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66 CHAPTER SIX CONCLUSIONS The purpose of this synthesis was to investigate airport experience with oil and gas extraction. Oil or gas activity on or under airport land can be highly lucrative for airport sponsors; however, it comes with investment risk and with considerable federal, state, and local oversight. For federally obligated airports, the FAA wants to ensure that oil and gas activity is subordinate to aviation activity and does not interfere with the safety and security of airport operations. Advisory Circular (AC) 150/5100- 20 provides a substantive discussion of existing FAA policies, regulations, and other applicable federal laws that apply to oil and gas activity on airport property. Airport sponsors suggested that requirements for compliance with FAA regulations are reduced when well sites are located off airport property and directional drilling is used to access oil and gas under the property. This arrangement does not require FAA lease review, changes to airport layout plans (ALPs), environmental assessment reports, or submission of Form 7460-1 for above-grade facilities on airport property (such as well site construction, drilling, or repairs). Other grant assur- ancesâthose related to good title, fair market value, and use of revenueâdo apply. State and local laws apply to all well sites, regardless of location. Some, but not all, states allow under-the-fence leases that involve pooling or unitization of land parcels for the purpose of mineral extraction. Airport sponsors reported that qualifying bidders and competitive bidding for oil and gas leases resulted in higher bonus and royalty payments. That said, oil and gas price volatility directly affected the amount and intensity of developer interest and the monetary value of bids. Timing of bid solicitations was critical. Airport sponsors can exercise the greatest influence over the details of the extraction program at the time of lease nego- tiations. Those interviewed reported that the lease must be detailed and explicit about the terms of operation, calculation of royalty payments, use of airport land, rights of way and easements for pipelines and surface access, noise standards and mitigation, environmental safety standards, cleanup, and reclamation. If fees must be paid to offset road or land damage, the method and amount of payment must be stated in the lease or in the appropriate permits. The sponsors interviewed also agreed that expert advice is crucial to the development and operation of an oil and gas program, including the engagement ofâ ⢠Oil and gas experts to qualify and review bids; ⢠Lawyers to prepare leases, permits, and ordinances; and ⢠Contractors with experience in environmental assessment, oil and gas operations, project management, well closures, and site reclamation. The extent of sponsor involvement in the extraction program depends on the participatory model chosen. The most com- mon models for airports are (1) an off-airport royalty interest, (2) an on-airport royalty interest, and (3) an on-airport working interest. Regardless of the model selected, it is critical that aeronautical activity on the airport remain the highest priority and that oil and gas operators exercise best practices for safety and protection of the environment. Oil and gas revenues must remain with the airport (unless the FAA grants a specific waiver), and sponsors must maintain separate and transparent accounts for these revenues. At this writing, state and local regulations are in flux, especially with respect to hydraulic fracturing and directional drill- ing. Some local municipalities have voted to ban fracking; some states have claimed jurisdiction over this decision. New York banned fracking in 2015; however, the ban did not extend to low-volume wells in certain locations. Airport sponsors engaged in or contemplating a mineral extraction program should stay up to date on local and state regulations.
