Allegheny County Airport Authority will negotiate drilling with Consol
By Tom Fontaine
Published: Friday, Dec. 14, 2012, 12:42 p.m.
The Allegheny County Airport Authority on Friday opted to negotiate a potential $250 million drilling deal with Consol Energy, which submitted what appeared to be the lower of two bids for the lucrative contract.
The Cecil-based company offered to pay $20.8 million upfront for the right to drill for natural gas on a combined 9,263 acres at Pittsburgh International Airport in Findlay and the county airport in West Mifflin. The bid included a deposit check of $2.1 million.
EQT, a Downtown energy company, made a bid that it said would have netted the authority $44 million in upfront cash. It did not include a deposit check.
“We went through both submittals very closely and felt the Consol submittal provided the best value to the authority,” authority CEO Brad Penrod said after a board meeting.
Penrod declined to elaborate.
Consol spokeswoman Lynn Seay said last week that the company believed its competitor's bid did not meet all requirements of the authority's request for proposals. She did not provide specifics. Penrod would not say whether that affected the decision.
“We're confident that this partnership will drive economic development and provide value across the board, to businesses and the community alike, by developing this natural gas in an environmentally responsible manner,” Seay said after the authority board's vote.
“We're surprised and disappointed. They left $20 million on the table. We have no idea about the reasoning behind (the authority's decision). No one informed us,” EQT spokeswoman Linda Robertson said.
County Executive Rich Fitzgerald said officials were “looking at more than just the upfront payment,” noting the most lucrative aspect of any drilling agreement would come from royalties. The authority required bidders to provide ongoing royalties of 18 percent on gas produced.
The average Pennsylvania well produces about 4 billion to 4.5 billion cubic feet of natural gas in its lifetime, according to industry estimates. That amounts to about $13.4 million of natural gas per well at today's prices. An 18 percent cut would amount to $2.4 million per well.
That does not include other commodities that could come from the natural gas, such as ethane, propane and butane.
“If the airport wells produce sufficient quantities of so-called natural gas liquids, then the gas would actually be worth more,” said Seth Blumsack, assistant professor of energy policy and economics at Penn State University.
Airport and Consol officials did not say how many wells they would drill. EQT's pitch called for at least 85 wells at Pittsburgh International Airport alone.
“We're anticipating at least $250 million (in royalties) over the long term, but that's all part of the negotiations,” said Fitzgerald, who has said county and airport officials intend to split the proceeds.
The authority operates on a $187 million budget, about $104 million of which is derived from non-airline sources such as development.
Tom Fontaine is a staff writer for Trib Total Media. He can be reached at 412-320-7847 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pa. Lottery’s new Penny not so lucky after all
- Steelers defense’s rapid decline looks similar to that of Steel Curtain’s
- Starkey: NHL stuck in stone age
- Pittsburgh police investigating two overnight robberies
- Steelers notebook: Roethlisberger comes to Haley defense again
- Peduto announces revamped early retirement incentive program
- Plumcreek fire victim identified
- Ex-Pittsburgher eliminated from ‘The Voice’
- Highmark health plan enrollment skyrockets from Healthcare.gov
- PNC plans to do away with tellers
- Vehicle hits house in Ross, 1 hurt