PENNSYLVANIA ENVIRONMENTAL DEFENSE FOUNDATION v. COMMONWEALTH OF PENNSYLVANIA, AND TOM WOLF, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF PENNSYLVANIA
No. 65 MAP 2020
IN THE SUPREME COURT OF PENNSYLVANIA MIDDLE DISTRICT
August 5, 2022
BAER, C.J., SAYLOR, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
[J-82-2021], Appeal from the Order of the Commonwealth Court at No. 358 MD 2018 dated October 22, 2020. ARGUED: December 8, 2021
CHIEF JUSTICE BAER
DECIDED: August 5, 2022
The Pennsylvania Environmental Defense Foundation (“PEDF“) comes before this Court for the third time challenging the use of proceeds from oil and gas leasing on the Commonwealth‘s forest and park lands as violative of
budgetary provisions enacted in the wake of the dramatic increase in oil and gas revenue resulting from Marcellus Shale exploration in Pennsylvania. Applying trust principles, this Court held that the budgetary provisions violated Section 27 by utilizing the oil and gas revenue for non-trust purposes via transfers to the General Fund. PEDF v. Commonwealth, 161 A.3d 911 (Pa. 2017) (”PEDF II“); PEDF v. Commonwealth, 255 A.3d 289 (Pa. 2021) (”PEDF V“).
PEDF‘s current declaratory judgment action filed against the Commonwealth of Pennsylvania and Governor Tom Wolf (collectively, “the Commonwealth“), raises numerous constitutional challenges to provisions of the General Appropriations Act of 2017 and 2018, as well as the 2017 Fiscal Code amendments, all of which were enacted after our decision in PEDF II.2 As discussed in detail below, these challenges can be grouped into several categories. First, PEDF contests the constitutionality of the use of trust resources to fund the Department of Conservation and Natural Resources’ (“DCNR‘s“) general operations. Second, PEDF seeks a declaration that the revenue from oil and gas leasing on State forest and park lands should be reserved for environmental programs tied to the Marcellus Shale region from which the oil and gas revenue derived. Third, PEDF challenges the repeal of the Oil and Gas Lease Fund Act and the transfer of
the Oil and Gas Lease Fund (“Lease Fund“) to the control of the General Assembly.3
I. PEDF II and IV4
Our decisions addressing PEDF‘s prior challenges elucidate several principles of Pennsylvania‘s nascent Section 27 jurisprudence directly applicable to the case at bar.
The Commonwealth Court first addressed PEDF‘s challenges to the 2009-2015 budgetary provisions in PEDF v. Commonwealth, 108 A.3d 140 (Pa. Cmwlth. 2015) (”PEDF I“), which this Court reversed in PEDF II, concluding that royalties from the oil and gas leasing must be returned to the trust corpus and remanding for the Commonwealth Court to apply private trust principles to address the bonus payments, rents, and interest payments. On remand, the Commonwealth Court applied what it deemed to be relevant private trust law principles in PEDF v. Commonwealth, 214 A.3d 748 (Pa. Cmwlth. 2019) (”PEDF III“).
While the remand following PEDF II was pending in the Commonwealth Court, PEDF filed the instant declaratory judgment action in that court challenging the 2017 and 2018 budgetary provisions, enacted after our 2017 decision in PEDF II. The Commonwealth Court‘s unpublished decision adjudicating the challenges to the 2017 and 2018 provisions can be found at PEDF v. Commonwealth, 2020 WL 6193643, at *1 (Pa. Cmwlth. 2020), and will be referenced herein as PEDF IV.
PEDF‘s current appeal of PEDF IV was pending in this Court when we reversed the Commonwealth Court‘s decision in PEDF III in PEDF V, 255 A.3d at 294. While we will utilize the designations of PEDF I-V in this opinion, we will strive to clarify the relevant decisions with descriptive phrases where possible.
As noted, PEDF challenged several 2009-2015 amendments to the Fiscal Code, as well as a provision of the Supplemental General Appropriations Act of 2009.5 Broadly considered, these provisions diverted revenues from the oil and gas leases on State forest and park lands into the General Fund under the control of the General Assembly.
Prior to the challenged enactments and pursuant to the Oil and Gas Lease Fund Act, all rents and royalties from oil and gas leasing on state land were deposited into the Lease Fund and appropriated entirely to the DCNR (or its predecessor) to be “exclusively used for conservation, recreation, dams, or flood control.”6
While additional appropriations were made to the DCNR from the Lease Fund through legislative direction, other enactments directed funds to the General Fund without any restriction that they be used for conservation purposes.
