Pennsylvania Environmental Defense Foundation v. Commonwealth
161 A.3d 911 (2017)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Article I, Section 27 of the Pennsylvania Constitution, the Commonwealth's public natural resources are the corpus of a public trust. The Commonwealth, as trustee, has a fiduciary duty to manage these resources consistent with Pennsylvania trust law, which requires that proceeds from the sale of trust assets (such as oil and gas royalties) remain in the corpus and be used exclusively for conservation and maintenance purposes.
Facts:
- In 1955, Pennsylvania enacted the Oil and Gas Lease Fund Act, which stipulated that all rents and royalties from oil and gas leases on Commonwealth land must be placed in a special fund to be used exclusively for conservation and recreation purposes.
- In 1995, the legislature created the Department of Conservation and Natural Resources (DCNR) to manage state parks and forests, granting it the power to lease state forest land for mineral extraction if deemed in the Commonwealth's best interest.
- Beginning in 2008, the DCNR began leasing large areas of state land for Marcellus Shale natural gas extraction, which led to a dramatic increase in revenues flowing into the Oil and Gas Lease Fund.
- Despite the DCNR's internal preference for a moratorium on further leasing to study environmental impacts, the executive and legislative branches exerted substantial pressure on the DCNR to continue leasing to generate revenue for the state's general budget.
- Between 2009 and 2014, the General Assembly passed a series of Fiscal Code amendments and appropriations acts that systematically diverted hundreds of millions of dollars in royalties and other payments from the Lease Fund to the General Fund.
- These legislative changes also capped the DCNR's annual appropriation from royalties and began using the Lease Fund to cover the DCNR's general operating expenses, which were previously paid from the General Fund.
- In 2014, the legislature amended the Fiscal Code to explicitly declare that the Lease Fund 'is not a constitutional trust' and that transferring funds from it to the General Fund was permissible to balance the budget.
Procedural Posture:
- The Pennsylvania Environmental Defense Foundation (Foundation) filed a declaratory judgment action in the Commonwealth Court against the Commonwealth of Pennsylvania and the Governor.
- The Foundation challenged the constitutionality of various statutes that transferred funds generated by oil and gas leases on state land to the General Fund.
- Both parties filed cross-applications for summary relief in the Commonwealth Court.
- Applying the test from its prior decision in 'Payne v. Kassab,' the Commonwealth Court granted summary relief to the Commonwealth, upholding the legislative transfers of funds.
- The Foundation filed a direct appeal as of right to the Supreme Court of Pennsylvania.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the legislature's diversion of revenues generated from oil and gas leases on state lands from conservation-related purposes to the state's General Fund violate the Commonwealth's fiduciary duties as trustee of the public's natural resources under Article I, Section 27 of the Pennsylvania Constitution?
Opinions:
Majority - Justice Donohue
Yes, the legislature's diversion of these revenues violates the Commonwealth's constitutional duties as trustee. Article I, Section 27 of the Pennsylvania Constitution establishes a public trust with the state's public natural resources, including oil and gas, as its corpus. The Commonwealth serves as the trustee for the people, who are the beneficiaries. This constitutional trust is governed by traditional principles of Pennsylvania trust law, which impose fiduciary duties of prudence, loyalty, and impartiality on the trustee. Under these principles, proceeds from the sale of trust assets, such as royalties from extracted oil and gas, are considered principal and must remain part of the trust corpus. These funds must be used solely for the trust's purpose: to 'conserve and maintain' the public's natural resources. The challenged legislative acts, which divert these trust assets to the General Fund for non-trust purposes, are facially unconstitutional because they treat the Commonwealth as a mere proprietor rather than a fiduciary and violate the fundamental duty to administer the trust for the benefit of the beneficiaries.
Concurring-in-part-and-dissenting-in-part - Justice Baer
No, the diversion of funds is not unconstitutional. While agreeing that the Environmental Rights Amendment is self-executing and that the old 'Payne test' should be rejected, the majority errs by applying strict private trust law principles. Section 27 should be interpreted through the lens of the public trust doctrine, which was the focus of its drafters. The public trust doctrine's primary goal is to preserve the natural resources themselves, not to dictate the management of financial proceeds. As long as the Commonwealth fulfills its duty to conserve and maintain the environment, it is permitted to use excess revenues from the sale of resources for general public purposes like education and infrastructure. The majority's holding improperly cordons off hundreds of millions of dollars from other critical state needs based on a misreading of the amendment's language and history.
Dissenting - Chief Justice Saylor
No, the challenged acts are not unconstitutional. This opinion joins Justice Baer's dissent, agreeing that the Environmental Rights Amendment is an embodiment of the public trust doctrine, not private trust principles.
Analysis:
This decision profoundly strengthens Pennsylvania's Environmental Rights Amendment, transforming it from a policy statement into a constitutionally enforceable mandate with significant financial consequences. By applying strict private trust law principles, the Court requires that revenues from the disposition of public natural resources be dedicated exclusively to conservation, severely limiting the legislature's ability to use these funds for general budgetary purposes. The ruling establishes a new, more rigorous standard for judicial review of government actions impacting the environment by rejecting the deferential, three-part 'Payne' test. This precedent will likely lead to increased litigation over the management of state resources and force the Commonwealth to prioritize its constitutional fiduciary duties over short-term fiscal needs.
