Gas drilling not savior it could be

BEAUMONT, Texas — Advances in drilling have helped American towns and cities strike natural gas, and just in time, it would appear. With many facing cash crunches, the millions of dollars they're reaping in royalties could go toward saving public services, jobs and badly needed road projects.

Not so fast. Because of restrictions built into deeds and federal grants, municipalities can't use most of their newfound wealth to plug budget shortfalls.

And so, while elected officials struggle to make ends meet, the money sits there, close enough to smell but just out of reach.

"There are street projects we'd like to move forward with, the designs are in place, but because of federal rules we're not in a position to utilize the funds," said Kyle Hayes, city manager of Beaumont, Texas, a refinery town that has made millions on gas drilling at the airport. "Right now, it's just sitting there — $35.3 million."

The rules differ slightly depending on whether they're dictated by a government agency, such as the Federal Aviation Administration, or by a charitable foundation or individual during a deed transfer. But the bottom line is the same: Revenue made from gas drilling often has to be reinvested into the area where the minerals were extracted.

With new technologies and drilling techniques making once out-of-reach gas reserves accessible, the problem is expanding and currently affects about a dozen airports, including several in Texas and Louisiana, and at least one in Pennsylvania, said Lynn Lunsford, an FAA spokesman.

"The FAA has been re-evaluating this policy in light of these windfalls," Lunsford said.

The FAA tied a reinvestment clause to the grants it gives out to ensure that money made at airports — for example from leasing stores or renting hangar space — gets reinvested there to help fund maintenance and improvements, Lunsford said. The clause only became a problem recently with the millions made from natural gas extraction on airport properties.

Beaumont has made more than $35 million in the past 10 months from gas royalty checks. But because of the reinvestment clause, that money has to go back into its tiny airport, which handles no more than 18,000 flights annually and has 39 private hangars for single-engine planes.

"I couldn't spend that much money if I tore everything down and rebuilt it," said Brenda Beadle, Beaumont's capital projects manager.

"I couldn't spend $3 million out there, let alone $35 million," Hayes said, laughing.

The city has tried to give the FAA money back, hoping to cut ties to get full access to the gas money. But Hayes said the answer the agency gave the city: "We've never had anyone want to return the money. We don't know if we can do that."

Lunsford acknowledged that grant contracts are not designed to allow for payback because they "rarely are looking to give money back." Improvement grants have a 20-year clause that requires all revenue in that time to be reinvested in the airport, he said. Grants used for land acquisition have a "forever obligation" and nearly all major airports — and many smaller ones — have received federal grants.

Fort Worth, a city of more than 720,000 west of Dallas, sits smack in the middle of Barnett Shale, says Mayor Michael Moncrief. The geologic formation, like others that crisscross the nation and world, has long been known to contain rich natural gas reserves that were out of reach until new drilling methods made them accessible about five years ago.

Fort Worth has made more than $89.5 million in the past 10 years from gas royalties, leases and bonuses from drilling in parks, golf courses and the major airport.

That money would cover the city's $72 million budget shortfall, which forced the closure of public pools and nearly shut down libraries. But only about $15 million of it was unrestricted, the rest has to be reinvested in areas where the money was made.