Pa. Envtl. Def. found. v. Commonwealth

Decision Date05 August 2022
Docket Number65 MAP 2020
Citation279 A.3d 1194
CourtPennsylvania Supreme Court

ARGUED: December 8, 2021

Appeal from the Order of the Commonwealth Court at No. 358 MD 2018 dated October 22, 2020.



The Pennsylvania Environmental Defense Foundation ("PEDF") comes before this Court for the third time challenging the use of proceeds from oil and gas leasing on the Commonwealth's forest and park lands as violative of Article I, Section 27 of the Pennsylvania Constitution, also known as the Environmental Rights Amendment. ("Section 27" or "ERA"), which created a trust to conserve and maintain Pennsylvania's public natural resources.[1] In the first two cases, PEDF challenged several 2009-2015 budgetary provisions enacted in the wake of the dramatic increase in oil and gas revenue resulting from Marcellus Shale exploration in Pennsylvania. Applying trust principles this Court held that the budgetary provisions violated Section 27 by utilizing the oil and gas revenue for non-trust purposes via transfers to the General Fund. PEDF v Commonwealth, 161 A.3d 911 (Pa. 2017) ("PEDF II"); PEDF v. Commonwealth, 255 A.3d 289 (Pa. 2021) ("PEDF V").

PEDF's current declaratory judgment action filed against the Commonwealth of Pennsylvania and Governor Tom Wolf (collectively, "the Commonwealth"), raises numerous constitutional challenges to provisions of the General Appropriations Act of 2017 and 2018, as well as the 2017 Fiscal Code amendments, all of which were enacted after our decision in PEDF II.[2] As discussed in detail below, these challenges can be grouped into several categories. First, PEDF contests the constitutionality of the use of trust resources to fund the Department of Conservation and Natural Resources' ("DCNR's") general operations. Second, PEDF seeks a declaration that the revenue from oil and gas leasing on State forest and park lands should be reserved for environmental programs tied to the Marcellus Shale region from which the oil and gas revenue derived. Third, PEDF challenges the repeal of the Oil and Gas Lease Fund Act and the transfer of the Oil and Gas Lease Fund ("Lease Fund") to the control of the General Assembly.[3]Finally, PEDF questions the constitutionality of specific aspects of the Lease Fund. For the reasons set forth below, we conclude that PEDF has failed to demonstrate that the challenged provisions violate the Pennsylvania Constitution. Accordingly, we affirm the order of the Commonwealth Court, although based on different reasoning.

I. PEDF II and IV [4]

Our decisions addressing PEDF's prior challenges elucidate several principles of Pennsylvania's nascent Section 27 jurisprudence directly applicable to the case at bar.

As noted, PEDF challenged several 2009-2015 amendments to the Fiscal Code, as well as a provision of the Supplemental General Appropriations Act of 2009.[5] Broadly considered, these provisions diverted revenues from the oil and gas leases on State forest and park lands into the General Fund under the control of the General Assembly.

Prior to the challenged enactments and pursuant to the Oil and Gas Lease Fund Act, all rents and royalties from oil and gas leasing on state land were deposited into the Lease Fund and appropriated entirely to the DCNR (or its predecessor) to be "exclusively used for conservation, recreation, dams, or flood control."[6] 71 P.S. §§ 1331, 1333 (repealed). In contrast, the 2009-2015 budgetary enactments, inter alia, provided that royalties from the Lease Fund could only be expended if "appropriated or transferred to the General Fund by the General Assembly[,]" apart from an annual appropriation of up to $50 million to the DCNR, with the direction that the DCNR "shall give preference to the operation and maintenance of State parks and forests." 72 P.S. §§ 1602-E, 1603-E.

While additional appropriations were made to the DCNR from the Lease Fund through legislative direction, other enactments directed funds to the General Fund without any restriction that they be used for conservation purposes. 72 P.S. §§ 1604-E, 1605-E. Concomitantly, the DCNR received decreased funding from the General Fund. Thus, "a larger portion of monies from the Lease Fund [were] used to pay for the DCNR's operational expenses, which had previously been funded by the General Fund, and thus reduced the amount of monies available for the DCNR's conservation activities." PEDF II, 161 A.3d at 923. PEDF argued that these provisions violated the Commonwealth's fiduciary duties under the ERA.

