Slowing down or unstable?

At the close of 2012, some observers began to report a downturn in the Wisconsin  frac sand rush, underscoring the potential instability of resource extraction industries.

As Kate Prengaman writes for the Wisconsin Center for Investigative Journalism, demand for frac sand declined due to a surplus of natural gas in the U.S.

From 2002 to 2012, writes Prengaman, citing the U.S. Energy Information Administration, shale gas production increased 2,400 percent. This rapid increase in shale gas production fueled demand for frac sand.

Making a profit off of frac sand, however, depends not only on the costs of production and transportation, but on fluctuating market prices. The frenzied pace of shale gas drilling generated a surplus of natural gas, pushing down gas prices and slowing unconventional gas development, in turn reducing the need for frac sand.

Prengaman reports that county officials in Wisconsin received fewer applications for frac sand operations during the fall of 2012 than earlier in the year. In addition, some permitted mines have not begun construction. Some companies may be waiting for prices to go back up, while others may simply hold onto permits as part of the company's "reserves" or to prevent competition from moving in.

Lance Pliml, chair of the Wood County Board and president of the recently formed Wisconsin Counties Association Frac Sand Task Force, says that some landowners have mineral rights contracts that offer no payment up front and may "not see that windfall they anticipated."

The "slowing" of the frac sand rush could have other adverse economic impacts if mining operations cut back on production and the much-touted "job creation" fails to materialize. This raises questions about the stability of resource extraction industries and whether or not mining offers a sound foundation long-term economic development. While many factors must be taken into consideration, as UW-Extension economists note, the instability represented by "boom-and-bust" cycles and the "flickering" of mining operations can transfer to local communities.