Allegheny County reaches $500 million deal for airport drilling

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Consol Energy Inc. will pay an estimated $500 million over the next 20 years for the right to drill for shale gas on land surrounding Pittsburgh International Airport.

At the start of a public hearing about airport drilling this evening in Moon, Allegheny County Executive Rich Fitzgerald announced details of the proposed agreement, which would include a $50 million upfront bonus payment and an estimated $450 million in royalties.

Mr. Fitzgerald said Consol also is planning to invest another $500 million in infrastructure and other costs related to the drilling, bringing the entire package to $1 billion.

"This deal is basically going to be a billion dollar investment that Consol is making in this region without any taxpayer dollars," he said. "I feel very good about what the taxpayers and the community are going to get out of this."

An overflow crowd of more than 300 attended the hearing this evening at Robert Morris University.

The Allegheny County Airport Authority board is expected to vote on the deal at its meeting today. In December, board members selected Consol over EQT Corp., the only other company that bid to drill on the 9,263 acres of airport land available.

At the time, it looked as if EQT was the higher of the two bids. It offered an upfront payment of $44 million, or $4,750 an acre, compared to Consol's $20.8 million, or $2,250 an acre.

But Mr. Fitzgerald said weeks of negotiations produced a higher upfront payment. Consol also will pay an annual 18 percent royalty on natural gas proceeds, meaning the company will have to extract at least $2 billion worth of gas and liquids over 20 years to hit the estimated $450 million figure.

Mr. Fitzgerald said the proceeds from the drilling will be used to reduce the costs to the airlines at Pittsburgh International in an effort to attract more flights; to support economic development on airport land; and to help make capital improvements to the airport.

Federal Aviation Administration regulations require that any proceeds from gas drilling be used to improve the airport or its properties.

"We just view this as a real economic benefit for the region," Mr. Fitzgerald said. "We appreciate that it's Consol, a local company, that wants to partner with the community."

Mr. Fitzgerald did not have a timetable for when the drilling would start.

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


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