In addressing these claims, this Court in PEDF II adopted the reasoning of the landmark decision in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013) (plurality), which revitalized the long dormant Environmental Rights Amendment. Notably, the ERA is included in Article I and, thus, is among the rights reserved to the people that are "excepted out of the general powers of government and shall forever remain inviolate." Pa. Const. art. 1, § 25.[7] We explained that the ERA established "a public trust, pursuant to which the natural resources are the corpus of the trust, the Commonwealth is the trustee, and the people are the named beneficiaries." PEDF II, 161 A.3d at 931-32.

This constitutional public trust imposed fiduciary duties on Commonwealth entities to "conserve and maintain [our public natural resources] for the benefit of all the people." Pa. Const. art. 1, § 27. Drawing from Robinson Township, we explained that "[t]he plain meaning of the terms conserve and maintain implicates a duty to prevent and remedy the degradation, diminution, or depletion of our public natural resources" and a duty to act toward the corpus of the trust "with prudence, loyalty, and impartiality." PEDF II, 161 A.3d at 932 (quoting Robinson Twp., 83 A.3d at 957). The Court concluded that the public trust was subject to basic trust principles in effect at the time of enactment of the ERA, including the restriction that proceeds from the sale of trust assets should remain part of the corpus of the trust and that trust assets could be used "only for purposes authorized by the trust or necessary for the preservation of the trust." PEDF II, 161 A.3d at 933.

In PEDF II, this Court held that the royalties generated by the oil and gas leases clearly derived from the sale of trust assets and, thus, had to be returned to the trust corpus. Accordingly, we deemed facially unconstitutional those statutory provisions that directed royalties to be paid over to the General Fund without any restrictions that the funds be used for conservation and maintenance of trust assets. Id. at 937-38. In so doing, however, we clarified "that the legislature's diversion of funds from the Lease Fund (and from the DCNR's exclusive control) does not, in and of itself, constitute a violation of Section 27." Id. at 939. Indeed, "the General Assembly would not run afoul of the constitution by appropriating trust funds to some other initiative or agency dedicated to effectuating Section 27." Id.

While the Court had sufficient information to determine the constitutionality of the statutes addressing royalties, which indisputably arose from the sale of trust assets, we remanded to the Commonwealth Court to address the other revenue streams generated by the leases, including bonus payments, rental fees, and interest penalties. We directed that court to apply the Pennsylvania trust principles in effect when Section 27 was adopted to determine whether these revenue streams should be deemed trust assets and restricted to trust purposes. Id. at 935-36.

Following remand, this Court, in PEDF V, rejected the Commonwealth Court's analysis which derived from that court's classification of current Pennsylvanians as life tenants and future generations as remaindermen.[8] Diverging from the Commonwealth Court, we concluded that the constitutional text did not create successive beneficiaries of current and future Pennsylvanians but rather established a cross-generational unity of interest in the conservation and maintenance of the public natural resources through Section 27's use of the phrase "all the people." PEDF V, 255 A.3d at 309-10 (relying upon Robinson Twp., 83 A.3d at 959). Accordingly, we concluded that the ERA created "simultaneous beneficiaries with equal interest in the trust's management," which negated any allocation of income between life tenants and remaindermen, a distinction created in the Commonwealth Court's analysis. Id. at 310. We nevertheless agreed with the Commonwealth Court's determination that the bonus payments, rental fees, and interest fees were income rather than funds resulting from the sale of trust assets. Id. at 308. The question remaining was whether this income should be reserved solely for trust purposes.

In considering this question, the Court observed that Pennsylvania trust law clearly provided that a trustee has a duty to deal impartially with all beneficiaries. Id. at 311 (citing Restatement (Second) of Trusts § 183 and 20 Pa.C.S. § 7773). Under the ERA, the benefit accorded to the people of Pennsylvania as beneficiaries is not an entitlement to income but rather the conservation and maintenance of public natural resources. Given "the absence of income entitlements, there is no authority for [the Commonwealth] to generate income from oil and gas assets and then use that income to benefit itself for non-trust purposes and not the beneficiaries." Id. at 313.

Thus the Court held that "the income generated from bonus payments, rentals, and late fees must be...

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