The PA Environmental Defense Foundation Thursday 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. (House Bill 218 (Saylor-R-York) page 366)
The General Fund budget bill became law at midnight Monday without Gov. Wolf’s signature.
The issue is before Commonwealth Court because the PA Supreme Court remanded the case involving its June 20 decision on other transfers in past budgets to Commonwealth Court to sort out issues like this consistent with the upper court’s ruling.
The June 20 ruling by the PA Supreme Court declared 2009 and 2010 amendments to the Fiscal Code transferring $478 million from the Oil and Gas Lease 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.
This brief is separate from a PEDF motion filed at the end of June asking Commonwealth Court to find the $383 million transfer to the General Fund involved in the June 20 PA Supreme Court ruling still to be in the public trust.
The new brief argues, “As trustee, the Commonwealth is a fiduciary obligated to comply with the terms of the trust and standards governing a fiduciary’s conduct. As a fiduciary, the Commonwealth has a duty to act toward the corpus of the trust – the public natural resources – with prudence, loyalty, and impartiality. (Slip Opinion at 31)
“PRUDENCE generally requires trustee to exercise ordinary skill, and caution in managing corpus of trust. If there are other ways to pay for the operation of the government agency from the corpus of the trust then the trustee has the duty to use the other ways. Id.
“LOYALTY imposes an obligation to manage the corpus of the trust so as to accomplish the trust’s purposes for the benefits of the trust’s beneficiaries. (Slip Opinion at 33) It requires the trustee to administer trust solely in beneficiary's interest and not his own; In re Hamill's Estate, 487 Pa. 592, 410 A.2d 770, 773 (Pa. 1980) (citing RESTATEMENT (SECOND) OF TRUSTS § 232).
“Using our public natural resources to pay for the operating costs of a state agency, rather than generating revenue through appropriate taxes (e.g., a severance tax on the oil and gas industry), is not loyalty to the trust or to the beneficiaries of the trust. It is loyalty to the industry.
“IMPARTIALITY requires that the trustee consider the rights of both the people living today and those in future generations (Slip Opinion at 32). Using trust assets to operate the agency fails to insure that the rights of the people in future generations are maintained.
“Using the funds from the Section 27 public trust to pay for operating expenses clearly violates the purposes of the trust, which to conserve and maintain the public natural resources. Funds generated from the sale of oil and gas extracted from our State Forests. Extracting the oil and taking the funds for purposes that do not conserve and maintain the natural resources diminishes, depletes and degrades these public natural resources.
“These funds must be used to restore these resources for the benefit of the people, and to insure that these resources are available for the use of the people for future generations.
“When these funds are transferred from the public trust to operate a government agency, they are lost to the trust. The direct effect of that loss is that the funds are no longer available to conserve and maintain the public natural resources of the people and these resources are directly diminished so that the government can use tax revenue in the General Fund for other purposes.
“If the Commonwealth can use our public natural resources for general operating expenses, including salaries and expenses, even assuming it is argued that the employees’ salaries and expenses are related to “conserving and maintaining” public natural resources, then no constitutional protection of the actual public natural resources will exist.
“The Commonwealth can and will use the public natural resources to pay the operating costs of DCNR and probably the Department of Environmental Protection (DEP), or any other agencies that might have obligations that could be viewed, under this interpretation, to be conserving and protecting our public natural resources, including both statewide and municipal entities.
“An interpretation of Section 27 that allows DCNR to use our public natural resources, whether in the form of conversion of our State Forest and Parks, or in the form of revenue from the extraction and sale of the oil and gas resources, to pay for the general operational costs of DCNR and other State agencies results in the degradation, diminution and depletion of the corpus of the public trust and, therefore, fails to conserve and maintain the public natural resources for the benefit of the people, including future generations.
The brief goes on to say, “Using the conversion and sale of our public natural resources for the salaries and expenses of the people who are the trustees of those resources creates a direct conflict of interest.
“Trustees faced with a choice between conserving the public resources of the people and paying themselves cannot fulfill their fiduciary duties of prudence, loyalty and impartiality. The proceeds of the sale of public natural resources that are trust assets must be used directly to conserve and maintain the public natural resources.”
Click Here for a copy of the brief.
For more information and background on the case, visit the PA Environmental Defense Foundation website.
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