Allegheny County Airport Authority board members approved a half-billion dollar deal with Consol Energy Inc. this morning to clear the way for shale gas drilling at Pittsburgh International Airport.
The agreement with CNX Gas Co., a Consol affiliate, calls for $50 million in upfront lease bonus and surface rent payments and an estimated $450 million in royalty payments over the 20-year life of the lease.
"We think that we got a pretty good deal," said Dennis Davin, an authority board member and director of economic development for Allegheny County.
Mr. Davin said the authority would receive the bonus payment within two months once county council authorizes the authority to lease the mineral rights to the 9,263 acres of airport land involved and the agreement is signed.
If all goes according to plan, drilling could begin in late 2014, Mr. Davin said.
He acknowledged that the money the authority receives in royalty payments, set at 18 percent of all proceeds, could vary depending on the price of natural gas.
But after talking to experts, the authority believes $450 million is on target.
"It could go up," Mr. Davin said. "It could go down. But we think that is a solid number right now."
Consol is planning six to seven well pads on airport property and 45 to 50 wells. Executive Director Bradley D. Penrod said the closest drilling will be several thousand feet from runways and won't interfere with airport operations.
The authority intends to use the money from drilling lower costs to the airlines in hopes of attracting more flights, to make capital improvements and to prepare land for development.
Besides the upfront and royalty payments, Consol also will invest $500 million in drilling related infrastructure, bringing the total deal to $1 billion, county Executive Rich Fitzgerald said.
Abstaining in the vote was member Robert Lewis who has business with
Mr. Davin said the other competitor for the contract, EQT Corp., did not submit a conforming bid.
Mark Belko: email@example.com or 412-263-1262.