In addressing these claims, this Court in PEDF II adopted the reasoning of the landmark decision in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013) (plurality), which revitalized the long dormant Environmental Rights Amendment. Notably, the ERA is included in Article I and, thus, is among the rights reserved to the people that are “excepted out of the general powers of government and shall forever remain inviolate.”
This constitutional public trust imposed fiduciary duties on Commonwealth entities to “conserve and maintain [our public natural resources] for the benefit of all the people.”
In PEDF II, this Court held that the royalties generated by the oil and gas leases clearly derived from the sale of trust assets and, thus, had to be returned to the trust corpus. Accordingly, we deemed facially unconstitutional those statutory provisions that directed royalties to be paid over to the General Fund without any restrictions that the funds be used for conservation and maintenance of trust assets. Id. at 937-38. In so doing, however, we clarified “that the legislature‘s diversion of funds from the Lease Fund (and from the DCNR‘s exclusive control) does not, in and of itself, constitute a violation of Section 27.” Id. at 939. Indeed, “the General Assembly would not run afoul of the constitution by appropriating trust
While the Court had sufficient information to determine the constitutionality of the statutes addressing royalties, which indisputably arose from the sale of trust assets, we remanded to the Commonwealth Court to address the other revenue streams generated by the leases, including bonus payments, rental fees, and interest penalties. We directed that court to apply the Pennsylvania trust principles in effect when Section 27 was adopted to determine whether these revenue streams should be deemed trust assets and restricted to trust purposes. Id. at 935-36.
Following remand, this Court, in PEDF V, rejected the Commonwealth Court‘s analysis which derived from that court‘s classification of current Pennsylvanians as life tenants and future generations as remaindermen.8 Diverging from the Commonwealth
Court, we concluded that the constitutional text did not create successive beneficiaries of current and future Pennsylvanians but rather established a cross-generational unity of interest in the conservation and maintenance of the public natural resources through Section 27‘s use of the phrase “all the people.” PEDF V, 255 A.3d at 309-10 (relying upon Robinson Twp., 83 A.3d at 959). Accordingly, we concluded that the ERA created “simultaneous beneficiaries with equal interest in the trust‘s management,” which negated any allocation of income between life tenants and remaindermen, a distinction created in the Commonwealth Court‘s analysis. Id. at 310. We nevertheless agreed with the Commonwealth Court‘s determination that the bonus payments, rental fees, and interest fees were income rather than funds resulting from the sale of trust assets. Id. at 308. The question remaining was whether this income should be reserved solely for trust purposes.
In considering this question, the Court observed that Pennsylvania trust law clearly provided that a trustee has a duty to deal impartially with all beneficiaries. Id. at 311 (citing RESTATEMENT (SECOND) OF TRUSTS § 183 and
Under this statute, life tenants were entitled to one-third of the net proceeds, while two-thirds had to be reserved to the trust corpus. Accordingly, the Commonwealth Court declined to find the remaining 2009-2015 budgetary provisions facially unconstitutional as PEDF had not demonstrated that the non-trust uses exceeded one-third of the proceeds from rent and bonus payments.
Relevantly, the Commonwealth Court applied the same analysis to PEDF‘s current challenges to the 2017 and 2018 budgetary provisions, as discussed infra. For the reasons stated in PEDF V, we again are restrained to reject the Commonwealth Court‘s analysis to the extent it relied upon the 1947 Act‘s division of revenue between life tenants and remaindermen.
to generate income from oil and gas assets and then use that income to benefit itself for non-trust
Thus, the Court held that “the income generated from bonus payments, rentals, and late fees must be returned to the corpus to benefit the conservation and maintenance of the public resources for all the people” and could not be diverted to non-trust purposes of the General Fund. Id. at 314. Accordingly, the challenged 2009-2015 budgetary provisions were facially unconstitutional as they directed income to the General Fund without restriction. We nevertheless reiterated our observation in PEDF II that “the legislature‘s diversion of funds from the Lease Fund (and from the DCNR‘s exclusive control) does not, in and of itself, constitute a violation of Section 27,” so long as the assets are directed to entities “dedicated to effectuating” Section 27‘s purpose of conserving and maintaining Pennsylvania‘s natural resources. Id. at 314 n.21 (quoting PEDF II, 161 A.3d at 939).
