Industry reps say frac sand mines gearing up again

By LeAnn R. Ralph

COLFAX — Representatives of the frac sand mining industry say companies are hiring workers again and are ramping up production.

Rich Kremer, host of the Wisconsin Public Radio show The West Side on 88.3 WHWC Menomonie-Eau Claire, spoke with Samir Nangia, an oil field services analyst and industry expert for the investment company IHS and Rich Budinger, operations manager for Fairmont Santrol out of Menomonie and spokesman for the Wisconsin Industrial Sand Association, on Monday, April 24.

With record high oil prices of over $100 per barrel in 2014 and 2015, using hydraulic fracturing to obtain oil and natural gas in the United States was cost effective.

The price of oil dropped to around $35 a barrel in 2016, making the use of hydraulic fracturing too expensive in comparison to the oil selling for around $35 a barrel.

As of May 5, crude oil was selling for around $46 per barrel.

The demand for frac sand is increasing because the number of horizontal drilling rigs is increasing and each new well that is being fracked is using more sand, Nangia said.

Frac sand, also known as a “proppant,” is pumped into oil wells at high pressure to force cracks in the rocks to stay open, making it possible to recover more oil and natural gas.

In 2013, six million pounds of frac sand was used per oil well, although some wells used 30 million to 50 million pounds, Nangia said.

Oil wells also now are using longer laterals for horizontal drilling, which also uses more sand, he said.

It is common for laterals to be 10,000 feet long and for those laterals to require using 25 million pounds of sand per well, Nangia said.

The increased use of sand results in the increased productivity of the wells, he said.

All together in 2014, 27,000 oil wells were fracked. In 2016, a little over 10,000 oil wells were fracked, Nangia said.

Frac sand mining is a cyclical industry. The sand mining operations are starting to come back, resulting in positive economic growth and development, Budinger said.

“It’s all great news. We are strictly regulated, and the regulations continue to protect the environment,” he said.

The industry needs fewer wells today, but the wells still “online” are more intense, Nangia said.

The fact that the number of wells has decreased by 40 percent is almost entirely offset by the increasing sand usage per well, he said.

Regulations

Nonmetallic mining is strictly regulated in Wisconsin, Budinger said.

When the operator of a sand mine is not operating responsibly, then it becomes an enforcement issue, he said.

People are concerned that the state Department of Natural Resources has been handicapped by a lack of staff and that there are not enough DNR employees to regulate sand mines, Kremer said.

The DNR has a “tremendous presence” in the sand mining industry, and in the last three years, DNR personnel have been coming on-site to sand mines to do inspections, Budinger said.

WISA members invite the DNR “with open arms,” he said.

Sand mining is nothing new in Wisconsin, but the scale of the industrial frac sand mines is new, Budinger said.

Sand mine operators must comply with the regulations, and if they do not, then the DNR must do enforcement, he said.

Brady gold

Sand from Wisconsin, known as Northern White, is highly desirable because of the roundness and the hardness of the grains.

But some hydraulic fracturing operations are starting to use “brown sand,” Kremer said.

More companies are starting to use brown sand in places like Texas, Nangia said.

The brown sand goes by a variety of names, such as Brady sand or Brady brown or Brady gold.

The sand from Wisconsin is of a high quality with “crush strength and roundness,” Nangia said.

The companies that are using inferior types of sand are doing so because the sand is available closer to the fracking operations, he said.

A small number of hydraulic fracturing companies are saying they do not need the highest quality sand for fracking, Nangia said.

If the sand mine and the sand processing facility are close to the oil wells, then the companies incur very little in transportation costs, he said.

Brown sand products are being produced in Texas and Oklahoma, but Northern White is being used in in the northern Midwest, Budinger said.

Sand mining is an industry that is evolving and finding better ways to produce a quality product. The cost per ton is decreasing, he said.

Consolidation

Kremer noted that some consolidation has taken place in the Wisconsin frac sand market.

Mammoth Energy Services out of Oklahoma has purchased two sand mines in Wisconsin, Taylor Frac in Jackson County and Chieftain Sand on the Barron and Chippewa County line, he said.

Chieftain Sand filed Chapter 11 bankruptcy and received court approval for the sale of the assets for $35.25 million in March of this year.

Nangia said he expected to see more consolidation of frac sand mines.

The downturn from the decrease in the price of oil hit many companies very hard, and from 2014 to 2016, quite a few bankruptcies were filed, he said.

Chieftain Sand had a less-desirable more coarse sand and did not have direct access to rail, Nangia said.

With the increased demand, it will make sense for the frac sand mines to come back into production, he said.