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Pennsylvania Supreme Court to Hear Challenge to Forest Drilling

The Pennsylvania Supreme Court said it would a hear a case that challenges the way the state manages oil and natural gas development on its publicly-owned forest land and how revenue from those operations can be allocated.

While the high court hasn't set a date to hear the case, it could require the state to better demonstrate how it conserves natural resources and if regulatory efforts meet a rare environmental rights amendment included in the state constitution that provides for people's right to clean air, pure water and natural scenery.

The justices decision to hear the case revives a lawsuit filed last year by the Pennsylvania Environmental Defense Foundation (PEDF) against an executive order issued by former Republican Gov. Tom Corbett. In May 2014, Corbett reversed a moratorium enacted by his predecessor on subsurface leases on state-owned land to generate $95 million to plug the state budget gap (see Shale Daily, May 23, 2014). The Commonwealth Court rejected that challenge, ruling the state could conduct oil and gas lease sales and use that revenue for the state budget rather than for the Department of Conservation and Natural Resources and a special fund for conservation (see Shale Daily, Jan. 22).

At the time, he PEDF said it would file an appeal with the state Supreme Court. Just weeks after the ruling, however, in one of his first significant moves after taking office, Democratic Gov. Tom Wolf reinstated the moratorium on oil and gas leases in state-owned parks and forests (see Shale Daily, Jan. 29).

But PEDF had argued that Corbett and the General Assembly violated the state constitution by directing DCNR to lease state land for the purpose of generating revenue for the state budget. In particular, the group claimed that Corbett and legislators -- as trustees of the state -- had violated Article I, Section 27 of the state constitution, which reads in part, "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."

The high court is now expected to review the standards for managing oil and gas development on state-owned land, especially as it relates to environmental interests  and whether it can use revenue from those operations for the state budget rather than a special conservation fund.

Both Wolf's decision and the Supreme Court case come at a time when Appalachian operators are cutting their budgets and land acquisitions. DCNR's Bureau of Forestry manages 2.2 million acres of state forest, of which 1.5 million acres are prospective for the Marcellus Shale. DCNR spokeswoman Christina Novak said 700,000 acres are either already leased for natural gas development or are in areas where the state does not own subsurface rights.

Wolf's order applies to new leasing of DCNR lands, she said. While the state has managed oil and gas extraction on its forest land since 1947, DCNR has conducted just three Marcellus lease sales since 2008, at a time when interest in the play was increasing.

In December 2013, the Pennsylvania Supreme Court struck down parts of Act 13, which was passed in 2012 to update the state's aging energy laws. To an extent, the ruling undercut the state's centralized regulatory powers and returned to municipalities (see Shale Daily, Dec. 27, 2013; Dec. 20, 2013) their right to change or enforce local zoning laws. But it hinged largely on a reading of Article I, Section 27, which has emboldened drilling opponents and led to a number of other challenges for the oil and gas industry.

State trade groups have submitted amicus briefs in the PEDF case and noted that a ruling from the high court could help resolve some of the fallout from the Act 13 case.

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