II. Procedural History and Standard of Review
The current challenge involves PEDF‘s 2018 petition for review filed pursuant to the Declaratory Judgement Act,
and new matter, the Commonwealth responded in opposition to each of PEDF‘s proposed declarations. Ultimately, the parties filed cross-applications for summary relief, which the Commonwealth Court granted in part and denied in part.10 PEDF appealed to this Court,
- the repeal of the act commonly referred to as the 1955 Oil and Gas Lease Fund Act (1955 Lease Fund Act) is facially unconstitutional;
- Section 1601.2-E of The Fiscal Code is facially unconstitutional;
- Section 1726-G of The Fiscal Code is facially unconstitutional; and
- affirmative legislation and a detailed accounting are required to ensure that the Lease Fund is protected and used in accordance with Section 27.
asking us to reverse the Commonwealth Court in relevant part and to grant the denied declarations.
In reviewing “the Commonwealth Court‘s decision on cross-motions for summary relief pursuant to Pa.R.A.P. 1532(b), we may grant relief only if no material questions of fact exist and the right to relief is clear.” PEDF II, 161 A.3d at 929 (citations omitted). The parties agree that this case does not involve any issues of fact but rather solely presents pure questions of law. PEDF IV, 2020 WL 6193643, at *4. Thus, “our standard of review is de novo, and our scope of review is plenary.” PEDF II, 161 A.3d at 929.
In challenging the constitutionality of duly enacted statutory provisions that are presumed to be constitutional, PEDF bears the burden of demonstrating that the provisions “clearly, plainly, and palpably” violate the Constitution. Id. As PEDF presents facial challenges to the statutes, we reiterate that “[a] statute is facially unconstitutional only where there are no circumstances under which the statute would be valid.” Germantown Cab Company v. Philadelphia Parking Authority, 206 A.3d 1030, 1041 (Pa. 2019).
As this Court opined in PEDF II, our review of the Commonwealth‘s actions challenged under the ERA requires careful consideration of “the text of Article I, Section 27 as well as the underlying principles of Pennsylvania private trust law in effect at the time of its enactment.” Id. at 930.
Applying basic principles of trust law, the Commonwealth must “administer the [Section 27 trust] in good faith, in accordance with its provisions and purposes and the
Id. at *17 (reformatted).However, we deny the Commonwealth‘s Application insofar as it seeks a declaration that its current usage of the trust is wholly consistent with its Section 27 trustee responsibilities and that affirmative legislation is not necessary.
interests of the beneficiaries and in accordance with applicable law.”
In light of these broad trust principles, we reiterate that Section 27 imposes fiduciary duties on Commonwealth entities to “conserve and maintain [Pennsylvania‘s public natural resources] for the benefit of all the people,” which includes a “duty to
III. Analysis
As stated, PEDF sought numerous declarations, which the Commonwealth Court granted in part and denied in part. PEDF filed a direct appeal from that determination to this Court, again raising numerous challenges, which can be grouped in four categories. First, PEDF challenges the use of Lease Fund monies to fund the general operations of the DCNR. Second, PEDF faults the allocation of Lease Fund monies for environmental projects outside of the Marcellus Shale region from which the monies derived. Third, PEDF contends that the repeal of the Oil and Gas Lease Fund Act and the transfer of the Lease Fund to the control of the General Assembly violates the ERA. Finally, PEDF challenges specific statutory provisions governing the funding of the Lease Fund and appropriations to other funds. We address these issues seriatim.12
A. Funding the General Operations of the DCNR
PEDF seeks a declaration that Sections 104(P) and 1601 of the General Appropriation Acts of 2017 and 2018 violate the Commonwealth‘s trustee duties by using trust resources to pay for the general operations of the DCNR.13 PEDF specifically
contends that revenue from oil and gas leases of State forest and park lands deposited in the Lease Fund should not be appropriated to pay DCNR‘s general operations, including inter alia, the “salaries, wages or other compensation and travel expenses” of DCNR officers and employees of the Commonwealth, or for the “purchase or rental of goods and services” or
PEDF additionally argues that these General Appropriations Act provisions violate Section 25 by using Lease Fund monies to replace appropriations from the General Fund. As an explanation for its position, PEDF alleges that the “passage of an annual appropriation act to fund general government operations for the current fiscal year is an Article III responsibility of the Commonwealth and cannot infringe” on the people‘s rights under Article I, Section 27, which are “excepted out of the general powers of government
The General Appropriations Act of 2018 contained a functionally identical Section 104(P). Act of June 22, 2018, P.L. 1203. We reference these provisions collectively as “Section 104(P).”any other expenses, as provided by law or by this act, necessary for the proper conduct of the duties, functions and activities and for the purposes hereinafter set forth for the fiscal year beginning July 1, 2017, and for the payment of bills incurred and remaining unpaid at the close of the fiscal year ending June 30, 2017.
