PA Environmental Defense Foundation Asks Court To Block FY 19-20 Transfers From Oil & Gas Fund To Pay DCNR Operating Expenses As Unconstitutional

On July 17, the PA Environmental Defense Foundation filed a petition for declaratory relief with Commonwealth Court asking the Court to block transfers from DCNR’s Oil and Gas Lease Fund to pay for DCNR operating expenses in the FY 2019-20 budget.

The PEDF petition alleges Gov. Wolf and the Commonwealth, as respondents, “knowingly and intentionally violated Article I, Section 27 [Environmental Rights Amendment] of the Pennsylvania Constitution and his fiduciary duties as trustee of the Section 27 public trust, as established by the [PA] Supreme Court in Pennsylvania Environmental Defense Foundation v. Commonwealth, by authorizing the use of Section 27 trust funds in the Oil and Gas Lease Fund for non-Trust purposes.”

“Nothing in the uses of these funds authorized in Section 104(b) or 1601 indicates that the Respondents considered the purposes of the public trust or exercised reasonable care in managing the Section 27 trust assets in a manner consistent with their Section 27 duties. The authorized uses of these funds are for non-Trust purposes.

“If the Respondents are authorized to use the funds from the corpus of the Section 27 public trust to pay for DCNR’s general government operations, then the very public natural resources of our State Forests that the Commonwealth is required to conserve and maintain under Section 27 trust are depleted in order to pay for DCNR’s operations. 

“This anomaly would authorize the Respondents to use up the corpus of the public trust to pay for general operations, not only of DCNR, but all agencies that must conserve and maintain public natural resources in carrying out their functions (e.g, DEP, Department of Agricultural (“DOA”), and Department of Transportation (“DOT”)). 

“Nothing in the language of Section 27 authorizes the Commonwealth, as trustee, to use the corpus of the Section 27 trust to pay for the general government operations of the Commonwealth.”

At stake this year is $69.774 million the FY 2019-20 Fiscal Code bill requires be transferred from the Oil and Gas Lease Fund to pay operating expenses for State Parks and State Forests.

PEDF asks the Court to declare--

--  “Sections 104(b) and 1601 of the General Appropriations Act of 2019 violate Section 27 on their face by appropriating $69,744,000 from the Oil and Gas Lease Fund for general government operations, which are non-trust purposes.

--  “The payment of DCNR’s salaries, wages or other compensation, travel expenses, contract fees, purchase or rental of goods and services and other expenses are part of its general government operations, and are non-trust purposes;

--  Sections 104(b) and 1601 of the General Appropriations Act of 2019 violate Section 27 on their face because they give no indication that the Respondents considered the purposes of the public trust or exercised reasonable care in managing the Section 27 trust assets in a manner consistent with their Section 27 duties; and

--  “Respondents violated the most basic of their trustee’s fiduciary obligations by failing to protect the corpus of the trust and the beneficiaries’ uses of the trust.” 

“As a result of these violations, Governor Wolf and the Commonwealth must be surcharged for the money unlawfully taken from the Section 27 trust and used for non-trust purposes in order to restore the corpus of the Section 27 trust.

“The following remedies are appropriate under 20 Pa.C.S. § 7781(b) for the Governor’s breaches:

-- “To enjoin the Governor from committing further breach of trust by appropriating oil and gas lease funds for government operations.

-- “To compel the Governor to redress the breaches of trust by repaying the money taken from the trust and used for non-trust purposes.

--  “To order an accounting of all oil and gas lease funds that are part of corpus of the environmental trust under Section 27 for use for government operations.”

Hazardous Sites Cleanup Fund

Using the same arguments, PEDF also asked the Court to declare the 2017 Fiscal Code provision annually requiring the transfer of $15 million from the Oil and Gas Lease Fund to the Marcellus Legacy Fund for distribution to the Hazardous Sites Cleanup Fund unconstitutional.  

At stake here is a total of $45 million transferred out of the Oil and Gas Lease Fund in 2017, 2018 and now 2019.

$45 Million Transfer

PEDF is also challenging a third provision in the FY 2019-20 Fiscal Code bill authorizing the Governor to transfer up to $45 million from any special fund to pay the operation costs of DEP and/or DCNR saying it does not prohibit the transfer of Section 27 trust funds in the Oil and Gas Lease fund to pay for those expenses.

PEDF asks court to declare any transfers under this provision from the Oil and Gas Lease Fund violates the Section 27 trust.

Appropriate Only To DCNR

PEDF also argues, as it has in previous motions and petitions, funds from the Oil and Gas Lease Fund must be appropriated to DCNR as the “legislatively appointed agency responsible for managing the public natural resources of our State Forests and State Parks and their associated mineral resources consistent with Section 27.”

PEDF asks the Court to direct the respondents to “act affirmatively to amend Section 1601.2-E of the Fiscal Code, or enact other legislation, to require DCNR to administer the Section 27 trust funds generated by the leasing of State Forest land for oil and gas extraction and sale consistent with its expertise to ensure the public natural resources of our State Forests and State Parks are managed sustainably consistent with the principles of ecosystem management.”

Click Here for a copy of the PEDF petition.

Continues Legal Challenges To Transfers

This new petition by PEDF continues a string of legal challenges to the transfer of revenue out of DCNR’s Oil and Gas Lease Fund generated by Marcellus Shale natural gas drilling on State Forest land since the 2017 PA Supreme Court decision.
Technically, the petition starts a new line of legal challenge and is not part of the PA Supreme Court’s remand to Commonwealth Court.

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.

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--

-- 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.