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How will Trumbull residents spend $331M shale bounty?


Published: Mon, April 2, 2012 @ 12:08 a.m.

By Karl Henkel

khenkel@vindy.com

YOUNGSTOWN

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].”


Comments

1facetiously_esoteric(3 comments)posted 2 years, 5 months ago

Yeah they will be spending most of it on buying clean water since people will no longer be able to use the ground water there.

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2glbtactivist(250 comments)posted 2 years, 5 months ago

It is all imaginary money. Part of the propoganda to promote this poorly operated adventure. There will be no $331 million for local people. Guaranteed. The profits will go to billionaires who own the gas companies who are in the top 1% of the US based on income. None live in Ohio. And most certainly, none care about the mess they will leave when they are done in ten years.

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3VINDYAK(1799 comments)posted 2 years, 5 months ago

This is not imaginary money. The amount quoted of $331 million is the amount BP paid to landowners as a signing bonus to allow them to drill a well. Each well will require at least a 640 acre parcel, so the drilling company must pool together a number of parcels. All landowners in this lease agreement received approximately $3900 per acre. If a farmer included a 100 acre parcel into this lease agreement, he received a check for $390,000. If a landowner included a 300 acre parcel, he received $1,170,000. This is actual money paid as a signing bonus and does not include any possible royalties if a well is drilled and produces. These lease agreements are well thought out and put together and generally are now about 30 to 40 pages in length and include many requirements and mitigations of the drilling companies.

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4HaydenThomas(208 comments)posted 2 years, 5 months ago

The farmer won't be happy when he can't sell his land because BP owns the mineral rights. But, most of the money will be squandered. Probably on drugs, booze, gambling, etc.

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5SBerger(2 comments)posted 2 years, 5 months ago

The people that now own the "Clinton Wells" are the ones making out...even though 40 years ago, noone thought about drilling deeper, the leases they hold, give them mineral rights to the center of the earth, Even if the well got plugged 10 years ago!

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6venuschild(21 comments)posted 2 years, 5 months ago

You guys are so negative!! The money is REAL, the ground water has a slim to none chance of contamination. Go educate yourselves on the real facts!!! The checks cash just fine, you can sell your land later if you want, the water will be fine and if they do drill on your land you will collect real royalties!

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7VINDYAK(1799 comments)posted 2 years, 5 months ago

Farmers tend to keep their land for many years and even buy or lease other lands to increase their crop production.

Regarding the old Clinton wells...despite the old oil/gas leases, the terms and conditions for those leases expire after a few years, so they must be re-newed, which can be a bonus to the astute landowner who holds out for better terms and conditions. Many leasing agents are out there right now attempting to re-sign landowners to the old and outdated terms and conditions, but the oil/gas companies will allow leasing agents to upgrade old leases to match current lease agreements of other landowners because they want to get as many acres signed up as soon as possible. The longer they wait, the higher the prices will be.

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