State Forest Gas Revenue Transfers Face Another Appeal

A long-running lawsuit over the Pennsylvania legislature’s diversion of millions of dollars received from oil and gas leases in state forests to pay agency operating expenses is headed back to the state Supreme Court.

At the heart of the case is the Environmental Rights Amendment to the state constitution, which states, “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 people.”

The Pennsylvania Environmental Defense Foundation (PEDF) sued the state government after the General Assembly began in 2009 to transfer money from a special conservation account called the Oil and Gas Lease Fund funded by oil and gas revenue on state land to help pay for general operating expenses of the Department of Conservation and Natural Resources. The transfers began after proceeds from Marcellus lease sales in state forests raised more than $400 million.

In 2017, the state Supreme Court ruled that the money must continue to be placed in the lease fund, which under the Oil and Gas Lease Act required that it be used by the DCNR only for conservation projects. The high court found that under the Environmental Rights Amendment the trust assets must be used for that purpose.

Soon after that ruling, the state legislature approved the diversion of $110 million from the Oil and Gas Fund in FY 2017-18 to pay for operating expenses. It also repealed the repealed the Oil and Gas Lease Fund Act. PEDF again appealed, and in October, the Commonwealth Court ruled that the “vast proceeds derived from oil and gas leases may be used in a variety of ways to benefit a wide array of Pennsylvania’s cherished natural resources,” and not just areas affected by oil and gas development.

The lawsuit also brought into question whether only lease payments must be kept in the special fund, while upfront bonuses and rental payments could be used for other purposes. The court previously determined that while leases were strictly to be used for conservation, two-thirds of rental and bonuses could be used for other purposes. The use and separation of that money also remains in question.

The PEDF has filed a notice that it intends to appeal this latest Commonwealth Court ruling to the Supreme Court, as hundreds of millions of dollars from leases in state forests hangs in the balance. The state budget for fiscal 2020-21 again diverts money from the Oil and Gas Lease Fund – this time $48.8 million.