Tuesday, June 20, 2017

PA Supreme Court Declares Law Diverting Oil & Gas Lease Funds To General Fund Unconstitutional

The PA Supreme Court Tuesday 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 (Article I, Section 27).
The case involved a challenge to the transfers by the PA Environmental Defense Foundation including the 2009 Fiscal Code amendments transferring $60 million to the General Fund without restriction to use it for conservation and an additional $143 million transferred to the General Fund in the General Supplemental Appropriations Act, a 2010 transfer of an additional $180 million and a 2014 transfer of $95 million.
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.
“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.
“We hold, therefore, that sections 1602-E and 1603-E [Fiscal Code], relating to royalties, are facially unconstitutional.  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
“To the extent the remainder of the Fiscal Code amendments transfer proceeds from the sale of trust assets to the General Fund, they are likewise constitutionally infirm.
“As described herein, the legislature violates Section 27 when it diverts proceeds from oil and gas development to a non-trust purpose without exercising its fiduciary duties as trustee.
“... if proceeds are moved to the General Fund, an accounting is likely necessary to ensure that the funds are ultimately used in accordance with the trustee’s obligation to conserve and maintain our natural resources.”
The Court remanded the case to Commonwealth Court for "further proceedings consistent with this Opinion."
“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 PEDF is grateful that, after 45 years since enactment, the Supreme Court has finally adopted Article I Section 27 as a viable trust for our public natural resources,” said John Childe of the Pennsylvania Environmental Defense Foundation. “The Court has mandated that the Commonwealth must manage and protect our public natural resources under strict compliance with the fiduciary requirements as a trustee.
“No longer can the Commonwealth treat our public resources as government property. Our resources are our property, and the government must protect them for us and for all our future generations.
“The court has further recognized that money from the conversion of those resources must be used for the benefit of those resources. This should stop our legislature from requiring leasing of our State Forest and Parks for revenue.
“The opinion is clear and far reaching. But there are many issues left open to further interpretation. There is still much work to be done in our courts to provide the protection of our resources from further government incursion,” said Childe.
Copies of the decision and related opinions are available online--
-- Copy of Opinion - Saylor, Eakin, Baer, Todd, Donohue, Dougherty, Wecht
-- Dissenting Opinion - Chief Justice Saylor

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