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County gets no bids to drill for gas
Officials want to open up more than 9,000 acres at two airports
Thursday, October 09, 2008

Officials hoped to strike it rich by opening up thousands of acres at Pittsburgh International and Allegheny County airports to natural gas exploration. Instead, they struck out altogether, at least for now.

Far from hitting the jackpot, the Allegheny County Airport Authority got no bids for the drilling rights to more than 9,000 acres at the two airports by yesterday's deadline.

At a time when other airports are generating millions of dollars a year from drilling rights, the lack of interest in Pittsburgh apparently did not surprise authority officials, given the turbulent economic times.

"Capital's tight and expensive. Gas prices are down. Gas volumes are up. All of that worked against us this morning," authority Executive Director Bradley D. Penrod said.

Kevin Evanto, spokesman for County Executive Dan Onorato, said that when the authority issued the request for proposals last month, natural gas prices were double what they are today and many of the interested companies had much higher stock values.

"What you saw today was the impact of the meltdown of the financial markets in the United States and around the world," he said.

But Laural Ziemba, manager of public relations for CNX Gas Corp., said the company's decision not to bid had more to do with the economics of the project than the overall state of the economy.

"It had nothing to do with the current credit markets, the airport authority or the county itself," she said.

Ms. Ziemba said CNX Gas did not believe the request for proposals issued by the airport authority "reflected current market conditions," adding the company was looking for something more "in line with market prices for the oil and gas industry."

She declined to say whether she thought the authority was asking for too much for the leasing of the rights.

In the request for proposals, the authority sought minimum royalties of $4.5 million over the first 18 months of a lease, as well as ongoing royalties of at least 25 percent from the gas drawn from Marcellus shale formations on airport property.

Such terms aren't unprecedented. Dallas-Fort Worth International Airport received an initial bonus of $186 million and a royalty of 25 percent of all gas produced on 18,000 acres it leased for drilling.

The county authority now will head back to the drawing board to assess the reasons for the lack of bids and to determine when the next round should take place. Yesterday's result also will give the authority and Mr. Onorato time to determine whether airport lands should be part of a comprehensive bid for the drilling rights to all county-owned property.

Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262.
First published on October 9, 2008 at 12:00 am