How to Make Money Off Drilling Becomes Issue in Pa. County Race

How to Make Money Off Drilling Becomes Issue in Pa. County Race

Thursday, May 05, 2011
Knight Ridder/Tribune Business News
by Timothy Puko, The Pittsburgh Tribune-Review

All four candidates for Allegheny County Executive want to drill for gas on county-owned land, but how to do it has become a matter of debate in the weeks before the May 17 primary.

Two candidates agree. Democrat Rich Fitzgerald of Squirrel Hill and Republican D. Raja of Mt. Lebanon want a traditional deal: The county should lease land to a gas driller for an up-front fee and a share of the gas royalties.

"Like anyone else, the county should seek the best deal possible as market prices allow," Raja spokesman Mark Harris said in an e-mail.

But taxpayers fall short in that kind of deal, said Mark Patrick Flaherty of Mt. Lebanon. Flaherty, a Democrat and county controller, advocates a joint venture with a drilling company on 9,200 acres at Pittsburgh International Airport and the county airport in West Mifflin. The county would have to borrow to help pay for the drilling, but would get a larger profit in the end, he said.

Both Fitzgerald and Republican candidate Chuck McCullough of Upper St. Clair opposed Flaherty's idea on Wednesday. The Fitzgerald campaign released a commercial on YouTube calling it a risky scheme that would be a big loss if the wells turn up dry.

McCullough called Flaherty's plan illegal. He contends state law prohibits municipalities from doing "any proprietary or private business."

Flaherty denied that.

"All you would do is be negotiating different terms of the lease," he said. "Instead of most of the lease proceeds going to the gas company, the residents would be getting more of a deal."

McCullough wants to sell and privatize the airports. The county should be able to get a larger sale price if the mineral rights are part of the deal, he said. It's safer, he added. "You're not supposed to be putting taxpayers' dollars at risk in business investments, and you're not supposed to be competing with them either," he said.

But selling an asset can be risky, too, Fitzgerald said. Leasing is the safest thing to do; that could bring up-front payments of $3,000 to $5,000 per acre and another 15 percent to 20 percent in royalties as the gas is extracted over several decades, he said. The county wouldn't face the liability that comes from explosions and blowouts at well sites, he added.

"I just don't think we should risk taxpayers' dollars," Fitzgerald said.

Copyright (c) 2011, The Pittsburgh Tribune-Review. Distributed by McClatchy-Tribune Information Services.

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