Pennsylvania Environmental Defense Foundation v. Commonwealth
161 A.3d 911
| Pa. | 2017Background
- In 1971 Pennsylvania added Article I, §27 (the Environmental Rights Amendment) declaring a right to clean air and pure water and making the Commonwealth trustee of public natural resources to “conserve and maintain” them for present and future generations.
- DCNR (created by the CNRA) manages state parks/forests and had authority to lease mineral rights; the Oil and Gas Lease Fund Act (1955) previously directed rents and royalties into a special fund exclusively for conservation/recreation/dams/flood control and appropriated those moneys to the Department (now DCNR).
- 2008–2014: Marcellus Shale leases produced large bonus payments, rents, and royalties; legislative Fiscal Code amendments (2009, 2010, 2014) redirected substantial royalty/lease proceeds to the General Fund or other uses and limited DCNR’s direct receipt (e.g., up to $50M annually).
- Pennsylvania Environmental Defense Foundation sued, seeking declaratory relief that the Fiscal Code amendments and appropriations violated §27 by diverting proceeds away from trust purposes and by failing to exercise trustee duties in leasing decisions.
- Commonwealth Court largely upheld the fiscal changes using an older Payne test and reasoning that the Lease Fund was statutory (not constitutional) and funds could be used for general public benefit; Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard for judicial review under §27 | Payne test is inadequate; §27 must be interpreted via its text and trust principles | Payne test should control or at least limit review | Rejected Payne test; review follows §27 text and Pennsylvania trust law (de novo for legal questions) |
| Status of public natural resources and proceeds | Public natural resources (including oil & gas) are corpus of a constitutional public trust; proceeds from sales/royalties are trust principal and must be used to conserve/maintain resources | §27 is silent about proceeds; legislature may appropriate royalties for general public benefit; Lease Fund is statutory and alterable | Held that §27 creates a public trust; proceeds from sale of trust assets (royalties) are part of the corpus and must be managed per trustee duties; royalties are presumptively trust corpus |
| Constitutionality of Sections 1602‑E and 1603‑E (Fiscal Code) | These provisions improperly transfer/control royalties and permit use for non‑trust purposes, violating trustee duties | Provisions only reallocate statutory fund receipts; General Assembly and Governor remain subject to §27 but may appropriate funds broadly | Sections 1602‑E and 1603‑E are facially unconstitutional insofar as they allow diversion of royalties without fidelity to trustee duties; Commonwealth Court’s contrary holdings reversed |
| Treatment of other lease revenue streams (bonuses, rents) and remedial path | All lease‑derived receipts must remain in trust corpus | Some receipts (e.g., rents, bonuses) may be income rather than principal and thus payable differently; classification is fact‑dependent | Court holds royalties are corpus; classification of up‑front bonus and other payments was left to remand for factual record and trust‑law analysis; DCNR must structure leases consistent with trustee duties |
Key Cases Cited
- Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013) (plurality) (interpreting §27 as creating enforceable public‑trust duties and explaining amendment history)
- Payne v. Kassab, 361 A.2d 263 (Pa. 1976) (affirming earlier decision without adopting Payne I’s three‑part test)
- Payne v. Kassab (Payne I), 312 A.2d 86 (Pa. Cmwlth. 1973) (formulated the three‑part test later rejected)
- McKeown’s Estate, 106 A. 189 (Pa. 1919) (trust law treating proceeds from sale of trust assets as principal)
- Illinois Central R.R. Co. v. Illinois, 146 U.S. 387 (U.S. 1892) (seminal public‑trust doctrine case on alienation of public trust property)
- County of Allegheny v. Commonwealth, 534 A.2d 760 (Pa. 1987) (constitutional limits on legislative funding mandates)
- Mental Health Ass’n in Pennsylvania v. Corbett, 54 A.3d 100 (Pa. Cmwlth. 2012) (illustrative of courts’ reluctance to review adequacy of agency funding)