From the Pittsburgh Business Times

Energy Payout Results in Lowering of  Landing Fees which has already Attracted 5 New Airlines, 21 New Destinations for Pittsburgh Residents

Consol Energy Inc. and the Allegheny County Airport Authority on Monday afternoon celebrated the beginning of natural gas production on Pittsburgh International Airport land, a deal struck in 2013 that could bring in hundreds of millions in royalties to the airport authority over the decades-long life of the deal.

Production began June 28 at the first six wells on Pad No. 2 of Consol’s (NYSE: CNX) operations at the airport. All six wells on the pad produce Marcellus Shale gas, but officials, citing a quiet period before next week’s earnings, declined to provide specific data for the production at the airport.

It’s the first of six well pads that will be operating at the 9,000-acre airport site: Another well pad has been drilled but has yet to be hydraulically fractured, and, among the other four, three are not drilled and a fourth is partially drilled. Plans to drill and complete wells are dependent upon the price of natural gas and market conditions.

The Allegheny County Airport Authority stands to receive 18 percent royalties on the natural gas that flows from the airport wells, which could net $450 million over the 50-year term of the agreement. An exact amount will depend on the amount of money Consol will receive for the natural gas, said Consol COO Timothy Dugan.

Dugan said Consol will invest about $1 billion total in the airport drilling project, the six well pads and upward of 40 wells, many in the Marcellus Shale but at least one in the Utica. That includes $500 million in work and the $450 million in revenue to the airport. Consol has already spent about $200 million, including $60 million on the six-well pad that is in production. He likened the entire Consol airport drilling project to the economic impact of building three Heinz Fields.

“For Consol, it’s a flagship project,” Dugan said.

It’s not just a revenue or energy play. Allegheny County Executive Rich Fitzgerald and Christina Cassotis, CEO of the Allegheny County Airport Authority, stressed that the revenue received — including the $46 million initial payment to the authority for the right to drill — has helped lower landing fees at Pittsburgh International Airport. That has helped to make the airport more attractive to new airlines wanting to serve Pittsburgh and the existing ones adding new flights. Landing fees per passenger are down from more than $14 in 2013 to $12.88, which is the lowest since 2008. Cassotis credited the airport’s five new airlines in the last 18 months and going from 36 to 57 destinations due to the Consol deal.

“It is precisely because of this innovative partnership that we are able to keep the costs stable and lowering for the airlines. The increase in non-aeronautical revenue is critical for our future; it’s critical for our present,” Cassotis said.

“Because of what we are here to talk about, a lot of these things (at the airport) have continued to happen, extra flights, lowering the costs,” said Fitzgerald.

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