On February 22, the PA Environmental Defense Foundation filed a brief related to their appeal of a 2020 Commonwealth Court ruling which asks the PA Supreme Court to enforce its 2017 ruling and stop the unconstitutional diversion of money generated from natural gas drilling on publicly-owned State Forest land to fill holes in the state General Fund budget.
The PEDF appeal involves what the Court found in 2017 to be the unconstitutional transfer of $234,690,000 from the Oil and Gas Lease Fund to the General Fund between 2017 and 2019 by the General Assembly and the Governor.
But the original case filed by PEDF that resulted in the 2017 ruling was prompted by the transfer of over $594,400,000 from the Oil and Gas Lease Fund to the General Fund between 2008 and 2016 by the General Assembly and the Governor to balance the state budget.
The PA Supreme Court accepted the PEDF appeal of the Commonwealth Court decision in May of 2020. Read more here.
Basic Arguments
PEDF made the request for relief in this appeal based on the PA Supreme Court’s 2017 ruling that the General Assembly and the Governor have a fiduciary responsibility as the trustees of Pennsylvania’s natural resources under the Environmental Rights Amendment to the state’s constitution.
Since the revenues were generated by publicly-owned resources on State Forest land, the fiduciary responsibility of the General Assembly and the Governor as trustee of those resources requires them to formally consider the impact of their decisions on those resources and they did not, according to the 2017 Court ruling.
The Court said in 2017, and PEDF contends it applies in this appeal, that--
“The Commonwealth itself readily acknowledges that revenue generated by oil and gas leases is now spent in a multitude of ways entirely unrelated to the conservation and maintenance of our public natural resources.
“... there is no indication that the General Assembly considered the purposes of the public trust or exercised reasonable care in managing the royalties in a manner consistent with its Section 27 trustee duties.”
“They plainly ignore the Commonwealth’s constitutionally imposed fiduciary duty to manage the corpus of the environmental public trust for the benefit of the people to accomplish its purpose – conserving and maintaining the corpus by, inter alia, preventing and remedying the degradation, diminution and depletion of our public natural resources.”
PEDF argues these same fiduciary principles apply to transfers from the Oil and Gas Fund to other Funds like the Environmental Stewardship [Growing Greener] Fund and the Hazardous Sites Cleanup and from the Keystone Recreation, Park and Conservation Fund to the General Fund to balance the budget.
Remedies
PEDF not only wants the unconstitutional diversion of funds stopped in the future, but asked the Court to require the Commonwealth to appropriate State Forest oil and gas drilling revenues to the Department of Conservation and Natural Resources for use in Northcentral Pennsylvania where much of the drilling occurred to conserve and maintain State Forest lands there.
Click Here for a copy of the latest PEDF brief.
Money Transferred To General Fund
The issue at stake involves the management of more than $234,690,000 in revenues generated from oil and gas drilling on publicly-owned State Forest land diverted from the Oil and Gas Fund to the General Fund between 2017 and 2020.
Specifically-- 2017 - $61,291,000; 2018 - $48,798,000; 2019 - $69,774,000; 2020 - $54,827,000; and proposed in 2021 - $66,290,000 to fill holes in the General Fund budget.
Although not part of this case, the General Assembly and the Governor also diverted these amounts from the Oil and Gas Fund to the General Fund to balance the state budget.
These diversions were the reason PEDF filed the original lawsuit against the transfers.
These amounts include--
-- FY 2008-09-- $143,000,000
-- FY 2009-10-- $ 60,000,000
-- FY 2010-11-- $180,000,000
-- FY 2013-14-- $106,500,000
-- FY 2014-15-- $73,000,000 and authorized another $95,000,000 from additional drilling on State Forest land, but additional drilling never happened
-- FY 2015-16-- $31,900,000
These previous transfers totalled $594,400,000 to fill holes in the General Fund budget.
These early transfer amounts were very large because gas drilling companies paid significant upfront payments to DCNR for the right to drill on State Forest land ,plus the payment of royalties to DCNR for the gas they produced.
Needless to say, DCNR hit the market at precisely the right time to command these upfront payments, but they weren’t used for the benefit of Pennsylvania’s natural resources, instead they went into the ‘Black Hole’ of the General Fund budget.
Additional Background
This case now being heard by the PA Supreme Court involves the FY 2017-18 appropriation of $61.2 million and $48.7 million in 2019 from the Oil and Gas Lease Fund for DCNR’s operations, and the repeal of the Lease Fund Act, which PEDF says is a violation of the Environmental Rights Amendment.
"The 2017-2018 Appropriation was approved by Gov. Wolf just months after the Supreme Court Opinion was issued," said John Childe, attorney for PEDF. "The Governor and the General assembly simply ignored the clear findings of the Supreme Court. So too has the Commonwealth Court in yesterday’s Opinion.
"Upholding the repeal of the 1955 Oil and Gas Lease Fund Act has completely striped the protection of our State Forest from the continued extraction of oil and natural gas for revenue for the Commonwealth," explained Childe. "The Lease Fund Act had, for the past 65 years, limited the extraction and provided protection of our State Forest by requiring that all the money from the leasing and extraction must be used only by DCNR for the conservation of the resources."
"In their 2017 Opinion the Supreme Court determined that the Commonwealth, including Gov. Wolf, has the fiduciary duty as trustee of the public trust under Article I Section 27, to restore the degradation and depletion of the natural resources in our State Parks and Forests,” said Childe.
After its 2017 opinion, the PA Supreme Court remanded the case to Commonwealth Court asking them to sort out which funds going into the Oil and Gas Fund should be considered part of the public trust responsibilities and therefore could not be transferred for General Fund use.
The October 2020 decision by Commonwealth Court found the diversion of $110 million from the Oil and Gas Fund to pay the operating expenses of DCNR was legal instead of using it for conservation purposes. Read more here.
PEDF believes this is a clear violation of the 2017 PA Supreme Court decision and appealed the decision. Read more here.
Click Here for a copy of the latest PEDF brief.
Continuing Legal Battle
This appeal is part of a continuing legal battle being waged by the PA Environmental Defense Foundation to uphold the 2017 PA Supreme Court Environmental Rights Amendment decision. Read more here.
For more information on this case, visit the PA Environmental Defense Foundation website.
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