First Free Story (1 of 3)Join Skift Pro
Pittsburgh International Airport won’t spend the influx of cash from natural gas drilling in one place.
Consol Energy will conduct a groundbreaking ceremony on Monday for its project to drill deep into the Marcellus shale under the airport’s nearly 9,000 acres, an estimated $500 million deal for an airport reeling from the loss of its US Airways hub a decade ago.
Drilling started a month ago, and money has arrived.
“It’s been so long since we’ve had discretionary money to be able to spend, I think some of us didn’t know what to do,” said Allegheny County Airport Authority Acting Executive Director James R. Gill. “It’s refreshing.”
Consol agreed to pay the airport $46.3 million in up-front payments and an estimated $450 million in royalties during the next 20 years. Despite a volatile market, Consol and independent industry analysts said the deal likely could exceed projections.
The airport authority will spend about $24 million of the up-front money during the next five years to lower fees that airlines pay to use the airport, Gill said. It spent nearly $9 million this year and last year to cut the average cost per passenger from $14.66 to $13.92, above the median rate of $7.33.
Lowering gate fees does not mean more flights, Gill said. Airlines base decisions on demand. If only five people a day want to fly to Kalamazoo, a direct flight to the southwest Michigan city likely won’t be added, he said.
But lower fees will make the airport more attractive and competitive.
“Can we say that this flight was added because we lowered the fees? I don’t think so,” County Executive Rich Fitzgerald said. “While you can’t say the cause and effect is necessarily direct, I think the fact is that there has been a lot of positive feedback, and there has been a lot of positive buzz.”
Fitzgerald noted the $7 million state grant announced on Aug. 14 for the World Trade Center, a mix of office space, jet hangars and a hotel and conference center on land controlled by the airport authority. Gill said airport traffic is up about 1 percent over last year, and July traffic was up about 6.2 percent.
The rest of the up-front money will be split between an economic development fund and capital improvements to the nearly 22-year-old airport: exterior repairs, heating and air conditioning improvements and upgrades to baggage handling and baggage screening systems.
The airport authority will divvy up royalty money based on where the gas comes from on airport property, Gill said. Gas from under runways or the terminal will go toward lowering fees. Gas from under vacant land could go toward economic development. Gas from under parking lots will go toward parking improvements.
Gill hoped royalty payments would start by early 2016. Tommy Johnson, Consol’s vice president of government and public relations, said the company is right on schedule to meet that.
Initial drilling started on July 17, according to Consol and permits the company filed with the state Department of Environmental Protection. By mid-August, a vertical drilling rig moved onto the project area, Johnson said. Horizontal drilling could start by the end of the year.
“It’s just the start of what we are expecting to be a long disruption of our way of life here,” said Robert Sterner, a resident of the Imperial Pointe neighborhood in Findlay and vocal critic of the drilling project.
The closest well pad is about 1,180 feet from Imperial Pointe. Sterner has noticed more truck traffic, and some neighbors have reported a low-pitched drone coming from the site in the evening and loud noises in the middle of the night, he said.
Johnson acknowledged there were initial complaints when work started. He said that since drilling began, there have been none.