Drilling for gas at Pittsburgh International Airport could be lucrative for those involved
FINDLAY TWP. — If you drill it, they will come.
At least that’s what some local officials are saying about the recently inked deal to drill on land at Pittsburgh International Airport and Shell’s proposed petrochemical plant in Beaver County.
The plant would be located about 20 miles north of the airport.
“I think there’s no question about that,” said Allegheny County Chief Executive Rich Fitzgerald when asked if he thought Consol’s airport drilling deal and Shell’s proposed cracker plant were linked.
“The level of feedstock will definitely help Shell move forward with their plans. All you have to do is look at why the cracker plants have been built down in the Gulf …. because that’s where feedstock is. What we’re going to see if we see more wet gas be extracted in western Pa., this may not be the only cracker plant that’s built.”
Consol last month announced plans to drill 47 unconventional, wet gas wells — the type of gas found in the Marcellus shale — on the more than 9,000 acres of land at Pittsburgh International Airport. Plans also include six well pads, three water impoundments, 16 miles of gas lines, 9 miles of water lines and several access roads.
While Shell has yet to firmly announce plants for the project, Fitzgerald seems relatively certain the proposed $2.5 billion ethane cracker plant is going to set up shop in Potter Township on the site of Horsehead Corp.’s soon-to-close zinc smelting plant.
“This is going to move forward,” he said.
Yet it hasn’t been a smooth road thus far. In June, Shell signed another six-month extension with Horsehead, the second extension granted. The original decision deadline was Dec. 31, 2012, but Shell asked for its first extension just days before that date.
Horsehead Corp. officials, however, aren’t so sure.
“(Shell) still has an option until the beginning of 2014,” said Ali Alavi, senior vice president of corporate and environmental affairs at Horsehead.
“I have not heard of any specific connection between the Shell project and drilling near the airport. As for whether Shell is going to move forward, I do not have any insight as to how they plan to approach their ultimate decision-making process. I know they continue to undertake review of the site and conduct various due diligence. That appears to be an indicator of continued interest, but I don’t know whether you can take that as a clue one way or the other.”
Consol officials are also hesitant to make a direct connection between the airport drilling deal and the proposed petrochemical plant.
“From an industry perspective, the proposed facility would create new markets for polyethylene and the potential of a new round of manufacturing investment in this region,” said Lynn Seay,director of media relations for Consol Energy. “It is further confirmation that the greater Pittsburgh region is rapidly emerging as America’s energy capital.”
Shell officials declined to comment Friday on whether the airport deal or any other external factors may affect their decision to build their proposed cracker plant in Beaver County.
WHO GETS WHAT?
We’ve all heard the numbers when it comes to the newly inked airport drilling deal. So far, it’s paid a $50 million bonus, and is expected to pay $500 million more in revenues. Experts have also projected Consol will invest another $500 million into the region. But just who will get the royalty money — the airport, the county or local municipalities?
According to Consol officials, the Allegheny County Airport Authority will receive all royalty payments from Consol. None of the money will go directly to the county or Moon or Findlay townships.
“Per the lease agreement we signed with ACAA and Federal Aviation Administration requirements, all royalty payments must be paid to the airport,” said Seay.
Fitzgerald said the county actually owns the airport land. But Federal Aviation Administration rules say any revenue generated by airport-owned “mineral, natural, or agricultural products or water” go back to the airport, to be used for airport operations.
But Seay did say the county and municipalities will get some money — just later, and in the form of impact fees.
“In accordance with Act 13, impact fees will be distributed to host municipalities and the county based on the distribution formula,” she said.
Act 13, passed last year, requires natural gas drilling companies to pay certain fees for each horizontal and vertical well, amounts that vary year-to-year, depending on the price of gas. In 2011, operators had to pay $50,000 for each horizontal well and $10,000 for each vertical well, according to Public Utility Commission officials. In 2012, those numbers differed slightly, at $45,000 for a horizontal well and $9,000 for a vertical well.
“Local governments with unconventional wells do benefit from the impact fee,” said PUC spokeswoman Jennifer Kocher. “However, we don’t how much they will benefit because that depends on the price of natural gas the year of the distribution. The price of natural gas dictates how much money the producers pay per well.”
WHAT WILL THEY DO WITH THE MONEY?
Fitzgerald has big plans for the money generated from the airport deal.
“First, we’ll use (revenues from the project) to lower costs at the airport, so the airport becomes more competitive,” he said. “One of the things we hear from the business community is that with some of their markets, they don’t have direct flights to now. Secondly, using (revenues) to make improvements at the airport by not putting that burden on taxpayers … this takes the burden off taxpayers. Thirdly, (we’ll use it) to build out infrastructure and create jobs.”
Fitzgerald also said the airport deal and the funds generated have the potential keep — or attract — businesses to the area, such as Dick’s Sporting Goods, which announced in June its plans to expand its Findlay offices near the airport.
“To lure those companies (or) to get those companies to expand there, sometimes government needs to provide a little bit of incentive, a little bit of a shovel-ready pad where they can build,” he said. “If they can build on a site that’s ready to go without having to spend add money to have road to get there, on water lines, it makes us more marketable, more desirable.”
THE DEAL THAT KEEPS ON GIVING
Consol will also need to purchase water to conduct the process of hydraulic fracturing — or fracking — which involves injecting chemically laced water into the subterranean Marcellus shale to release the natural gas within. Experts have said fracking a single well takes anywhere from 4 to 5 million gallons of water.
Seay said Consol is in talks with both Findlay and Moon townships to provide water to use for the fracking process. Findlay officials said last month that Consol expects to use about 1 million gallons of water per day, which would double the county’s daily usage. These water sales could generate millions of dollars for both townships.
Seay confirmed that Consol expects to purchase about 300 million gallons of water to support drilling operations, but said they are still in the process of determining the volumes to be provided by the townships.
The company will also have to sign leases with private citizens living adjacent to the airport if the well bores extend beyond airport lands and onto private property.
The Associated Press contributed to this report.