Thursday, June 22, 2017

Shale Law in the Spotlight: Pennsylvania Supreme Court Takes Expansive View of State Environmental Rights Amendment, Strikes Down Use of Oil and Gas Revenue for Non-Conservation Purposes

Written by Patrick Stickney, Research Assistant for Professor Lara Fowler

On June 20, 2017, the Pennsylvania Supreme Court reaffirmed the view, first expressed in the Court’s plurality decision in Robinson Township v. Commonwealth (2013), that the state’s Environmental Rights Amendment should be given a more expansive construction than has been accorded to the Amendment previously by the courts. In Pennsylvania Environmental Defense Foundation v. Commonwealth (PEDF), the Supreme Court rejected the test formulated by the Commonwealth Court shortly after the passage of the Amendment in the 1970s. Along with reaffirming a more expansive construction of the Amendment, the Court struck down amendments made to the state’s Fiscal Code which transferred all but up to $50 million a year in royalty money from oil and gas leases on state lands from the Pennsylvania Department of Conservation and Natural Resources to the state’s general fund, because those funds were not used for the conservation or maintenance of public natural resources. Additionally, the Court remanded the question of whether, distinct from royalty payments, rental payments made as part of the lease are payments that should also be considered part of the trust, in the view that they should if they were made as “consideration for the oil and gas that is extracted.” Even so, the decision still leaves many aspects of the Environmental Rights Amendment open, including the question of exactly how much of the Robinson Township plurality decision has become affirmed by the Court. 

Two years after the Pennsylvania legislature passed the Environmental Rights Amendment, the Commonwealth Court articulated a three-part test for the public trust doctrine portion of the Amendment in Payne v. Kassab. The Payne test asked:
  • Was there compliance with all applicable statutes and regulations relevant to the protection of the Commonwealth's public natural resources?
  • Does the record demonstrate a reasonable effort to reduce the environmental incursion to a minimum?
  • Does the environmental harm that will result from the challenged decision or action so clearly outweigh the benefits to be derived therefrom that to proceed further would be an abuse of discretion?
Between the articulation of the test and the Supreme Court’s decision in Robinson Township, state courts had found the test to be controlling. The Robinson Township plurality upended the conventional formulation of the Amendment, relegating the Payne test to be applied only when a claim is made that an action by the government fails to comply with a statute that the legislature passed to further advance the goals of the Environmental Rights Amendment. However, its status as a plurality decision raised questions as to whether an expansive construction of the Amendment would replace the exclusive use of the Payne test; the Commonwealth Court itself continued to apply the Payne test because Robinson Township was not a majority decision. 

The Court’s Decision
Instead of relegating the Payne test to a portion of the analysis under the Amendment as the plurality in Robinson Township did, the Court rejected it entirely in PEDF, stating that the analysis should be controlled by the plain language of the Amendment and state private trust principles in effect at the time of the Amendment’s passage. The Court rejected the Payne test by stating that, although the Court upheld the Commonwealth Court’s decision in Payne, it did so without adopting the test. 

The Court affirmed the Robinson Township plurality’s explanation that state trust principles give the duties of prudence, loyalty, and impartiality to the state. Additionally, the Court explained the state has the “duty to prohibit the degradation, diminution, and depletion” of public natural resources, whether through state or private action, and the state must affirmatively act through legislation to protect the environment. Because state trust law requires that trust assets cannot be used for purposes outside the scope of the trust, including the revenue from the sale of those assets, legislative action allowing funds from state oil and gas leases to be used for non-conservation purposes were a violation of the state’s duties under the Amendment. The Court explained that this revenue did not need to stay in the fund established for this lease revenue, but if it is transferred, the funds must be used for the conservation and maintenance of public natural resources. 

The Court’s majority decision in PEDF has opened up new ground for Environmental Rights Amendment litigation, and it will be key to pay attention to how the Commonwealth Court decides the issue on remand and follows the judgement of the Supreme Court. The Court’s decision in PEDF could serve as a foundation on which greater limits on state action in this area could be established, or the effect of the Court’s decision could be limited through subsequent decisions.

No comments:

Post a Comment