Section 1601 of the 2017 General Appropriations Act appropriated to the DCNR $50 million for general operations, nearly $8 million for state park operations, and approximately $3.5 million for state forest operations. The following year, Section 1601 allocated to the DCNR approximately $37 million for general operations, $7.5 million for state park operations, and $4.2 million for state forest operations.
and shall forever remain inviolate” under Section 25. PEDF Brief at 28 (quoting
The Commonwealth refutes PEDF‘s argument by observing that “[c]onservation and maintenance activities are not accomplished in a vacuum: they require people and equipment.” PEDF IV, 2020 WL 6193643, at *5. It contends that the funding of DCNR‘s general operations is a proper use of trust fund assets as the funding allows DCNR to perform its trustee duties to conserve and maintain Pennsylvania‘s public natural resources; the Commonwealth emphasizes that “DCNR‘s main purpose is to effectuate Section 27.” Cmwlth. Supp. Brief at 7. It highlights that trust law provides for trustees “to incur expenses which are necessary or appropriate to carry out the purposes of the trust and are not forbidden by the terms of the trust.” Id. at 11 (quoting RESTATEMENT (SECOND) OF TRUSTS § 188 (1959)).
The Commonwealth contrasts the provisions challenged herein with the statutes deemed unconstitutional in PEDF II, which “removed DCNR‘s ability to act as trustee because the funds were placed in the General Fund, potentially for non-conservation purposes.” Cmwlth. Brief at 14 (quoting PEDF II, 161 A.3d at 927). In contrast, the current provisions “appropriate the funds directly to the DCNR so that it can continue its conservation and maintenance efforts.” Id. Thus, the Commonwealth asserts that the allocation of lease fund monies for DCNR‘s general operation does not violate the Commonwealth‘s trustee duties under the ERA.
Rather than resolving the constitutionality of using trust resources to fund DCNR‘s operations, the Commonwealth Court instead relied upon its then-recent analysis in PEDF III, which this Court subsequently respectfully rejected in PEDF V. As discussed
supra, the Commonwealth Court in PEDF III reasoned that one-third of the revenue derived from rents and bonus payments could be used for non-trust purposes under the Act of 1947, applicable at the time of the ERA‘s adoption.
Applying the PEDF III analysis to the instant case, the Commonwealth Court distinguished the royalty transfers that this Court deemed unconstitutional in PEDF II from the current provisions, which involved
While it is understandable that the Commonwealth Court utilized its PEDF III analysis in the instant case given that it pre-dated PEDF V, this portion of the court‘s analysis cannot stand as it is directly contrary to PEDF V. PEDF V, 255 A.3d at 293. We nevertheless affirm the Commonwealth Court‘s ultimate holding, denying PEDF‘s motion seeking a declaration that Sections 104(P) and 1601 of the General Appropriations Acts of 2017 and 2018 violated the ERA. See Ario v. Ingram Micro, Inc., 965 A.2d 1194, 1200 (Pa. 2009) (“[A]n appellate court may uphold an order of a lower court for any valid reason appearing from the record“).
In addressing PEDF‘s claim, we apply fundamental principles of Pennsylvania trust law. As explained in PEDF II, a “trustee may use the assets of the trust only for purposes authorized by the trust or necessary for the preservation of the trust.” PEDF II, 161 A.3d at 933 (internal quotation marks omitted). One of the basic duties of a trustee is to administer the trust, and Pennsylvania‘s trust law provides that a trustee may incur costs in administering the trust, so long as the costs “are reasonable.”
As applied to the trust created by Section 27, this basic trust law clearly empowers the Commonwealth, as trustee, to incur reasonable costs in administering the trust to conserve and maintain Pennsylvania‘s public natural resources. As noted by the Commonwealth, conservation and maintenance does not occur in a vacuum but instead require people and materials,
are indisputably in furtherance of the purposes of the Section 27 trust.16
Respectfully, we decline to determine whether all of DCNR‘s statutory responsibilities qualify as trust purposes because PEDF, in the current litigation, presents a facial challenge to the use of trust assets for DCNR‘s general operations, rather than challenging DCNR‘s use of trust funds for specific administrative costs. We further observe that our nascent Section 27 jurisprudence has not explored what activities qualify as trust purposes. Accordingly, while it appears that many, if not all, of DCNR‘s responsibilities are consistent with Section 27, we do not speak to those issues herein. Rather, for purposes of this case, we conclude that the existence of these other duties does not undermine our rejection of PEDF‘s facial challenge to the appropriation of trust assets for DCNR‘s general operations, as the challenged provisions are not inconsistent with DCNR‘s use of the trust assets solely for trust purposes. See Germantown Cab Company v. Philadelphia Parking Authority, 206 A.3d 1030, 1041 (Pa. 2019) (“A statute is facially unconstitutional only where there are no circumstances under which the statute would be valid.“).
