Low oil prices threatening fracking industry
This part of the CBS Evening News' ongoing series on the effects of lower oil prices. Our first installment covered the impact on air fares; our second covered the auto-industry's gains ; our third covered the risk of job cuts; and the report below concludes our series with a look at how the shale industry is faring.
MISSISSIPPI -- Max Lawson says things started to change in Mississippi's Amite County three years ago, when the oil companies showed up. Before their arrival, Lawson described the county as "poor" and "rural."
Now he has a well on his land pumping oil that brings him $1,500 to $2,000 a month in royalties. He told me it was a good day for his family when the equipment started appearing on his property, but that he's concerned about the future.
The company that set up here, Encana, drilled a dozen wells this year, but has plans for only three or four next year. The reduction is impacting those who were counting on the income.
"It's got a lot of peoples' hopes lost, they don't know what to do now," Lawson said.
The shale oil industry, which uses a technique known as fracking, produces nearly four million barrels a day. But for many producers, it's no longer profitable when oil prices dip below $65 dollars a barrel. It's estimated 60 percent of the rigs in North Dakota's Bakken Shale will be too expensive to operate if oil prices stay below $60.
Back in Amite County, Bernell McGehee showed us how the promise of an oil boom had already transformed the town of Liberty. McGehee expanded his restaurant because business grew ten percent a year. Oil companies have filled office space on Main Street.
"When was the last time you had so many people leasing space downtown?" I asked.
"Never," he said. "This is a boom."
The boom could continue for Max Lawson as projects already in place, like this rig, will continue for now. But he's not sure he'll see a return on a $70,000 dollar investment - a pond for water used in fracking - since he was recently advised to put that project on hold.
