PENNSYLVANIA SUPREME COURT ISSUES TWO OIL AND GAS DECISIONS
July 5, 2017
The Pennsylvania Supreme Court has recently issued two rulings affecting the State’s oil and gas industry. Both decisions involved the “Environmental Rights Amendment” to Pennsylvania’s Constitution. One of the rulings related to the court’s 2013 decision enjoining certain provisions of a re-write of Pennsylvania’s Oil and Gas Act of 1984. The other ruling involved the allocation of funds from the Commonwealth’s leasing of oil and gas rights.
Pennsylvania Independent Oil and Gas Association v. Pennsylvania Department of Environmental Protection
In 2012 the Pennsylvania Legislature substantially re-wrote the State’s Oil and Gas Act. Known as “Act 13,” it included among its provisions a “set-back” requirement (restricting the areas in which development could occur) and provided for waiver of the set-back provisions in certain circumstances. In 2013 the waiver provision, among others, was deemed to violate Pennsylvania’s Environmental Rights Amendment by the Pennsylvania Supreme Court. See Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013). The court additionally enjoined the set-back provisions, finding that they were not severable from the waiver provision. Other provisions of Act 13 were also held to be un-severable from the enjoined provisions, including a requirement that Pennsylvania Department of Environmental Protection (PADEP) consider the impacts of a proposed well on certain public resources.
After the Robinson Township ruling, the PADEP continued to require information in permit applications about the same public resources contemplated by the Act 13 provision that the Pennsylvania Supreme Court had found unconstitutional. The Pennsylvania Independent Oil and Gas Association (PIOGA) filed suit in Commonwealth Court. There, the court disagreed that the PADEP was precluded from collecting and using the public resource information, even in light of the Robinson Township decision. It reasoned that the injunction in Robinson Township only affected the PADEP’s ability to collect information on impacts to public resources to the extent that such collection was directly tied to the enjoined set-back and waiver provisions of Act 13. If the set-back and waiver provisions were not implicated, PADEP could disregard the Robinson Township and request the relevant information. PIOGA appealed, and on June 20 the Pennsylvania Supreme Court affirmed the Commonwealth Court’s decision without issuing an opinion.
Pennsylvania Environmental Defense Foundation v. Commonwealth of Pennsylvania
In Pennsylvania, the Department of Conservation and Natural Resources (DCNR) is empowered to lease minerals in State forests so long as it determines that the lease is in the State’s best interest. Historically, these lease revenues were appropriated to the DCNR. In 2008 alone, the DCNR entered into leases that produced $167 million in revenue (more than the cumulative revenues accrued since 1947). These funds were committed to conservation projects. Thereafter, however, the DCNR temporarily ceased its leasing program while a study was conducted regarding the effects of Marcellus shale production and development. Meanwhile, the Legislature enacted provisions prohibiting expenditures from the lease funds unless they were first appropriated and transferred to the State’s General Fund.
The funding mechanism was challenged by environmental groups in Commonwealth Court. The groups alleged that the legislative provisions violated the Environmental Rights Amendment. The Amendment grants two rights to the public: rights to clean air and water as well as the preservation of natural and scenic values; and common ownership of public resources. The groups argued that disbursement of lease revenues to the General Fund violated the Amendment by using money earmarked for conservation projects to fill State budget gaps.
The litigation addressed a three-part test enunciated in 1973 by the Commonwealth Court (Payne v. Kassab, 3012 A.2d 86 (Pa. Commw. 1973)), which required courts to weigh the potential environmental harm of a challenged decision against its benefits. Relying on the Payne test, the Commonwealth Court refused to find that the legislative provisions violated the Environmental Rights Amendment. The Commonwealth Court also declined to rule, however, that the commingling of the lease payments with the General Fund or the statutory allocation of funds to the General Fund were unconstitutional. On appeal, the Pennsylvania Supreme Court refused to apply the Payne test, finding that it inappropriately limited the scope of the Environmental Rights Amendment. Referencing the rights granted to the public by the Amendment, the court ruled that proceeds from the sale of trust assets (such as oil and gas) are part of the “public trust” and must be used for conservation and maintenance of public resources.
A likely result of these rulings is that the Environmental Rights Amendment will be invoked more often in challenges to Pennsylvania’s permitting, zoning and other decisions.
This article is authored by Douglas J. Crouse, Jackson Kelly PLLC.