruling On Unconstitutional Transfer Of DCNR Oil & Gas Fund Monies To Fill Budget Gaps

-- PA Environmental Defense Foundation Asks PA Supreme Court To Stop Unconstitutional Diversions Of Revenue From Gas Drilling On State Forest Land That So Far Has Taken Over $829 Million

[Posted: July 21, 2021]

7/26/2021