Pa. Supreme Court: Money from state-forest drilling cannot prop up state budget

The Pennsylvania Supreme Court ruled that state officials cannot transfer money from the Department of Conservation and Natural Resources’ Oil and Gas Fund — derived from natural gas drilling on state forest land — to the state’s general fund to help balance the annual budget.

The PA Environmental Defense Foundation brought the lawsuit, and was appealing a 2020 Commonwealth Court decision, which paved the way for the diversion of more than $110 million from the Oil and Gas Fund between 2017 and 2019, to pay operating expenses rather than using it for conservation purposes.

John Childe, attorney for the foundation, said the court’s opinion “affirms our belief that all funds from the oil and gas leases, including the royalties, bonus and rental payments, are part of the public trust, and must be used to conserve and maintain the public natural resources, including our state forest.”

The foundation has pushed back against the transfers for the past dozen years.

The Supreme Court’s opinion does not mean the money must be paid back; only that it must be used for conservation purposes going forward.

Supreme Court justices found the Commonwealth Court’s 2020 ruling was at odds with its own 2017 ruling on the same issue, when foundation members challenged the transfer of $594 million from the fund between 2008-16. Foundation officials argued that the state’s Environmental Rights Amendment does not permit money from the Oil and Gas Fund to be used for general budgetary matters.

“We rejected the commonwealth’s averment that revenues generated from the sale of trust assets may be redirected to budgetary matters on the theory that the (Environmental Rights Amendment) is silent on that point,” Justice Christine Donohue wrote in the majority opinion.

Unconstitutional appropriations from the fund between 2017-19 total more than $234 million.

Childe said the use of bonus and rental payments from the fund have amounted to more than $500 million over the past decade. In total, more than $825 million has been diverted from the fund.

Childe said the Supreme Court’s decision reaffirms that any choice the state makes about the use of state forest land must be based on protecting the rights of Pennsylvanians to clean air and the preservation of natural, scenic and historic resources.