Currently viewing the category: "Minerals"

We are not there yet. At least we weren’t in February. Of course in the depths of winter, one of the worst winters in a long time what do you expect, but boy is this country lucky. Just think of all the American men and women who are alive today because of The Bakken, oil and gas.

I just read recently that America will reach a point of being a net exporter of oil. Just think of those long lines at the gas pump. Think of all the articles, the dire articles that were written about our future. Yes, others will gain as well, and some of them are not too nice, but with the proper leadership, well things are looking good again for America.

That doesn’t mean we can not be concerned about global warming, or at least studying the science to see if it is true. That doesn’t mean we shouldn’t design safe pipelines, or tank cars. But just think of how much better the American economy is today because of fracking. All those railcars, all those pipes, all those people employed. All that money including in our taxes. Especially what we are setting aside for our children and grandchildren, even great grandchildren.

What will they write about us in the books a hundred and two hundred years from now.

So, here is the current data. Now it will get interesting as we go into the summer.

 

Should we call it “The Perfect Storm”? I, along with most economists who write about agriculture because it is so important to those areas we are writing about have been saying crop prices are going to go down and that means the incomes we look at are going to decline.

We apparently were right. If you read Moody’s Analytics chart of wheat and soybeans, two important ND crops, that is what has been happening. Their prices are declining. As always I am surprised about Moody’s analysis. Where is the corn. It isn’t on the chart and it certainly has become important to ND. So too have been dry beans and they are also not charted.

So, take the figures with a grain of salt, no, at least a half teaspoon of salt. With what they show though wheat and soybean prices are more than 20 percent about the 2010 base. Of course in 2011 and 2012 they both were as much as 60 percent higher than in 2010 and that is significant. If they were shown, so too would corn and dry beans. Moody’s show all food commodities at about 25 percent above the 2010 average, down from a peak in late 2012 of about 35 percent above the 2010 base of 100.

If you don’t believe that has made a difference just drive by the implement dealers lots and look at all the machinery in their lots. If that doesn’t convince you go inside and ask a salesman. Watch their eyes.

As for Moody’s projections, they are only short about a percent a one-half in sales taxes. That is certainly within the realm of acceptability. However, individual income tax collections are nearly 40 percent above their predictions and so too the corporate income taxes, collections more than 40 percent above their predictions. Auto sales excise taxes are 10 percent short of what they predicted.

They are so far off on so many accounts that when it comes to the bottom line the net figure collected is only a little more than 6 percent greater than their predictions.

This begins to get complicated, but please note: The general fund cap for oil and gas taxes contains two tiers. The first tier of $200.0 million was reached in October 2013. Additional oil taxes will flow to the property tax relief fund until that fund receives $341.8 million, after which time the general fund will receive an additional $100.0 million. Total production and extraction tax collections were $250.3 million in February 2014. Monthly allocations to the property tax relief fund were $73.4 million; allocations to the legacy fund were $69.6 million.

Standby. A significant negative in collections could lead to an interesting situation before the biennium is completed. I don’t know the people in OMB, and I have tried to keep my comments from being partisan in anyway, but I am glad that Jack Dalrymple is the Governor. They may have a tiger to ride before the biennium is over.

 

Well the weather has kept us from the million barrel mark to the point of this report, but it wouldn’t surprise me if March is the month. In any case, it will happen soon, real soon.

We see how the weather has affected us. The rig count was down from December to January and the well completion number was nearly only one half-119 to 60. This was a tough winter, and there is no guarantee it is over yet.

According to Lynn Helms there were only three days in January too cold for fracking, but there were 12 days too windy for well completion work. Twelve days, that is 40 percent of the month gone because of the wind.

We are beginning to see the federal governments plans for fracking on federal land. BLM published proposed rules and they received 177,000 comments. Don’t know what the rules said and I don’t know what the comments said, but the BLM withdrew the rules. That gives me an idea of the direction of what they were saying.

They then issued a new proposed rule last May with the comment period ending in August. That rule brought 1.2 million comments. Next week the Department of Interior is holding a meeting in Denver to “continue dialogue on implementation of the rules”. They are also starting the process of new venting and flaring regulations.

North Dakota has said from the beginning of this that it would be the federal government that would stop this oil activity. Now we will see. The time is here.

In the meantime here is the production for the middle of the winter. Pretty good I think. Where we go from here is up to us as a nation. I have included a new section comparing the different oil patches around the country. Proves how important the Bakken-Three Forks is.

 

Here are two new reports.First is the North Dakota General Fund Revenues and Transfers for the biennium through December.

Below that is the city sales tax reports. It is in detail for Grand Forks, and then compares several of the major cities in the state. The sales taxes are for the checks the cities received on February 15th.

So, to begin, the state report:

We are now one-fourth of the way through the biennium and the collections are nearly 20 per cent ahead of last biennium’s revenues. Also, revenue is about 9 percent ahead of the projections the state bought. That doesn’t sound too bad, but the devil is in the detail.

In this case, major special fund transfers are already at their limit and so do not add to the error. Actually the three major funds we really need to look at are sales tax, individual income tax and corporate income tax.

The sales tax collections are only a short four percent over projections. That is certainly within expectations. Where the projections are really off is in both the individual and corporate income taxes, about 50 percent for both, and that is too much. If this keeps up the Governor and legislature will need to come into the session with a plan of what to do with the extra money. Of course if the ag economy turns out much worse than most of us expect we may be happy to have this money.

If a special session occurs that too may change everything. Because of all the problems I don’t expect that. In the meantime, you and I can only see what the leaders decide.

 

Of course it had to happen. Even those guys out on the oil rigs had to shut down for some parts of December in that terrible weather. Just saw a report calling it Williston’s fifth worse winter. Not sure how it was measured, but as for me, I think it ranked even worse than that. In my life I don’t remember anytime where there has been so many difficult days in a row, nor anytime where there were so few decent days over even a short period of less than a week.

The result: a minor decline in production from November to December’s production. Of course January could show the same, and possibly so too February. But they are only hiccups. Even as I write this the weather forecasts include temperatures into the 30s.

This will be the year we should be able to understand just what this oil play will mean for the long run, at least for the Bakken and Three Forks. Of course if the new plays develop we will also maybe see some of those start to come in, too. Although when that happens it seems to me that with the lessons learned this time we will not see the “Wild West” approach that this has been.

And as I mentioned last month we continue to see the activity move from the original five most active counties into the southern area where a lot of the excitement is now in the Dickinson area.and north towards Watford City. The quiet area that may surprise a lot of people this year may be around Bottineau. It will certainly be something we should watch.