are unreasonable or that the DCNR has failed to act with prudence, loyalty, or impartiality in carrying out its fiduciary duties.17
As we conclude that PEDF failed to demonstrate that the provisions violate Section 27, we likewise find no violation of Section 25. Accordingly, we affirm the Commonwealth Court‘s denial of PEDF‘s requested declaration.
B. Funding Environmental Projects Outside of the Marcellus Shale Region
PEDF seeks a declaration that Sections 104(P) and 1601 violate the ERA by allocating
The Commonwealth responds that the plain language of Section 27 does not provide geographic restrictions on the use of trust resources. The Commonwealth instead emphasizes this Court‘s recognition that trustees have “discretion with respect to the proper treatment of the corpus of the trust,” so long as that discretion is exercised in support of the purpose of the trust. Cmwlth. Brief at 17 (quoting PEDF II, 161 A.3d at 933). It stresses that the Section 27 trust extends to the conservation and maintenance
of public natural resources across Pennsylvania, such that it is appropriate for DCNR to expend trust resources to “address the broad environmental threats faced by Pennsylvania,” including those outside the Marcellus Shale region. Id. at 18. Indeed, it contends that restricting the use of these funds to the Marcellus Shale region would arguably violate the Commonwealth‘s fiduciary duty of impartiality to the beneficiaries across Pennsylvania. Cmwlth. Supp. Brief at 19, 26. Moreover, the Commonwealth observes that at the time of the ERA‘s enactment, use of the Lease Fund was not restricted to the area that produced the funds but instead was intended to be used “for conservation, recreation, dams, or flood control.” Id. at 19 (quoting
In reviewing these claims, the Commonwealth Court found PEDF‘s proposed geographic restriction of the use of funds to be “myopic,” when the Commonwealth was confronting a multitude of “environmental threats from climate change to polluted waters to invasive species.” PEDF IV, 2020 WL 6193643, at *8. The court instead opined that DCNR had discretion as trustee to determine how trust funds should be used to conserve and maintain all of Pennsylvania‘s natural resources. Accordingly, the court denied PEDF‘s requested declaration and granted the Commonwealth‘s related declaration, holding that “the appropriations contained in Sections 104(P) and 1601 of the General Appropriation Acts of 2017 and 2018 to the DCNR for the operation of State parks and forests are not facially unconstitutional.” Id. at *9.
While rejecting PEDF‘s declaration that the fund must be limited to the Marcellus Shale region, the Commonwealth Court nevertheless “caution[ed] the Commonwealth that the failure to remedy the degradation, diminution, or depletion of the State forests and parks impacted by Marcellus wells - the very public resources harmed in order to generate these funds - may constitute a failure to preserve the trust and a dereliction of its fiduciary duties under Section 27.” Id. at *9 n.16.
As noted by the Commonwealth Court, the broad language of Section 27 instructs that “Pennsylvania‘s public natural resources are the common property of all the people, including generations yet to come” and that the Commonwealth, as “trustee of these resources,” “shall conserve and maintain them for the benefit of all the people.”
C. Oil and Gas Lease Fund Challenges
PEDF next asks this Court to deem unconstitutional the 2017 repeal of the 1955 Oil and Gas Lease Fund Act,19 and the enactment of
PEDF asserts that the repeal of the Oil and Gas Lease Fund Act and transfer of the Lease Fund in Section 1601.2-E violated the Environmental Rights Amendment because the General Assembly eliminated the restrictions on the use of the funds that had been explicitly imposed by the Oil and Gas Lease Fund Act. It also claims that the removal of the Lease Fund from DCNR‘s control eliminated the prior arrangement whereby DCNR had the statutory authority both to lease State forest and park lands for oil and gas exploration and extraction and to dispense funds to remedy any harm resulting from those leases. PEDF deems the restrictions imposed by subsection (c) on the General Assembly to be insufficient, asserting that subsection (c) fails to restrict Lease Fund monies solely for conservation and maintenance of Pennsylvania‘s natural resources.
