Pennsylvania Supreme Court Rejects Longstanding Payne v. Kassab Test, Emphasizes Application of Principles of Pennsylvania Trust Law

On Tuesday, June 20, 2017, the Supreme Court of Pennsylvania held in Pennsylvania Environmental Defense Fund v. Commonwealth, No. 10 MAP 2015 (June 20, 2017) (PEDF), that the longstanding Payne v. Kassab test initially adopted by the Commonwealth Court of Pennsylvania in 1973 was not "the appropriate standard for deciding" challenges under Article I, § 27 of the Pennsylvania Constitution (often referred to as the "Environmental Rights Amendment" or "ERA"). No. 10 MAP 2015, at 27-28. In doing so, the  majority of the Supreme Court adopted the ruling of a plurality of the Supreme Court in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013) (plurality). Moreover, the Supreme Court held that "when reviewing challenges to the constitutionality of Commonwealth actions under [the ERA], the proper standard of judicial review lies in the text of [the ERA] itself as well as the underlying principles of Pennsylvania trust law in effect at the time of its enactment." No. 10 MAP 2015, at 28.

PEDF initially filed the lawsuit in Commonwealth Court on March 19, 2012, arguing that the removal of funds generated from the leasing of public lands for oil and gas development from accounts maintained by the Department of Conservation and Natural Resources (DCNR) to general government funds violated the requirements of the 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.

Pa. Const. art. I, Section 27. In its underlying decision issued on January 7, 2015, the Commonwealth Court determined that the ERA did not preclude the transfer of the revenues from DCNR accounts to general government accounts. Pennsylvania Environmental Defense Fund v. Commonwealth, 108 A.3d 140 (Pa. Commw. Ct. 2015).

In its decision reversing the Commonwealth Court, the Supreme Court rejected the longstanding three-part test adopted by the Commonwealth Court in Payne v. Kassab, 312 A.2d 86 (Pa. Commw. 1973) (Payne) to determine a violation of the Environmental Rights Amendment. The three-part Payne test addressed the following questions:

1. Was there compliance with all applicable statutes and regulations relevant to the protection of the Commonwealth’s public natural resources?
2. Does the record demonstrate a reasonable effort to reduce the environmental incursion to a minimum?
3. Does the environmental harm which 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? Id. at 94.

The Supreme Court reasoned that the Payne test "strip[ped]" the ERA "of its meaning."  No. 10 MAP 2015, at 27. The Supreme Court found that the proper standard of judicial review for challenges to the constitutionality of Commonwealth actions under the ERA "lies in the text of Article 1, Section 27 itself as well as the underlying principles of Pennsylvania trust law in effect at the time of its enactment." No. 10 MAP 2015, at 27-28. Additionally, the decision relied upon and favorably cited the plurality decision in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013) (Robinson), which had previously indicated that the Payne test should not be used. Id. at 967. The Commonwealth Court had previously indicated that as the Robinson decision was merely a plurality decision, the Payne test remained applicable. Pennsylvania Environmental Defense Fund v. Commonwealth, 108 A.3d 140, 159 (Pa. Commw. Ct. 2015).

While considering the constitutionality of the statutes addressing the transfer of funds from DCNR to general accounts, the Supreme Court also addressed the Commonwealth’s duty as a trustee of "public natural resources" under the ERA. Robinson Township v. Commonwealth, 83 A.3d 901, 956-57 (Pa. 2013). In PEDF, the Supreme Court applied that requirement to the funds and accounts generated by leasing of public lands. No. 10 MAP 2015, at 14. Although acknowledging that the ERA creates a "public trust," No. 10 MAP 2015, at 30, the Supreme Court applied principles of private trust law to its analysis of the ERA and its applicability to funds generated from DCNR’s leasing. No. 10 MAP 2015, at 31-33.  It should be noted Justice Baer, in his concurring and dissenting opinion, disagreed with the application of private trust principles to the public trust. See, e.g., No. 10 MAP 2015 at 2 (Baer, J., conc. and dis.) ("the current decision imposes upon our sister branches of government private trust principles that are absent from the constitutional language and tangential to the forces motivating the adoption of [the ERA].").  

The case was remanded to the Commonwealth Court in order to further develop the appellate record, because the Supreme Court deemed it was not sufficiently developed to conclude whether all revenues generated by the leases remained in the corpus of the natural resources trust. Id. at 37-38.