Sand Mines Reopening

Here's another report from last week on the expected rebound of demand for frac sand. According to the article, "Wisconsin frac sand producers say they are poised for another sand boom after an agonizing two-year lull." Some industry folk anticipate returning to 2014 production levels next year.

However, not all observers are so optimistic.

"Oil industry analytical firm IHS is a little more guarded in its predictions for the frac sand market in 2017. Managing Director Samir Nangia expects demand to grow by 15 percent per year. The most recent IHS ProppantIQ report states there are around 20 idled sand mines in the U.S., most of them in Wisconsin, accounting for 26 million tons of idled frac sand production capacity."

See the full article: Rich Kremer, "Wisconsin Frac Sand Producers Bullish About Market Rebound," WPR, December 1, 2016.

Signs of a come back?

Stock for frac sand companies appears to have risen in value following indications that OPEC intends to cut production, thereby triggering increased demand for U.S. fracking. Is this the dawn of a new phase of frac sand mining development in Wisconsin?

As one observer notes, "Frack sand could be a very interesting industry as we head into 2017 and beyond. Many of the advances in shale drilling in recent years -- drilling longer horizontal portions of wells, doing more fracking stages per linear foot of horizontal well, and using more sand per individual fracking stage -- all point to sand volumes growing at a pace much faster than overall drilling activity."

For the full discussion, see:

• Tyler Crowe, "Shares of Frack Sand Suppliers Explode After Today's OPEC Announcement," The Motley Fool, November 30, 2016. 

What's $80,000 to a frac sand mine?

For some people, it's a house. For others, it's a car... or two. Or maybe student loan debt. For some frac sand mines, it's a few hours, if that.

Last month Alpine Sand, operating near Arcadia, in Trempealeau County, was fined $80,000 for violating storm water regulations. Their facility was originally cited by the DNR in October 2012 for mismanaging storm water. Then sand and sediment washed into a tributary of Newcomb Valley Creek on multiple occasions in 2013.

What does $80,000 mean to a frac sand mine?

According to the Wall Street Journal, in April the going rate for frac sand was $56 per ton (not including transportation or handling costs). We know that Alpine Sand is permitted to haul 180 loads a day from this particular mine. If we assume that one truckload typically carries about 20 tons (a figure I have heard for other operations), then we might estimate that Alpine Sand moves about 3,600 tons per day.

That means they move about $201,600 worth of sand, daily. If they operate every day, that's $1,411,200 per week. Eighty grand doesn't seem to represent a very big dent in their revenue stream.

What does such a modest fine mean for frac sand mining in general? Well, the Wall Street Journal recently boasted about a Texas-based investment firm striking it rich with Wisconsin frac sand, scoring gains of $1.4 billion on a $91 million investment. Read that again. $1.4 billion. Billion.

I wonder if an $80,000 fine will really encourage these out-of-state billionaires to take environmental standards seriously?

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.

New forms of wealth and division

As part of their periodic series called "Frac Sand Fever," the Star Tribune recently reported about community divisions stemming from frac sand development in western Wisconsin.

In a piece titled "Sand Mining Creates Wealth and Friction" (Dec. 2, 2012), reporter Curt Brown tells the story of Lou Ellen and Jim Frei, a couple in their late 60s who have lived in Blair, WI, in Trempealeau County, for 40 years, and who sold their dairy farm to a frac sand company in 2010 for half a million dollars. Here are some of the financial figures cited in the story:

• Winn Bay Sand Co. paid the couple, along with three neighbors, $3850 per acre (for their 143 acres). They retained 10 years of rights to continue farming, logging, and hunting. 
• Preferred Sands bought an 80 acre parcel in 2010 for $250,000 (or $3,125 an acre).
• Brown reports on rumors of people receiving $10,000 an acre; he writes that the Texas oil and gas company Windsor Permian "has offered more than $15,000 an acre for a possible mining site near Red Wing."