In response, the Commonwealth emphasizes that the repeal and transfer did not result in the elimination of the Lease Fund but rather the explicit continuation of the Lease Fund as a “special fund in the State Treasury,”
The Commonwealth additionally highlights that the plain language of subsection (c) explicitly directs the General Assembly to consider its trustee duties under the ERA when making appropriations, in contrast to the provisions deemed unconstitutional in PEDF II, which allowed for unrestricted transfers to the General Fund for non-trust uses. Indeed, it argues that any
The Commonwealth Court addressed PEDF‘s challenges to subsections (a) and (c) separately. In addressing the “continuation” of the Lease Fund in subsection (a), the Commonwealth Court rejected PEDF‘s facial challenge, concluding that the absence of explicit restrictions on the use of the Lease Fund in the text of Section 1601.2-E(a) did not violate Section 27, given that all Commonwealth entities were bound by “Section 27‘s constitutional requirement that trust principal must be used for trust purposes.” PEDF IV, 2020 WL 6193643, at *11.
The court, however, found support in PEDF II for PEDF‘s challenge to subsection (c). Specifically, it equated subsection (c)‘s language, dictating that the “General Assembly shall consider the Commonwealth‘s trustee duties under [S]ection 27,” to language that this Court deemed inadequate to remedy the constitutional violation in PEDF II, where Section 1602-E instructed that the “General Assembly shall consider the adoption of an allocation to municipalities impacted by a Marcellus well.” PEDF IV, 2020 WL 6193643, at *13.
The Commonwealth Court, nevertheless, concluded that Section 1601.2-E(c) did not facially violate Section 27 relying again upon its analysis in PEDF III, which deemed it permissible to use one-third of the non-royalty revenues for non-trust purposes. In so doing, the court distinguished the section deemed unconstitutional by this Court in PEDF II, which solely involved a transfer of royalties, from the section at issue in the current case, which directed a transfer from the Lease Fund generally. Given that it was possible that the transfers could be encompassed within the one-third that it viewed as permissible to use for non-trust purposes, the court concluded that PEDF failed to demonstrate that Section 1601.2-E(c) facially violated the ERA. Accordingly, the Commonwealth Court granted the Commonwealth‘s application for declaratory relief and denied PEDF‘s contrary application.
As with the Commonwealth Court‘s analysis of PEDF‘s challenge to the use of Lease Fund assets for DCNR‘s general operations, we affirm the court‘s denial of PEDF‘s proposed declaration but diverge from its reasoning to the extent it relies upon the now-rejected analysis in PEDF III permitting one-third of non-royalty revenues to be used for non-trust purposes. In contrast, we conclude that the decision in PEDF II answers PEDF‘s challenge to both Subsections 1601.2-E(a) and (c).
In PEDF II, we observed that “that the legislature‘s diversion of funds from the Lease Fund (and from the DCNR‘s exclusive control) does not, in and of itself, constitute a violation of Section 27,” because DCNR is not the only Commonwealth entity with a fiduciary duty under Section 27. PEDF II, 161 A.3d at 939. Instead, all Commonwealth entities, including the General Assembly, are bound to conserve and maintain Pennsylvania‘s public natural resources. PEDF II, 161 A.3d at 931 n.23. Thus, as we explained in both PEDF II and PEDF V, “the General Assembly would not run afoul of the constitution by appropriating trust funds to some other initiative or agency dedicated to effectuating Section 27.” PEDF II, 161 A.3d at 939; PEDF V, 255 A.3d at 314 n.21.
Section 1601.2-E(c) expressly reminds the General Assembly of its duties in administering
We further observe that the language of subsection (c) seems intended to remedy the fault identified in PEDF II. In that case, we criticized the statute reviewed therein for the absence of any “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.” PEDF II, 161 A.3d at 938. The current language addresses these failings by expressly requiring that “the General Assembly shall consider the Commonwealth‘s trustee duties under section 27 of Article I of the Constitution of Pennsylvania.”
As stated above, Section 1601.2-E(c) instructs that the General Assembly “shall consider the Commonwealth‘s trustee duties under section 27 of Article I of the Constitution of Pennsylvania.” While the responsive opinion reads this phrase as providing for the General Assembly‘s “mere consideration” of its trustee duties, we view this language as an express reminder to the General Assembly of its mandatory duties imposed by the Constitution. Concurring and Dissenting Opinion at 8. The statute‘s arguably inarticulate use of the verb “consider” does not negate the mandatory nature of the General Assembly‘s Section 27 duties.
These duties, as interpreted by this Court in PEDF II and V, include, inter alia, the duty to act with prudence toward the corpus of the trust, which is defined as incorporating the duty of “exercising reasonable care, skill and caution” in administering the trust.
