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Dallas/Fort Worth Airport May Get into Gas Business

Posted on: Friday, 8 July 2005, 18:00 CDT

Jul. 8--As soon as next year, fliers landing at Dallas/Fort Worth International Airport could see symbols of Texas' most storied industry alongside seven runways that accommodate 2,000 flights a day.

Officials at the world's third-busiest airport hope they can tap extra revenue from caches of natural gas under the sprawling property to fund airport projects and offset costs to tenant airlines.

D/FW could award contracts by the end of the year to companies that want to drill under the airport, which may sit atop the Barnett Shale gas field that has brought small riches to landowners around Fort Worth.

D/FW's 18,000-acre property could conservatively accommodate around 150 wells, said John Terrell, the airport's vice president of commercial development.

The 31-year-old airport has hired an oil-and-gas attorney and consultants to work through several issues, Mr. Terrell said. He declined to speculate what the leases might be worth to D/FW but said several companies were exploring the opportunity.

"There wouldn't be this much interest if they didn't think there were significant revenue opportunities here," he said.

Oil and gas companies have drilled for years at other airports, such as Oklahoma City's Will Rogers World Airport, dotting the landscape with rigs and pump jacks.

At Alliance Airport, Chief Oil & Gas LLC plans to start drilling wells early next year as little as a half mile from the runways. The Dallas firm has already drilled about 40 wells in the Alliance area over the last three years.

Drilling on an airport presents a special set of regulations and aviation safety concerns.

"The challenges are minimizing the surface presence as much as possible," said Trevor Rees-Jones, president and chief executive of Chief, the No. 3 producer in the Barnett Shale.

The massive gas field is the largest in Texas and one of the largest in the U.S., containing more than 26 trillion cubic feet of natural gas trapped in rock formations across 15 counties.

Parks, schools and individual homeowners around Fort Worth have profited from the region's natural gas boom in recent years with the development of horizontal drilling technology. It allows companies to drill underneath land from rigs as far as a mile away.

Unobtrusive techniques

Using the technique at an airport, a company would drill vertically about 7,500 feet into the ground before bending and drilling horizontally more than 5,000 feet below the surface, even under runways and terminals.

A drilling rig in the Barnett Shale ranges from 150 to 175 feet. The Federal Aviation Administration already has rules governing the location of rigs near runways.

A successful drilling project would represent an expansion of Barnett Shale development farther east than most companies expected would be possible just a few years ago.

The size of the payoff for the airport remains unclear. Once a lease is signed, a producer would need to start seismic mapping to find the best drilling sites, a process that could take six to 12 months.

"This has all been something that's come up in a relatively short period of time in oil and gas industry terms," Mr. Rees-Jones said. "There's really no production close to D/FW Airport, so you really don't know how it'll turn out."

Airport officials haven't worked out lease details. But at a minimum, the airport would require a cash bonus up front, plus a 25 percent royalty payment for leases of two to four years, said Mr. Terrell, the airport official.

D/FW has been involved in other unconventional businesses for an airport. To save money on maintenance, D/FW leased out land for cotton and corn farming. That was discontinued more than five years ago because it attracted too many birds, which pose a safety threat to aircraft. Bear Creek Golf Club also operates on airport grounds.

D/FW is a residual airport, meaning that the airlines operating there are financially responsible for covering its expenses.

Non-aviation revenue collected from sources such as property leases, concession sales and parking fees accounts for more than 40 percent of D/FW's income and helps offset the costs the airport charges airlines.

The effort could reopen a contentious debate over tax revenue-sharing agreements with Grapevine and Coppell.

D/FW has revenue-sharing agreements with Dallas and Fort Worth for land inside the city limits of Euless and Irving. Legislation in 2001 created an agreement to share revenue for land inside Grapevine that was south of State Highway 114.

But there are 2,000 acres of airport property in Grapevine north of State Highway 114, and 267 acres in Coppell that are not covered by such an agreement.

Kevin Cox, D/FW's chief operating officer, said the revenue potential from gas drilling could change that.

"We won't pursue any [gas] developments there until we have an agreement," Mr. Cox said.

D/FW has been looking at gas development on its property for the last five years, but it has only started meeting with potential operators in the last two months.

Rising natural gas prices and newer drilling technology have made such leases more feasible because operators can drill and extract gas more profitably, Mr. Terrell said.

Airport officials have already met with a dozen potential operators, and several others have contacted them.

"Anything we can do to generate an additional dollar in revenue to offset the costs to the airlines makes us more cost-competitive and helps us to continue to grow this facility," Mr. Cox said.

By Suzanne Marta and Sudeep Reddy

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Source: The Dallas Morning News

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