From my perspective, it's interesting to examine how people try to make sense of the rapid social and economic changes associated with frac sand mining. Using a popular culture reference, one neighbor described the influx of frac sand wealth as a rural "rags to riches" story, and subtly frames the hills of rural Wisconsin as a nuisance: 

• "It's like the Beverly Hillbillies: Who would have thought these hills we've been tipping our tractors over on all these years would become such a hot commodity?" - Lorna Tenneson

Engaging the frac sand PR machine

The frac sand industry has responded to my Dunn County News guest column "Sand doesn't equal community well being," with Aaron Scott, the plant manager of a mine located just outside Menomonie, writing a letter to the editor titled "Sand mining has economic benefits."

For the most part, I feel honored that my ideas have caught the attention of the mining industry. In a way, it's validating that they see a need to respond in a public forum. The operation that Scott manages is owned by Wisconsin Industrial Sand, a subsidiary of Fairmount Minerals, headquartered in Chardon, Ohio, which operates at least three frac sand mines in central Wisconsin. Fairmount is also a founding member of the new Wisconsin Industrial Sand Association (WISA), a lobbying group recently formed by four companies.

Scott's letter simply repeats a series of claims about jobs and economic benefits that have been widely disseminated by Fairmount Minerals through their substantial public relations efforts. Coordinated now through WISA, frac sand interests are actively seeking to frame public discussion and perception of their industry.

What frustrates me is that Scott calls my article "misleading," suggesting that I am spreading "false information." Anyone who reads my article and thinks about it will recognize that I am raising questions and highlighting a wider context. There is nothing misleading or false about this.

I suspect Scott, however, is more concerned with his company's public image than substance.

Economics of Sand Mining in Buffalo County

I recently learned about a report on the economics of sand mining prepared by Carl Duley, UW-Extension, and Steven Deller, UW-Madison/Extension, for Buffalo County:

• The Economics of Sand Mining and Buffalo County
• Executive Summary

While their analysis focuses on the specific conditions of Buffalo County (comparison with other counties should be done with caution), the report raises some important questions that are relevant to the broader region. Some of the highlights:

Sand doesn’t equal community well-being : Dunn County News

Sand doesn’t equal community well-being : Dunn County News

Here is a much shorter version of my article about the socioeconomic impacts of frac sand mining, published in the Dunn County News on Wednesday, September 5. (The Dunn County News website includes a head-shot photo with the article, but the photo is ridiculously huge... not sure why.) My hope is that some of the questions I raise in the article will contribute to the broader debate about the future of frac sand mining in this region. Do local decision-makers read the Dunn County News? I hope so. I've heard many local officials and frac sand advocates make simplistic and misleading claims about the presumed economic benefits of industrial frac sand mining, with local officials invoking "economic development" as a rationale for their decision-making. There may be benefits for some, but also costs, often imposed on others or on future generations. These are serious issues that require accurate information and careful assessment, not wishful assertions backed up by the empty guarantees of mining companies striving to profit from frac sand.

Does Frac Sand Create Socioeconomic Well-being?

by Thomas W. Pearson, Assistant Professor of Anthropology, University of Wisconsin-Stout

The recent boom in frac sand mining in Wisconsin has been touted as a source of economic growth, and especially job creation. Some frac sand corporations have adopted the slogan "sand = jobs," a phrase repeated by many sand mining advocates. But the role of frac sand in community economic development is much more complex. Local elected officials, policy makers, economic development planners, and citizens need to think more critically about the claim that “sand equals jobs.”

‘Job Euphoria’

In the wake of the economic recession and in a highly charged political atmosphere where the economy remains a hot button issue, “job creation” has become empty political rhetoric. Often it's nothing more than an obligatory phrase for elected officials seeking support among voters or corporations seeking the consent of economically battered communities. Who would possibly be against job creation, right?

We regularly hear people say that sand mines create dozens, hundreds, even thousands of jobs, with the assumption that any amount of jobs must be a good thing. But what does that mean? Has the euphoria of job creation become a rhetorical smokescreen that obscures other issues we should be talking about instead?