Gas drilling bids sought for Pittsburgh International, Allegheny County airports
The Allegheny County Airport Authority is trying a second time to strike it rich by opening up thousands of acres of land at Pittsburgh International and Allegheny County airports to natural gas drillers.
It is requesting bids from companies interested in a lease to drill on the 9,263 acres available, most of it at Pittsburgh International.
The airport authority advertised for the bids Wednesday. They must be filed by Dec. 5.
"We think that this is a good time for the airport authority and Allegheny County to explore what options are available to us and how it may benefit county taxpayers," said county Executive Rich Fitzgerald, who appoints airport authority board members.
The last time the authority tried to interest gas companies in drilling on Pittsburgh International property, it ended up with no bids, even though airports in other parts of the country were generating millions of dollars a year from drilling rights at the time.
Officials blamed the lack of interest on falling natural gas prices and the meltdown of the financial markets in the United States and elsewhere.
At the time, 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.
In retrospect, Mr. Fitzgerald said he believes the terms kept companies from bidding. "They put a lot of restrictions on that bid. I think in some ways it probably was a learning experience. I think this time we're giving the flexibility to the drilling companies to evaluate whether it's worth it and how to do it," he said.
This time around, the authority is asking for less for the drilling rights at the Findlay and West Mifflin airports. It is seeking an ongoing royalty of 18 percent on all oil, hydrocarbons and gas produced. While it is asking for a per-acre lease bonus upfront, it is not placing a minimum value as to what it will accept.
With the changes, both Mr. Fitzgerald and Randy Forister, the authority's senior director of development, believe the second time around could be a winner for airport and county officials.
"We think this is a new and improved document. It's much cleaner and it's much more straightforward. It's what you would do in the open market," Mr. Forister said.
Despite low natural gas prices, Mr. Fitzgerald believes the airport could benefit because of the market for higher-priced "wet" gas, or gas that comes loaded with hydrocarbons such as ethane and butane, and the proximity of the new Shell Oil cracker plant near Monaca, which will break down the wet gas compounds.
He said the county has been told that the land near Pittsburgh International Airport has more wet gas than dry gas, or gas that does not contain the hydrocarbons.
"We want to see what the market will generate," Mr. Fitzgerald said.
The authority, Mr. Forister added, didn't think there was much of an advantage in waiting longer to test the waters again.
"We have been looking at this for quite a while. I think every entity is looking for additional revenue. While we understand that prices aren't as high as they have been in the past, I'm not sure there's going to be a lot of change in these prices as you look to the future," he said.
Mr. Forister said the new bid also contains provisions to protect the environment, including requirements to keep drilling pads far from wetlands and streams and to test all water supplies within 2,500 feet of a well pad. The authority also is "strongly encouraging" drillers to use public water supplies in their operations.
The county will put any lease before county council to review and will hold a public hearing in the municipality affected by the drilling. Mr. Fitzgerald said most of the revenue would be used to reduce costs at Pittsburgh International, although some of it may go back to the county.
First Published September 20, 2012 1:02 pm