Tuesday, May 19, 2020

PA Supreme Court Grants PA Environmental Defense Foundation Request For Oral Argument In Challenge To State Forest Drilling Revenue Transfers

On May 19, the PA Supreme Court granted a motion by the PA Environmental Defense Foundation for oral argument in PEDF’s challenge to a July 29 Commonwealth Court ruling on the legality of the transfer of State Forest drilling revenue to balance the state budget.
PEDF said in its request the Commonwealth Court decision ignored the 2017 PA Supreme Court decision saying public officials, local and state governments and agencies like the Department of Conservation and Natural Resources have a duty, as trustees of the environmental public trust created by the Environmental Rights Amendment, to manage the monies resulting from oil and gas drilling on State Forest land in a manner consistent with the Amendment.
Oral argument may not be scheduled until September or October.
Commonwealth Court Ruling
In a July 2019 Commonwealth Court ruling, the court said two-thirds of the bonus and rental payments made should remain part of the trust, but one-third could be transferred for use for other purposes.
There was no legal argument over whether royalty payments should have remained with the trust and in the DCNR Oil and Gas Lease Fund because those payments were the result of extracting the natural gas.
To describe the scope of the payments involved, there were an estimated $383 million in bonus and rental payments made during the 2009 and 2010 fiscal years covered by the original legal action and transferred to the General Fund.
Using the one-third rule, Commonwealth Court said one-third of those payments could be transferred for other uses-- $127 million-- while the remainder-- $255 million-- should not have been transferred.
While the original cases being pursued by PEDF dealt with the legality of the transfers made from DCNR’s Oil and Gas Fund from natural gas drilling payments-- somewhere around $1 billion, PEDF did not ask for the return of those funds to the Fund for the benefit of the trust until recently.
In a legal action filed in July 2019, PEDF asked the Court to order for the return of $69.774 million from the Oil and Gas Fund used by the General Assembly to pay the operating expenses for State Parks and State Forests, consistent with the Pennsylvania’s Environmental Rights Amendment and the 2017 PA Supreme Court decision. Click Here for more.
Issues Court Will Review
In its order, the PA Supreme Court said it will review these specific issues from the 2019 Commonwealth Court ruling--
-- Are payments other than royalties made under leases entered into by the Pennsylvania Department of Conservation and Natural Resources ("DCNR") consideration for activities necessary to permanently sever oil and gas from our State Forest and therefore part of the corpus of the public trust under Article I, § 27?
-- If not payment for the purchase of State Forest oil and gas, can payments made under the State Forest oil and gas leases still be part of the corpus of the public trust under Article I, § 27?
-- Did the Commonwealth Court err in concluding that one third of bonus and rental payments made under State Forest oil and gas leases can be transferred to the General Fund because:
     -- These payments are solely for oil and gas exploration on our State forest, not for the extraction and sale of the oil and gas;
     -- The payments are not refundable;
     -- Section 27 beneficiaries can be characterized as life tenants entitled to income and remaindermen;
     -- DCNR has authority under the Conservation and Natural Resources Act ("CNRA"), 71 P.S. §§ 1340.302(a), to enter into leases of State Forest land for oil and gas extraction and sale;
     --  Section 9 of the Principal and Income Act of 1947 applies to the bonus and rental payments;
     --  Lease payments designated as income can be used by the Commonwealth for general government operations, so the legislative actions mandating the transfer of $383,000,000 in bonus payments to the General Fund are not facially unconstitutional; and
     -- Section 27 allows the sale of trust assets to provide income to the Commonwealth to achieve an equitable balance between conserving our natural resources and providing income from the sale of those resources.
--  Are Sections 1604-E and 1605-E of the Fiscal Code and Section 1912 of the Supplemental General Appropriations Act of 2009, which transferred $383,000,000 from the Oil and Gas Lease Fund to the General Fund, facially unconstitutional?
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
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[Posted: May 19, 2020]  PA Environment Digest

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