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Board OKs $500M Consol Deal for Pittsburgh Airport Drilling

Allegheny County Airport Authority (ACAA) board members Friday unanimously approved a deal with Consol Energy Inc. for Marcellus Shale natural gas drilling rights at Pittsburgh International Airport. The arrangement could be worth $500 million over the next 20 years.

ACAA Treasurer Dennis Davin, who also serves as economic development director for Allegheny County, told NGI's Shale Daily that if finalized, the deal calls for Consol to award the authority a $50 million signing bonus and pay 18% royalties on all future production.

"We think that there will be probably between six and seven well pad sites, and somewhere on the order of 45 to 50 [horizontal] wells drilled," Davin said Monday. He added that all 8,800 acres of airport property will be leased. "There will be some wells drilled under the facility."

The Allegheny County Committee on Public Works is scheduled to vote on the lease deal on Thursday. If approved, Davin said the Allegheny County Council would vote on the deal at its next regular meeting on Feb. 19. He added that the Federal Aviation Administration (FAA) reviewed Consol's bid package in late 2012.

"The FAA will likely take a look at the lease once the lease is executed," Davin said. "Once the council vote takes place, if approved, the airport authority would then enter into the lease with Consol; they already have the authorization to enter into the lease."

Davin said revenue generated by the Consol deal would be used to reduce rates and charges at Pittsburgh International Airport and to make capital improvements throughout the facility. He said some revenue would also be spent on economic development activities at the airport.

"The FAA has a ruling that any revenue that comes out of the ground, or any revenue associated with airports in general, has to stay on the airport in one way, shape or form," Davin said.

The ACAA manages Pittsburgh International Airport (which straddles Findlay and Moon townships) and Allegheny County Airport, a 400-acre facility in West Mifflin Borough. Davin said the Consol deal was just for the property at Pittsburgh International Airport, but he said the ACAA may revisit leasing the county airport, perhaps in one to three years.

Consol's plans to drill must also meet the requirements of the state Department of Environmental Protection (DEP), Davin said.

"We feel pretty good about the way this is being covered," Davin said. "Obviously, this will be done in as environmentally sensitive of a way as possible, with regulations and permitting under the DEP, and then the FAA weighing in on the environmental impact. The airport authority will also have its own inspectors and environmental folks on the ground, reviewing this on a day-to-day basis."

ACAA spokeswoman JoAnn Jenny told NGI's Shale Daily that the nine-member board voted 6-0 in favor of the deal; there were two abstentions; one member was on maternity leave.

Last December, the ACAA board accepted a bid by Consol of $2,250/acre ($20.8 million total), an amount less than half of a competing bid by rival EQT Corp., which had offered $4,750/acre ($44 million total) for the drilling rights (see Shale Daily, Dec. 18, 2012; Dec. 7, 2012). Officials with the ACAA and Allegheny County insisted that the Consol offer was a better deal for taxpayers.

According to airport data, Pittsburgh International Airport served 8.01 million scheduled passengers in 2012, a 3.1% decrease from 2011.

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