While Section 1601.2-E(c) is facially constitutional as it requires the General Assembly to consider its mandatory trustee duties and does not authorize the Commonwealth to use trust assets for non-trust purposes, our holding herein does not negate the potential of an as applied challenge to the General Assembly‘s ultimate appropriation of the Lease Fund. We reiterate
D. Section 1601.2-E(b) – Commingling of Funds
PEDF next challenges the constitutionality of Section 1601.2-E(b), which sets forth the “sources” of the Lease Fund. Specifically, it provides for the inclusion in the Lease Fund of trust assets of “rents and royalties from oil and gas leases of land owned by the Commonwealth” along with funds derived from the Indigenous Mineral Resources Development Act and “[a]ny other money appropriated or transferred to the fund.”23 PEDF contends that this comingling of trust and non-trust assets violates the basic trust principle requiring a trustee to maintain separate accounts for trust assets. The Commonwealth responds that Section 27 does not mandate separate accounts.
The Commonwealth Court rejected PEDF‘s assertions, determining that the addition of other funds to the Oil and Gas Lease Fund did not render the statute facially unconstitutional given that the statute could be applied constitutionally if the Commonwealth appropriated the entirety of the funds solely for trust purposes. The court cautioned, however, that a constitutional issue could arise if the Lease Fund was used for non-trust purposes. Thus, it opined that the Commonwealth trustees should maintain “a clear accounting and identification of corpus funds ... to ensure that these funds are properly used in strict compliance with Section 27.”24 Id. at *12. It concluded, however, that while the Commonwealth should engage in an accounting, the absence of language requiring an accounting did not render Section 1601.2-E(b) unconstitutional.
We affirm the Commonwealth Court‘s holding. We reiterate that a party challenging a duly-enacted statute has the burden of demonstrating that the statute “clearly, plainly, and palpably violates the Constitution.” PEDF II, 161 A.3d at 929 (internal quotation marks omitted). In this case, PEDF failed to demonstrate that Section 1601.2-E(b) is facially unconstitutional given that the Commonwealth may fulfill the dictates of Section 1601.2-E(b) without violating its trustee duties under Section 27, by segregating the monies from the different funds and keeping an
E. Section 1726-G of the Fiscal Code
Finally, PEDF challenges Section 1726-G‘s transfer of funds from the Keystone Recreation, Park and Conservation Fund (“Keystone Fund“) to the General Fund.26 It emphasizes that the Keystone Fund had previously been used by the DCNR to improve State forest and parks.27 PEDF claims that reducing this line of funding constitutes a violation of the Commonwealth‘s trustee obligations under Section 27, which should have entailed public notice and an evaluation of the effect of the transfer of these funds on DCNR and the projects affected by the reduced funding.
The Commonwealth Court denied relief to PEDF. The court observed that the Keystone Fund derives not from the proceeds of oil and gas leasing but instead from the sales of bonds and notes and the State Realty Transfer Tax. PEDF IV, 2020 WL 6193643, at *15 (citing
The Commonwealth Court additionally rejected PEDF‘s claim that the Commonwealth entities breached their fiduciary duties by failing to provide public evaluation of the environmental impact of the transfer from the Keystone Fund. The court concluded that Commonwealth entities are not obligated by their fiduciary responsibilities under Section 27 to provide public evaluation of every transfer of non-trust funds that might implicate Pennsylvania‘s natural resources.
We affirm the Commonwealth Court‘s denial of PEDF‘s proposed declaration in regard to Section 1726-G based upon its conclusion that the transfer from the Keystone Fund does not implicate Section 27. As the Commonwealth Court observed, the Keystone Fund does not involve trust assets but rather allocates funds derived from non-trust sources of Commonwealth revenue. We likewise do not find support
IV. Conclusion
For the reasons set forth above, we affirm the order of the Commonwealth Court, while rejecting that portion of the court‘s analysis derived from its decision in PEDF III, 214 A.3d 748.
Justices Todd, Donohue and Mundy join the opinion.
Justice Donohue files a concurring opinion in which Justice Todd joins.
Justice Mundy files a concurring opinion.
Justice Dougherty files a concurring and dissenting opinion.
Justice Wecht files a concurring and dissenting
Former Justice Saylor did not participate in the consideration or decision of this matter.
Notes
The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. Pennsylvania‘s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.
To guard against transgressions of the high powers which we have delegated, we declare that everything in this article is excepted out of the general powers of government and shall forever remain inviolate.
