By Karl Henkel
BP’s recent Utica Shale investment means Trumbull County residents will have $331 million in extra income during the course of the next year.
But how will that money — about half as much as the recent $640 million Mega Millions jackpot — be spent?
Or will it be saved?
According to a Pennsylvania State University study, a little of both.
The study, “Economic Impacts of Marcellus Shale in Pennsylvania,” published in 2011, looked at how 412 individuals who leased land to drilling companies spent their share of nearly $2.4 million in bonus payments.
About 55 percent of that money was invested or saved through financial institutions.
The No. 2 expenditure was taxes, which consumed about 17.5 percent leasing dollars.
Motor-vehicle (9 percent), real estate (5) and farming (5) made up a majority of the other expenditures.
The report found that households receiving lease dollars used the money “differently than normal income.”
That extra cash led to a direct impact for businesses, according to the study.
About 31 percent of surveyed businesses in two of the most actively-drilled Pennsylvania counties said annual sales changed due to oil and gas exploration; 28 percent reported sales increases, and 3 percent said sales decreased.
Saved bonus payments also have led to a new offering in the banking industry.
At Canfield-based Farmers National Bank, president and CEO John Gulas said a special three-month CD at a 1 percent interest rate specifically targets recipients of oil- and gas-lease payments.
“We’ve seen the lottery winners and I’ve seen what happens to them when they don’t plan,” said Gulas, who said previously there were no short-term investment options for landowners. “We’re giving them a good rate to slow down, catch their breath and think.”
But after that breath, much of the money from bonus payments will be spent.
Cleveland-based economist George Zeller said the stimulus-like effect of the bonus payments, along with the increase of oil and gas jobs, is now the driving force behind the Mahoning Valley’s economic resurgence, but not the saving grace.
“The BP investment and other shale gas drilling investments are very positive factors, [but] they are not a magic wand,” Zeller said.
Gulas echoed those comments and said the additional income for about 1,800 Trumbull County landowners will benefit both landowner and economy, but the stream of money will eventually run dry.
“A lot of people look at this as like a professional athlete,” Gulas said. “There is no guarantee. This may be a one-time thing, and they may never drill on your land [and therefore receive no royalties].”