EQT, Consol bid on drilling at 2 airports

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Two local energy companies are offering to pay the Allegheny County Airport Authority tens of millions of dollars to drill for natural gas on thousands of acres of public land surrounding Pittsburgh International and Allegheny County airports.

If deemed to be acceptable, Wednesday's bids by Consol Energy Inc. and EQT Corp. could generate anywhere from $20.8 million to $44 million in upfront payments for the authority as well as ongoing royalties of 18 percent on all gas, oil or hydrocarbons produced by the drilling.

"On the face of it, they look very promising to me," county executive Rich Fitzgerald said.

But neither Mr. Fitzgerald nor the airport authority is counting the cash just yet, saying both offers must be reviewed to determine if they are valid and meet the requirements of the bidding.

Consol and EQT were the only two companies to bid on the 9,263 acres available for drilling at the airports in Findlay and West Mifflin.

"We did not believe that bidding on the airport was best for us at this time given the 1 million net acres that we already have in Pennsylvania. We will, however, remain an active company in the leasing of land in this region for shale," Range Resources spokesman Matt Pitzarella said.

In the bidding, EQT offered a per-acre lease bonus of $4,750, while Consol advanced a lease bonus of $2,250 per acre.

Based on the 9,263 acres available, the EQT lease bonus would generate $44 million for the authority, while the Consol bid would produce slightly less than half of that, $20.8 million.

The Consol bid was accompanied by a $2 million check, representing 10 percent of the total lease bonus payment, a deposit required by the authority.

EQT did not submit a deposit, which calls into question whether its offer met the requirements of the bidding.

Linda Robertson, EQT spokeswoman, said the firm would make a deposit once it reached a final lease agreement with the authority. She said she believes the deposit "is dependent upon certain issues in the initial agreement that still perhaps need to be hammered out."

JoAnn Jenny, an airport authority spokeswoman, would not say whether the lack of a deposit disqualified EQT. "We are reviewing all of the information in the responses and will have more information in a few days," she said.

Nonetheless, Lynn Seay, a Consol spokeswoman, said the company believes it is the only one to submit a bid that conforms with the authority's bidding guidelines, though she did not elaborate.

She added that Consol has spent considerable time "carefully developing a proposal that outlines a drilling program to develop the liquids-rich natural gas located within the properties" controlled by the airport authority.

"Given our detailed proposal, our demonstrated operational record of safety and compliance, coupled with our strong balance sheet, we're excited to be the leading homegrown energy producer up for consideration in this process," she said.

EQT believes the airport land contains deposits of higher-priced "wet" gas, or gas that comes loaded with hydrocarbons such as ethane and butane. That is particularly important given the proximity of the proposed Shell Oil cracker plant near Monaca, which will break down wet gas compounds.

The bidding "basically creates a win-win opportunity for EQT to partner with our home county to economically and safely develop this particular property and those resources," Ms. Robertson said.

She said that if EQT wins the bid, it expects to begin drilling at Pittsburgh International in late 2013 or early 2014.

The airport authority now will sift through the material submitted by the companies to determine if they meet the requirements laid out in the bid documents. Bidders must have done at least 25 directional/horizontal wells and they must have at least 5,000 net mineral acres under lease.

They also must have at least five years of experience producing natural gas through directional/horizontal drilling. Both EQT and Consol say they meet that requirement.

Ms. Robertson said EQT has been "routinely drilling horizontal wells since 2006." Consol did its first horizontal well in Greene County in 2001 and has drilled 486 horizontal wells to date. Ms. Seay said.

Neither EQT nor Consol have any experience drilling at airports, but that was not required by the authority.

Mr. Fitzgerald said he wants to know why there is such a disparity between the two bids and whether there are conditions attached to one or the other. He said the ongoing royalties of 18 percent could end up being more lucrative in the long run than the upfront payments.

The bids, he said, were "probably in line with expectations. We want to get as much as we can for the taxpayers." Before any drilling begins, there would be public hearings in the affected areas to discuss details, impact, and concerns, he said.

Mr. Fitzgerald said he would like to see any money generated by the drilling to be used to help reduce the airline costs and to attract more flights at Pittsburgh International. Federal Aviation Administration rules generally require that revenues collected on airport properties be used to benefit aviation projects.

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Mark Belko: mbelko@post-gazette.com or 412-263-1262.


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