Pittsburgh International Airport is in more than the transportation business these days. The 9,000+ acre airport property has become one of the largest producers of natural gas in the state of Pennsylvania.
Not only has this duel role pulled the airport out of a financial nose dive, it’s resulted in reduced landing fees to airlines utilizing the facility and, in turn, passenger fares.
The airport has reduced landing fees to airlines to their lowest rate in eight years. Airport officials hope this will increase traffic.
Production commenced at the airport in June, three years after a deal was struck between Allegheny County Airport Authority and CONSOL Energy. The arrangement could bring in hundreds of millions in royalties to the airport authority over its 50 year term.
The Airport recently received a $46 million up-front payment as part of the deal and will receive 18% royalties on gas production, providing a critical non-aviation revenue stream to the financially challenged airport.
The airport currently has a midstream infrastructure, two pads and six producing deep wells into the Marcellus and Utica Shale. All six wells have been turned in-line and are now flowing natural gas into the MarkWest infrastructure system.
This couldn’t have come at a better time for the airport, which reportedly devotes 42% of its annual budget to pay off its substantial debt – much of which was incurred to build gates that are no longer in use. Traffic at its terminals has dwindled ever since US Airways began phasing it out as a hub in 2004. Also gone are the days when British Airways flew 747s to London, and TWA flew to Frankfurt.
For salvation, airport officials turned to the gas-rich shale formations far below the tarmac. The quiet runways are sitting on enough natural gas to run the entire state of Pennsylvania for a year and a half.
By lowering costs using some of the shale money, airport officials hope to attract flights and start to stabilize revenues.
Although the actual wells are located outside the airport fence, horizontal drilling will extract the rich deposits that lie under the terminals and the runways. Once royalties kick in, the airport will receive about $20 million a year.
Production at the airport marked a critical next phase of the sweeping natural gas exploration, development and production partnership expected to continue well into 2018.
Pittsburgh isn’t the only airport in the country with oil or gas exploration on its grounds. Dallas-Fort Worth has done it for years, and oil and gas wells existed at Denver International even before the airport was there.But no other airport relies on oil and gas revenue the way Pittsburgh will.
Dallas-Fort Worth, by comparison, earns $8 million from the 100 wells on its property, a fraction of its annual revenue of $650 million. And Denver International brought in $6.2 million in 2012, about 1% of its revenue, from its 76 wells.
CONSOL will reportedly invest about $1 billion in the airport project, which will total six well pads and more than 40 wells, many in the Marcellus Shale but at least one in the Utica
February 2013 – The Airport Authority leased approximately 9,200 acres at Pittsburgh International and Allegheny County Airport to CONSOL for oil and gas development. At PIT, 6 pads with up to 45 Marcellus wells are planned.
July 2013 – Following the initial lease payment of $46 million by CONSOL, the Airport Authority steadily lowered its cost per enplaned passenger. The average cost per enplaned passenger was cut by 3.8% to $14.11.
October 2013 – The Airport Authority approved an additional decrease in the cost per enplaned passenger from $14.11 to $13.92.
August 2014 – Following a year of site preparations, public hearings and securing local, state and federal permits, CONSOL commenced drilling operations on Pads 1 and 2.
October 2014 – The Airport Authority approved another decrease in the cost per enplaned passenger from $13.92 to $12.90.
April 2015 – CONSOL commenced hydraulic fracturing/completions on Pad 2 delivering the industry’s first complete fracturing spread powered by EPA Tier 4F emissions standard-compliant engines.
October 2015 – The Airport Authority reduced airline rates for the third straight year, lowering the cost per enplaned passenger to $12.88, the lowest since 2008.
July 2016 – All six wells on Pad 2 are flowing natural gas into the MarkWest midstream infrastructure system.
SOURCE: Pittsburgh International Airport