Sunday, March 17, 2013

Does annexation subvert local controls over frac sand mining?

As community involvement in the expansion of frac sand mining has become more organized and influential, it appears that industry has embraced annexation as a tactic to advance controversial frac sand projects.

Annexation law in Wisconsin allows cities and villages to increase their size through acquisition of contiguous land, a process often initiated at the request of landowners. Cities and villages sometimes view annexation as an economic development strategy that creates an increased tax base. Once a city or village annexes land, it is required to extend public services to its newly expanded jurisdiction.

Some frac sand operations have recently benefited from annexation, pursued to achieve a "friendlier" regulatory environment or to circumvent local opposition to controversial projects. Whether by intention or not, this tactic appears to subvert local democratic control over the decision-making process involving a contentious and rapidly-expanding industry.

Use of Annexation to Force Industry-friendly Regulations

In Trempealeau County, the frac sand industry has used annexation to secure a more lenient regulatory environment. As Tony Kennedy reports, for example, Trempealeau County issued an operating permit in 2011 for a mine in Preston Township opened by Winn Bay Sands LP of Saskatchewan. The permit limited hours of operation to weekdays, required air monitoring, and mandated periodic inspections of nearby homes. But in January 2012 the mine was sold for $200 million to Pennsylvania-based Preferred Sands. Founded by Michael O'Neill, a former Philadelphia banker and real estate executive, Preferred Sands then sought to have the property annexed to the City of Blair, a small municipality surrounded by Preston Township.

Annexation of the 500-acre Preferred Sands property, which nearly doubled the City of Blair's land mass, was accompanied by a new permit with lighter restrictions. The new permit grants the mine unlimited hours of operation, reduces the original noise restrictions, is silent on air quality monitoring or inspection of neighboring buildings, is good "into perpetuity," and is transferable to new owners. Preferred Sands said in a statement that it complies diligently with regulations wherever it operates. In addition to losing the ability to regulate the operating conditions, with annexation Preston Township also stands to lose future tax revenues (more than $72,000 in 2012) after a five-year grace period. Bob Tenneson, the longtime chairman of Preston Township, said that "We spent hours trying to see if we could block it. When somebody wants to annex to the city, you can't stop them." (Tenneson himself recently joined the frac sand business, Kennedy reports, receiving county approval for a new sand mine in Preston Township that is opposed by his neighbors.)

"The maneuver stands as an example of the way mining companies are leveraging jobs and money to exert their will in the small communities of southeastern Minnesota and western Wisconsin," writes Kennedy. "It also shows how, in the absence of statewide oversight, local units of government are competing for sand mines at the expense of consistent standards." Kennedy also reports that Trempealeau County officials have "tempered their regulatory approach" due to the threat of annexation. "They viewed the Blair annexation as a tactic with a clear message to back off on regulations," writes Kennedy, and county officials are reworking the permitting process to facilitate the interests of the frac sand industry.

Use of Annexation to Circumvent Community Opposition

Some frac sand companies have also pursued annexation in a seeming attempt get around local opposition. Recently in St. Charles, Minnesota, a proposed sand mine was met with opposition in the township, so the company, Minnesota Proppant LLC, asked the City of St. Charles to annex the land, but the city declined. Soon after that decision, some news reports suggested that the company has begun to consider alternative locations in Wisconsin, which it perceives as friendlier to the frac sand industry.

In another case, the Texas-based company Vista Sand has encountered staunch opposition to two of its projects in Wisconsin, one a proposed mine near Glenwood, in St. Croix county, and another involving a transload facility and rail spur originally proposed for the Town of Menomonie, Dunn County, around 25 miles from the mine. Both projects triggered intense local debate but were approved at the town levels during the summer of 2012. Given that the projects cast a wide regional shadow with miles of trucking routes that affect numerous towns, they were met with significant community opposition, organized through informal grassroots networks linking together multiple rural communities. Hundreds of people attended dozens of public meetings and in overwhelming numbers spoke out against both Vista Sand projects.

Vista Sand eventually withdrew its request for the mine anticipating that the St. Croix County Board of Adjustment would reject its application, which did not comply with a county ordinance limiting active mining to 20 acres or less. Vista similarly withdrew its request for the rail spur in September 2012 after Dunn county officials began raising questions about the project's environmental and economic impacts. In both St. Croix and Dunn counties, sustained community opposition had put substantial pressure on the company and helped embolden public officials in their scrutiny of the proposals.

Over the past two months the Vista Sand proposals have resurfaced and the possibility of annexation has been raised as part of both revamped projects. Vista Sand has been negotiating with property owners in the Town of Red Cedar, in Dunn County, as a new site for their transload facility and rail spur. Red Cedar currently has a moratorium on frac sand operations and has been developing a non-metallic mining licensing ordinance. In January, the landowners and Vista Sand approached the neighboring City of Menomonie about annexation, hoping to avoid the permitting process in Red Cedar. City officials said they are not interested. Now Vista is expected to bring their proposal to the Red Cedar town board this spring.

At the beginning of the year Vista also resubmitted its proposal to develop a 567-acre frac sand mine a mile south of the City of Glenwood, in St. Croix County, about a quarter mile from the Glenwood City public school. In late January St. Croix County officials determined the application to be incomplete and the county is currently gathering more information from Vista. But in February the landowners working with Vista informally approached the City of Glenwood to ask officials if they would consider annexing the property for the proposed mine. While Vista is still pursuing approval at the county level, one of the landowners, Kwik Trip CFO Scott Teigen, described the annexation proposal as a "plan b." With annexation the mine would be subject to less restrictive city ordinances, reports the New Richmond News.

Annexation as "spatial fix" 

It is clear that some frac sand companies view local ordinances and other regulations -- designed to protect the environment, public health, and community well-being -- as burdensome obstacles to advancing their economic interests. Likewise, organized communities that challenge or assert local control over frac sand development are also viewed as an impediment to profit. Some frac sand interests appear to have embraced annexation as a "spatial fix" to these problems, redirecting their focus geographically from one place to another or pitting municipalities against each other in a competition to accommodate the interests of frac sand companies.


Eau Claire Leader Telegram. Frack sand company eyes Wisconsin after Minnesota Vote. March 14, 2013.

Kennedy, Tony. Sand mine rules melt under pressure. StarTribune, February 4, 2013.

Kennedy, Tony. Mining-hub town of St. Charles says no to major frac sand facility. StarTribune, March 13, 2013.

Lindfors, Tom. Glenwood City Council hosts annexation discussion. New Richmond News, March 1, 2013.

Prengaman, Kate. Frac sand industry faces DNR violations, warnings. Wisconsin Center for Investigative Journalism, March 3, 2013.

Swedien, Jon. Sand company seeks annexation. Eau Claire Leader-Telegram, February 27, 2013. Inside a Town Meeting on Frac Sand Mining; Glenwood City, WI. March 8, 2013

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