Airport Participation in Oil and Gas Development (2018) / Chapter Skim
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Pages 22-29
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From page 22... ...
22 CHAPTER THREE COMPONENTS OF AN OIL AND GAS LEASE FAA AC 150/5100-20 provides guidance on the extraction of oil and gas at federally obligated airports. The document is a summary of FAA policies, applicable laws and regulations, standards, and obligations, and how they pertain to oil and gas drilling on airport property.
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23 Once a proponent is qualified and selected, lease negotiations begin. The following sections set forth some of the key elements of a lease for counsel and business agents representing an airport.
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24 Likewise, it is reasonable to expect that if the airport wishes to develop any of the property for gas storage, it must first offer that right to its lessee before offering it to any third parties. If that right is not exercised and the airport proceeds to grant storage rights to a third party, all three parties will have to cooperate to coordinate their respective activities on the property, with the understanding that the drilling activities will take priority.
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25 8. Audit Rights Because ongoing airport revenue is based on the royalty streams paid on oil or gas sold, it is imperative to retain audit rights.
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26 The airport should be insured at appropriate levels against all risks, including pollution liability, well control, and general liability. For a list of types and levels of coverage, see Appendix B
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27 from disclosure. In such a scenario, the lessee should be obligated to indemnify the airport from any liability arising out of a failure to disclose in accordance with the applicable statute.
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28 FIGURE 7 Conventional and Horizontal Drilling. Source: Tom Baker, Dispatch, 2012, http://www.iasparliament.com/current-affairs/gs-i/ shale-gas.
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29 2 Bonus payments provide a financial incentive for airports. In the case of DFW, Chesapeake paid the airport approximately $180,000,000 for the exclusive right to drill and frack on DFW land.
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