$500M drilling deal riles residents
By Timothy Puko
Published: Wednesday, Feb. 27, 2013, 12:01 a.m.
Paul D. McLaughlin Jr. recalls feeling heat rise up his neck when he heard about the $500 million deal for airport gas drilling.
McLaughlin, 66, lives in Moon, about three blocks from Pittsburgh International Airport, on land where his grandfather's family once mined coal, he said. Though many people his age are retiring, McLaughlin works a 4 a.m. to noon shift at an airport-area garage to pay his bills and help a niece through college.
Allegheny County's deal with Consol Energy Inc. for shale gas drilling on airport property might have taken his chance to make life a little easier, he realized.
McLaughlin is one of at least 300 people offered pennies for oil and gas rights from which the Allegheny County Airport Authority is about to make millions. The county used eminent domain condemnations in court to acquire 9,000 acres the authority is leasing to Cecil-based Consol.
The most recent acquisitions were in 2004 and 2005, when the county offered 50 members of the McLaughlin family and 32 other families $1 to split for each parcel of their mineral rights.
“It just seems like we were robbed,” McLaughlin said. “I told my sister, ‘Did you see what these crooks did?' They said there was nothing of value out there. And lo and behold, they're going to make $500 million in the next 20 years.”
Some residents have protested airport land acquisition since government leaders started using eminent domain to condemn land for an airport in the 1950s. A few landowners appealed in court over the decades with mixed results.
Court records do not show how many of them negotiated better offers, nor how much money the county paid in total to acquire airport land and mineral rights. Lawyers for the county and airport said they did not have those figures.
Government representatives fully followed the law during condemnations, said Downtown attorney Jeff Letwin, an airport authority lawyer since its 1999 inception. He ensured the airport took control of missing mineral rights, he said.
“I felt it was important,” Letwin said. “We were about to embark on an aggressive real estate plan that we've been successful with, and I didn't want anybody to make any claims that could prevent that from happening.”
When County Executive Rich Fitzgerald was County Council president from 2004 to 2011, he signed legislation authorizing the last two eminent domain efforts to take coal, oil, gas, limestone and other mineral rights at the airport. He declined comment for this story, referring questions to the authority.
Even in 2005, almost no one had heard of the Marcellus and Utica shale formations that drillers now are tapping for natural gas, airport officials said. The combination of sideways drilling and hydraulic fracturing to crack the shale allows Consol to plan six to eight well pads on the airport's perimeter and access gas even under runways.
Range Resources Corp. demonstrated promising signs of how well fracking would work in the Marcellus in October 2004 — 10 months before the county filed its last of eight eminent domain cases. But Range didn't make public its success until 2007.
No airport officials heard of the possibility until 2008, and they made their first attempt to bid out drilling rights that year, Letwin said.
The county and airport didn't take mineral rights to get rich off gas royalties, their lawyers argued in court filings at the time. They did so to keep mining and drilling companies off the land, to protect airport buildings, runways and surrounding commercial development from risks such as land subsidence, officials have said.
Not everyone bought that argument.
In an appeal to Commonwealth Court in 2003, a lawyer argued that the county hadn't proved it took the land for public good, as the law requires. It took land to lease it to other private parties, argued Diana Slivinska, who represented Carol Nicoletti, a coal rights owner from Findlay.
“You don't have to be a rocket scientist to see that. It's essentially government engaging in land speculation” on the cheap, at the expense of people whose land it took, Slivinska said in a recent interview. “This is not how government is supposed to function. This is not how government is supposed to treat its citizens.”
Those citizens didn't necessarily own the mineral rights, though, and that's one reason the county commonly made low offers, said Lynda Dupre, a Ligonier lawyer who was hired as outside counsel for the county and airport authority.
Some people owned mineral estates that were separated from surface properties decades ago, and that's how the county ended up with land but not all the mineral rights. Some people had only leases that would have long ago expired, Dupre said.
County officials made nominal offers to everyone as a precaution, because it's often hard to tell a lease from a sale in 19th-century documents, she said.
“They wanted to clear everything up,” she said. “You don't want someone to say they can come out here and they have a right to put a well right in the middle of a parking lot.”
The case would be tough to fight now because courts likely won't show sympathy for people who didn't challenge the county's offer, lawyers said. In eminent domain cases, citizens have about five years to challenge, according to David B. Snyder, a lawyer with Fox Rothschild LLP in Philadelphia.
“That's a pretty bright line,” said Snyder, an expert on Pennsylvania eminent domain law. “If you blow that five years and you haven't challenged the amount of money they're offering you, it's just like a statute of limitations. ... You're out of luck.”
Leticia Haxall blames her situation on her ignorance.
Haxall, 84, of Oceanside, Calif., might be the farthest flung of the oil and gas heirs, including some who moved to Florida and Maine, court documents show. The county's offer told her she had six years to challenge, but she never did.
“My son told me not to sign off on that” $1 offer, said Haxall, who learned of the $500 million deal in a Tribune-Review phone call. “He told me, ‘They'll find oil under that airport, for sure, if you sign off on that.' But I did anyway. Oh dear.”
Many residents said it didn't make sense for them to pay attorneys or experts for rights that might get them only $1 to split among dozens of heirs. The county approached some family members who were elderly or ailing, they said.
“It just kind of overwhelmed everybody, and everybody just kind of walked away from it,” said McLaughlin, who said his father was battling diabetes at the time. “We were more concerned about him than we were the property like that. ... It just feels like it's like David going up against Goliath.”
Ownership issues became part of negotiations between Consol and the county. Airport officials accepted responsibility for any title challenges, Letwin said. Consol withheld $1 million of its initial $50 million payment, pending clarification of a few parcels, he said.
That's standard in a mineral rights deal, lawyers said. It's especially true for a deal so big and on land with a complicated history, said C. William Kenny, an attorney with Berger and Green on Washington's Landing.
“There's $500 million at stake here, and there's a sense of entitlement as an American that ‘That's my property,' ” Kenny said. “Somebody's going to challenge it.”
Timothy Puko is a Trib Total Media staff writer. Reach him at 412-320-7991 or firstname.lastname@example.org.
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