- the appropriations from the Lease Fund contained in Sections 104(P) and 1601 of the General Appropriation Acts of 2017 and 2018 for the DCNR‘s government operations are facially unconstitutional;
- the use of these appropriations for environmental initiatives beyond Pennsylvania‘s Marcellus Shale region are likewise facially unconstitutional;
We grant [PEDF‘s] Application insofar as it seeks a declaration that the Commonwealth is required to maintain accurate records of the Lease Fund and track trust principal as part of its trustee duties, and we deny the Application in all other respects.
We grant the Commonwealth‘s Application for Summary Relief upon concluding that the following legislative enactments are not facially unconstitutional: Sections 104(P) and 1601 of the General Appropriation Acts of 2017 and 2018; the repeal of the 1955 Lease Fund Act; Section 1601.2-E of The Fiscal Code; and Section 1726-G of The Fiscal Code.
We also grant the Commonwealth‘s declaratory request that Lease Fund money, including trust principal, may be expended on environmental conservation initiatives beyond the Marcellus Shale region.
If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing and distributing the trust property, giving due regard to the beneficiaries’ respective interests in light of the purposes of the trust. The duty to act impartially does not mean that the trustee must treat the beneficiaries equally. Rather, the trustee must treat the beneficiaries equitably in light of the purposes of the trust
(p) Oil and Gas Lease Fund. -- The following sums set forth in this act, or as much thereof as may be necessary, are hereby specifically appropriated from the Oil and Gas Lease Fund to the hereinafter named agencies of the Executive Department of the Commonwealth for the payment of salaries, wages or other compensation and travel expenses of the duly appointed officers and employees of the Commonwealth, for the payment of fees for contractual services rendered, for the purchase or rental of goods and services and for payment of
The primary mission of the Department of Conservation and Natural Resources will be to maintain, improve and preserve State parks, to manage State forest lands to assure their long-term health, sustainability and economic use, to provide information on Pennsylvania‘s ecological and geologic resources and to administer grant and technical assistance programs that will benefit rivers conservation, trails and greenways, local recreation, regional heritage conservation and environmental education programs across Pennsylvania.
PEDF alleges that these transfers violate Section 27 because these funds support statewide projects that are not limited to the Marcellus Shale region and not controlled by the DCNR, and also because these funds were previously supported through non-trust sources, including a waste disposal fee and the Capital Stock and Franchise Tax. As these allegations fail for the same reasons PEDF‘s challenges to the General Appropriations Act provisions fall, we will not address them separately below.
(a) Continuation. -- The fund is continued as a special fund in the State Treasury.
(b) Sources. -- The following shall be deposited into the fund:
- Rents and royalties from oil and gas leases of land owned by the Commonwealth, except rents and royalties received from game and fish lands.
- Amounts as provided under section 5 of the act of October 8, 2012 (P.L. 1194, No. 147), known as the Indigenous Mineral Resources Development Act.
- Any other money appropriated or transferred to the fund.
(c) Use. -- Money in the fund may only be used as provided under subsection (e) or as annually appropriated by the General Assembly. In making an appropriation from the fund, the General Assembly shall consider the Commonwealth‘s trustee duties under section 27 of Article I of the Constitution of Pennsylvania.
(d) Priority. -- Money appropriated from the fund under a General Appropriation Act or other appropriation act shall be distributed prior to allocations under subsection (e).
(e) Annual transfers. -- The following apply:
- (i) Except as provided under subparagraph (ii), for the 2017-2018 fiscal year and each fiscal year thereafter, $20,000,000 shall be transferred from the fund to the Marcellus Legacy Fund for distribution to the Environmental Stewardship Fund.
- (ii) No amount shall be transferred from the fund to the Marcellus Legacy Fund for distribution to the Environmental Stewardship Fund for the 2019-2020, 2020-2021 and 2021-2022 fiscal year.
- (2) For the 2017-2018 fiscal year and each fiscal year thereafter, $15,000,000 shall be transferred from the fund to the Marcellus Legacy Fund for distribution to the Hazardous Sites Cleanup Fund.
During the 2017-2018 fiscal year, $300,000,000 shall be transferred from amounts available in special funds and restricted accounts to the General Fund. The transfers under this section shall be in accordance with the following:
- (1) The Secretary of the Budget shall transmit to the State Treasurer a list of amounts to be transferred from special funds and restricted accounts to the General Fund.
- (2) Upon receipt of the list under paragraph (1), the State Treasurer shall cause the transfers under paragraph (1) to occur.