One of my favorite social studies to conduct is to take in the reader comments on articles published by Yahoo!, Salon, Huffington Post, and so forth…
You can pretty much tell what’s going on in the world — as well as the prevailing social beliefs — by reading these comments.
The other day I was reading a Yahoo! article entitled, “President Obama’s Weirdest New Taxes.” The author listed five new taxes in the budget, ranging from a tax on flavored vodka to a tax on corporate jets.
It wasn’t scientific, but I would guess that at least 80% of the comments supported the new taxes.
Many argued this was a good way to grow the economy: raise taxes = growing the economy.
Of course, I threw my two cents in:
Look at Texas and North Dakota. Booming economies… and in the case of NoDak’s Williams County, it has posted the lowest unemployment ever recorded in U.S. history. How to grow the economy? Frack it!!
Not surprisingly, half of the people who voted on my comment voted ‘thumbs down.’
But it’s true.
In fact, the state of North Dakota reported blowout numbers in tax revenue just one week ago.
According to the press release:
North Dakota’s oil tax fund is nearing $1 billion in assets. The Legacy Fund gets 30% of the state’s oil tax collections. None of the money can be spent until 2017, and even then it takes a two-thirds vote of the Legislature to dip into it.
March deposits were about $87 million. That brings the fund’s total to $927 million. Oil revenue began gushing into the fund only since September 2011. Analysts initially estimated it would have a $618 million balance when the state’s current two-year budget period ends on June 30.
Revenue from the fund has been invested mostly in short-term, low-risk U.S bonds. The Legacy Fund’s seven-member advisory board is recommending that half of the fund’s assets be shifted to the stock market and other investments.
It’s not a new problem…
Last year banks in San Antonio (home of the Eagle Ford) reported problems with an influx of cash in depositors’ accounts.
According to the San Antonio Express:
South Texas landowners getting fat checks from oil companies for drilling on their land have been a boon to banks based in the Eagle Ford Shale.
Deposits at most of those banks have surged. The Karnes County National Bank’s deposits rocketed 110% to almost $168 million from the end of 2009 through the first quarter of this year.
Eleven other institutions registered jumps in deposits that ranged from 46.8% to 82.7%. By comparison, domestic deposits at U.S. banks increased 14.7% during the same period.
But the influx of deposits has left the Eagle Ford-area banks with something of a challenge: how to deploy that money at a time when loan demand isn’t nearly as strong.
“It’s a problem, but it’s a good problem,” said H.B. “Trip” Ruckman III, president and chairman of The Karnes County National Bank in Karnes City. Its deposits rose by $88 million from the end of 2009 to March 31, while its loans rose by $19 million.
“We have had depositors come in with more than a million dollars at a whack,” he added. “So it is a challenge to keep the money invested.”
And in the gas-rich Marcellus, bank deposits have skyrocketed as well.
Energy In Depth looked at banks in various parts of the Marcellus, including in New York — which still has a ban on fracking to date.
Here’s what they found…
Now let’s take a look at the deposit information from 2007-2012 for Peoples Neighborhood and see how those coincide with the regional increase in natural gas development. Keep in mind, Susquehanna County’s natural gas activity became more pronounced in 2009 and Wyoming County’s in 2010. Lackawanna County has yet to see much activity, aside from companies establishing offices in the county, and Broome County is currently under a natural gas moratorium in New York.
As you can see, there is a major difference in increase in deposits between Marcellus and non-Marcellus counties. Lackawanna County grew in deposits as the branch became established in the community and Broome County in New York remained fairly steady with no significant increases as the banking industry has begun to bounce back since 2007.Compare that with Susquehanna and Wyoming Counties, which each experience significant jumps in deposits, coinciding with more natural gas wells being developed, hooked up to pipelines, and thus more royalty payments being made.
The CEO of Angel Publishing, the publisher of Energy and Capital, was recently in Western Pennsylvania. He said the locals have a term for residents who sell leasing and drilling rights to gas companies…
They call them “shaleionaires.”
In the coming weeks, I’m going to show you firsthand how to collect checks from the drilling in these parts of the United States — even if you live in New York.
Frack it all, baby.
Forever wealth,
Brian Hicks
Check us out on YouTube!Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy and Capital. For more on Brian, take a look at his editor’s page.
