PA Env. Defense Fdn., Aplt. v. Gov. Wolf, PA Env. Defense Fdn., Aplt. v. Gov. Wolf

Background

In 1971 Pennsylvania added Article I, §27 (the Environmental Rights Amendment), declaring public natural resources common property and making the Commonwealth trustee charged to “conserve and maintain” them for present and future generations.
DCNR historically managed leases of state forest and park lands for oil/gas; rents and royalties were deposited in the Oil and Gas Lease Fund (Lease Fund) and, pre-2009, were specifically appropriated to the agency responsible for conservation.
Beginning in 2009 (and in subsequent budget acts and Act 13 of 2012 and 2014 Fiscal Code amendments), the General Assembly authorized transfers/appropriations of Lease Fund royalties and other proceeds to the General Fund and limited DCNR’s automatic access (e.g., §§1602‑E, 1603‑E, §1604‑E, §1605‑E). Large Marcellus Shale leases greatly increased receipts.
Pennsylvania Environmental Defense Foundation sued, seeking declaratory relief that the Fiscal Code amendments and transfers violated §27 by diverting trust corpus and proceeds to non‑trust purposes and by impairing trustee duties.
The Commonwealth Court largely upheld the challenged statutes, treating the Lease Fund as a statutory special fund and requiring evidence that DCNR funding was so inadequate as to impair its function. The Supreme Court granted review.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proper review standard for §27 claims	Reject Payne I test; review under text of §27 and trust law	Payne I is acceptable; courts should defer to legislative budget choices	Rejected Payne I; §27 claims are judged by the Amendment’s text and Pennsylvania trust-law duties (de novo review of legal questions)
Nature of §27 trust and treatment of proceeds (royalties, rents, bonus payments)	Public natural resources and proceeds (at least royalties) are corpus of the constitutional public trust and must be used to conserve/maintain resources	Proceeds need not remain in trust corpus; Legislature can appropriate revenues for broader public benefit	Royalties are proceeds from sale of trust principal and are part of the trust corpus; proceeds must be managed consistent with trustee duties; classification of other payments (e.g., bonus bids) requires remand for fact development
Constitutionality of §§1602‑E and 1603‑E (Control/appropriation of royalties; up to $50M to DCNR)	These provisions divert royalty proceeds to non‑trust purposes without exercising fiduciary duties; facially unconstitutional	Fiscal code amendments merely allocate budget authority; royalties are not constitutionally required to be reinvested; DCNR and legislature can balance needs	§§1602‑E and 1603‑E are facially unconstitutional because they permit trust assets (royalties) to be used for non‑trust purposes without reflecting trustee duties; reversed as to those provisions
Other transfers (§1604‑E, §1605‑E, General Appropriation transfers, Act 13 transfers) and authority over leasing	Transfers of Lease Fund proceeds to General Fund diverted trust corpus and were unconstitutional if not done pursuant to trustee obligations; DCNR must structure leases to protect corpus	Transfers served legitimate budget needs and benefit the public generally; Lease Fund is statutory, not constitutional, so transfers are lawful	Transfers that move proceeds of sale out of the trust for non‑trust purposes are constitutionally infirm unless made pursuant to the Commonwealth’s fiduciary duties; remand for accounting and trust-law application; DCNR retains leasing authority but all branches bear trustee obligations

Key Cases Cited

Robinson Twp. v. Commonwealth, 83 A.3d 901 (Pa. 2013) (plurality) (developed trust‑based principles for Article I, §27 and described trustee duties)
Payne v. Kassab, 361 A.2d 263 (Pa. 1976) (affirming prior decision but not adopting Payne I test) (discussed historical treatment of §27 claims)
Payne v. Kassab (Pa. Commw.), 312 A.2d 86 (Pa. Commw. 1973) (articulated the three‑part Payne I test later rejected)
McKeown’s Estate, 106 A. 189 (Pa. 1919) (trust law principle: proceeds from sale of trust assets are presumptively principal and remain part of corpus)
Illinois Central R.R. Co. v. Illinois, 146 U.S. 387 (U.S. 1892) (public trust doctrine background authority relied upon in briefing)