Courts in 2020 continued to define the contours of Article I, Section 27 of the Pennsylvania Constitution, known as the Environmental Rights Amendment (ERA). The ERA, states:
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.
In 2017, as reported here, the Pennsylvania Supreme Court, in Pa. Envtl. Defense Found. v. Commonwealth, 161 A.3d 911 (Pa. 2017) (“PEDF II”), overturned a decades old balancing test and instead focused on the text of the ERA, splitting it into two parts – the individual right embodied in the first sentence, and the Commonwealth’s trustee obligations embodied in the second and third sentences. The Supreme Court applied the second and third sentences of the ERA in the context of private trust principles that existed at the time the ERA was enacted in 1971 and struck down as unconstitutional statutory enactments that directed oil and gas royalties to the Commonwealth’s general fund rather than a fund used exclusively for conservation purposes. The Supreme Court found that “royalties – monthly payments based on the gross production of oil and gas at each well – are unequivocally proceeds from the sale of oil and gas resources” and must therefore remain in the trust. The Supreme Court remanded to the Commonwealth Court the issue of whether rental payments and up-front bonuses made under those oil and gas leases constituted trust assets that must also be used exclusively for conservation purposes.
In 2019, as reported here, the Commonwealth Court, in Pa. Envtl. Defense Found. v. Commonwealth, 214 A.3d 748 (Pa. Cmwlth. 2019) (“PEDF III”), held that two-thirds of rental payments and up-front bonuses must be reserved for conservation purposes under the ERA. The Court held, however, that proceeds designated as income are not required to remain in the corpus of the trust and used solely for conservation purposes and may instead be appropriated for general fund purposes. The Court therefore found that the statutory enactments that directed the transfer of the rental and bonus payments to the Commonwealth’s general fund were not facially unconstitutional, but the Court noted that an accounting is necessary to ensure that no more than one-third of the rental and bonus payments were used for non-conservation purposes. PEDF has appealed that decision to the Pennsylvania Supreme Court.
On October 22, 2020, as reported here, the Commonwealth Court rejected a facial constitutional challenge to two statutory enactments that directed over $110 million generated from oil and gas leases on state lands to pay for the general government operations of the Pennsylvania Department of Conservation and Natural Resources, finding that the appropriations were not facially unconstitutional under the ERA. Pa. Envtl. Defense Found. v. Commonwealth, 241 A.3d 119 (Pa. Cmwlth. 2020) (“PEDF IV”). In rejecting the facial constitutional challenge, the Court noted that the enactments did not identify whether the funds were royalties, rents, bonuses, or interest, and therefore the Court could not determine that the enactments were facially unconstitutional. The Court, however, similar to its holding in PEDF III, required the Commonwealth to conduct an accounting to ensure that the assets of the trust are being used for purposes authorized by the trust or necessary for the preservation of the trust in accordance with the ERA. The Court likewise rejected an argument that the use of the funds is restricted to the Marcellus Shale region, noting that the public trust under the ERA encompasses all public natural resources and not just one specific type. The Court also upheld the repeal of the 1955 Lease Fund Act, finding that the “Commonwealth has a constitutional obligation to ensure that trust proceeds are used to conserve and maintain the corpus of the trust, regardless of any statutory safeguards.” PEDF has appealed that decision to the Pennsylvania Supreme Court.
On February 21, 2020, as reported here, the Commonwealth Court dismissed a claim brought by a group of municipalities alleging that a Pennsylvania Public Utility Commission (PUC) regulation governing the siting of gas meters failed to sufficiently protect historic resources under the ERA. See City of Lancaster, et al. v. Pa. Pub. Util. Comm’n, No. 251 MD 2019 (Pa. Cmwlth. Feb. 21, 2020) (unreported). The PUC regulation at issue, 52 Pa. Code § 59.18, was amended in 2014 to encourage natural gas distribution companies (NGDCs) to site gas meters outside, rather than inside, of buildings. Subsection 59.18(d), nevertheless, allows an NGDC to consider locating a gas meter inside of a historic building, such as one designated as historic under the Pennsylvania Historic District Act, but only if certain safety conditions are met.
In City of Lancaster, an NGDC serving three municipalities – the City of Lancaster, Borough of Carlisle, and Borough of Columbia – had decided to relocate meters from the interior of buildings to the exterior of buildings in the municipalities’ historic districts. The municipalities argued that Section 59.18 violates the ERA by making the interior locations of meters in historic districts the exception rather than the rule, by failing to set standards that a utility must follow when installing a meter in a historic district to protect historic resources, by leaving this decision to the ultimate discretion of the utility, and by exempting utilities from local historic district requirements.
The Court began its analysis by noting that the Pennsylvania Supreme Court, in PPL Electric Utilities Corp. v. City of Lancaster, 214 A.3d 639 (Pa. 2019), held that the Pennsylvania Public Utility Code occupies the entire area of utility regulation in the Commonwealth, known as “field preemption.” The Court stated that, as a general matter, Section 59.18 therefore supersedes any local regulation or ordinance that falls within the ambit of that field. At the same time, as the Commonwealth Court previously held in UGI Utilities, Inc. v. City of Reading, 179 A.3d 624 (Pa. Cmwlth, 2017), preemption is barred where the regulation at issue completely removes protections to the public natural resources protected by the ERA.
Here, the Court found that the municipalities failed to establish that 52 Pa. Code § 59.18, on its face, caused an “unreasonable degradation” of historic values protected under the ERA. The Court explained that the intent of Section 59.18 is actually to protect historic buildings by providing a specific exception for considering the placement of meters indoors in historic districts as long as certain safety requirements are met. The Court emphasized that “the duties to conserve and maintain natural resources under the ERA ‘do not require a freeze of the existing public natural resource stock” and “are tempered by legitimate state interests.’” The Court ultimately dismissed the municipalities’ facial challenge to Section 59.18, finding that there may be circumstances in which no harm to historic resources will result from the placement of meters outside of historic buildings, but allowed the municipalities to seek to amend their Petition for Review to assert an as-applied challenge.
City of Lancaster is a reminder that courts will require parties to allege specific facts to support their ERA claims and that courts will tend to defer to the Commonwealth in the face of an ERA challenge when there is a sufficient state interest in the regulation at issue.
* * * Looking into 2021, there may be a relatively decreasing trend in ERA case law but expect parties to raise important issues that are currently undecided, such as the definitions of the terms “Commonwealth” and “public natural resources” in the ERA and the extent to which the ERA imposes independent obligations on PADEP and other state agencies.