Drilling for $$$

Progress being made on uncovering valuable resources deep underground is helping some airports capture new revenue opportunities. Beneath much of the state of Pennsylvania, as well as parts of neighboring states, a rock formation called Marcellus Shale is believed to hold massive amounts of natural gas. Geoscientists recently estimated that the Marcellus Shale region may hold as much as 50 trillion cubic feet of recoverable natural gas, enough to fuel the entire U.S. for two years. Here, a consultant involved with airports for such drilling operations considers the benefits and challenges.

Until recently, these resources, lying at a depth of 5,000 to 8,000 feet, have been too expensive to tap. Advanced drilling technology and a shift in fuel pricing, however, are encouraging oil and gas companies to find safe and effective ways to penetrate the formation and recover the gas within it.

Communities in the Marcellus Shale region are anticipating an economic boom related to the drilling activity, which could create as many as 175,000 jobs by 2020. Among the first to potentially benefit from this economic opportunity are local and regional airports in the Eastern states where the drilling will occur.

Plan to plan
As the owners of very large tracts of land, airports are now working with their consultants to evaluate their property to determine if it may offer appropriate drilling sites, or if property is available for development by businesses related to the Marcellus Shale industry. By opening portions of unused airport land to Marcellus Shale drilling or development, airports may generate new sources of revenue that do not interfere with aviation operations.

Of course, if an airport expects to dedicate portions of its property to drilling or development while also seeking to expand its own operations, it will be crucial to develop a master plan. While FAA’s master planning recommendations focus on the airfield, it’s equally important for airports to create master plans for their business operations. Such a business plan helps an airport realize the added value and potential that resides in its tenants.

Business plans are especially important for airports in the area around the Marcellus Shale formation. A thoroughly prepared business plan will incorporate three principal activities:

  • A map for future growth. Many government-owned facilities have no clear plan for long-term growth based on business goals. The aviation consultant should work with clients to identify their vision, their purpose, and their aspirations and then help in planning the steps for reaching their goals.
  • Rigorous financial evaluation. The consultant will collect financial data, review and summarize the data, project revenue and expenses up to 20 years in the future, and explore funding opportunities as necessary. It’s vital that the airport’s business plan be self-financing, and investments should yield immediate results.
  • Operational and business-development planning. The airport should expect its aviation consulting team to provide advice on the daily administration and operations of a successful airport, with an emphasis on tenant retention and attraction services, lease negotiations, land lease RFP development, accounting and work-order systems, and coordination with governmental agencies.

When creating a business plan, airports should consider that, in almost all cases, their land has been purchased with federal funds; and, in receiving federal grants for development, airport sponsors must meet various grant assurances regarding the development of their facilities. One such assurance requires that the National Environmental Policy Act of 1969 (NEPA) be met for all airport developments, including drilling or development associated with Marcellus Shale. Therefore, an environmental finding must be completed. Airport sponsors can work with their consultants and FAA to identify the type of environmental document that will be required for the proposed development and to complete that work prior to allowing the drilling or development to take place.

Another item for consideration is ensuring that the airport sponsor receives fair market value for the mineral rights and/or leasing that is associated with Marcellus Shale development. It’s important for the airport sponsor to work directly with FAA and with a certified real estate appraiser to determine the fair market value of the land and then to negotiate, using that value as a minimum level for lease and/or gas payments.

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As Vice President – Operations Manager of Aviation Services for L.R. Kimball, Holes manages Airport Design Projects. Within the past two years, he has managed projects on the Doylestown, Quakertown, University Park, Williamsport Regional, Wilkes-Barre/Scranton International and York Airports in Pa. Holes can be reached at (814)-472-7700.

L.R. Kimball is a Pennsylvania-based architecture, engineering and communications technology firm that has advised and managed projects for airports over more than half a century. The firm also provides services to oil and gas companies that intend to drill in the Marcellus Shale region.