Officials with Consol Energy Inc. and Allegheny County, PA, said natural gas production has begun from six wells targeting the Marcellus Shale at Pittsburgh International Airport.
In a statement, the Allegheny County Airport Authority (ACAA) said the production milestone marked the beginning of the next stage in its partnership with the Pittsburgh-based producer, which was signed in February 2013 (see Shale Daily, Feb. 21, 2013). The ACAA said the partnership with Consol is expected to continue through 2018 and provide hundreds of millions of dollars in economic development for the region.
"We were thrilled to have the opportunity to explore this public-private partnership two years ago following an extensive public process," Allegheny County Executive Rich Fitzgerald said at a celebration marking the event on Monday. "Today, we are celebrating the benefits of it as we see our airport benefitting from reduced costs and increased service."
Fitzgerald also lauded the news that a unit of Royal Dutch Shell plc will build an ethane cracker about 30 miles northwest of Pittsburgh (see Shale Daily, June 7). "Our region, as a whole, will continue to benefit with the start of [natural gas] production," he said. "With last month's announcement of the ethane cracker plant being built just a few miles away from here, we look forward to even more advancements and opportunities within the natural gas industry."
Consol has signed an agreement to supply Shell's cracker with ethane.
Under the agreement with Consol, the ACAA received a $46 million signing bonus and 18% royalties on all future production in exchange for leasing approximately 9,200 acres at the airport. Six wells on the company's Pad No. 2 have been turned in-line and are currently flowing gas into a midstream system operated by MarkWest Energy Partners LP, the ACAA said.
"Since the initial lease was signed and upfront payment received, we have reduced fees to airlines to their lowest rate in eight years," ACAA CEO Christina Cassotis said. "Innovative partnerships like this with a local, world-class company like Consol are key in helping attract air service."
According to the ACAA, the $46 million bonus allowed it to reduce airline passenger fees at the airport by 3.8% in July 2013, to $14.11 per passenger. The fees were reduced three more times each October and are currently $12.88 per passenger, the lowest rate at Pittsburgh International since 2008.
"As a company that has called this region home for 152 years, we are very proud to have been selected to develop this flagship project," Consol COO Tim Dugan said. He added that the company "takes our responsibility in terms of safety and protecting the environment very seriously. These are the core values that we live by each and every day, and these are the values which will continue to guide us as we move forward with this important project."
Consol is scheduled to announce its second quarter earnings at 6:45 a.m. ET on Tuesday, July 26. A conference call to discuss 2Q2016 will follow at 10 a.m.
The ACAA and Consol unveiled plans for the company to drill 47 wells on airport property targeting the Marcellus and Upper Devonian Shale, and the construction of 17 miles of natural gas pipeline, in August 2013 (see Shale Daily, Aug. 29, 2013). In order to comply with federal air quality standards, Consol agreed to use electric engines to power its vertical and horizontal drilling rigs in December of that year (see Shale Daily, Dec. 18, 2013).
The Federal Aviation Administration approved Consol's plans to drill at the airport in March 2014. One month later, the Findlay Township Board of Supervisors also gave the company a green light to proceed (see Shale Daily, April 25, 2014; March 28, 2014).
Consol officially started hydraulic fracturing (fracking) operations at the airport in August 2014 (see Shale Daily, Aug. 26, 2014). The company contracted with Halliburton Co. to debut state-of-the-art emissions technology -- also known as Tier 4F equipment under U.S. Environmental Protection Agency standards -- to power its fracking pumps in April 2015 (see Shale Daily, April 2, 2015).