Demand is exploding for the massive amounts of sand used in fracking, creating a windfall for mines from Texas to Wisconsin but leading to worries about the health impacts of breathing silica dust.
Drillers are expected to use nearly 95 billion pounds of “frac sand” this year. That’s up 30 percent from last year, according to energy specialists at PacWest Consulting Partners, who expect the market to keep growing as drillers increasingly accept that using more sand increases the oil and gas production from each well.
The demand could mean future mines opening from the Carolinas to Maine, according to a new report. In the meantime, the sand mining industry is roaring, with the stock for Emerge Energy Services, based in Southlake, Texas, near Fort Worth, surging some 400 percent since going public a year and a half ago.
Dropping oil prices could dampen fracking investment, and therefore sand mining, if they continue for too long, but analysts aren’t betting on it.
“As (oil and gas companies) seek to optimize well results, they are using significantly more frac sand per well,” said a recent Morgan Stanley Research report. “We believe the industry now sits on the verge of a prolonged frac sand supply shortage.”
Companies are scrambling to fill the gap. U.S. Silica just announced plans to add 3.8 million tons of frac sand mine and plant capacity in Wisconsin and Missouri. The company also bought a central Texas mining company that recently had expanded its production.
“Based on conversations with our customers, we believe that a steep change is occurring with regard to the volumes of sand being used per well, which translates into significant demand for our products,” said Bryan Shinn, CEO of U.S. Silica.
Sand is vital for hydraulic fracturing, known as fracking, in which huge amounts of high-pressure water and chemicals are pumped underground to break shale rock and release the oil and natural gas inside.
The sand is used to prop open the paper-thin cracks fracking makes in the shale. That allows the oil and gas to pass through and up the well to the surface. In the past year or so, drillers have discovered that using much more sand than they had been using results in more oil and gas produced from the well.
A single fracked well can now use as much as 10,000 tons of sand.
Companies use a specific kind of sand for fracking, and it’s not what you’d find on the beach.
Rounded quartz sand is needed because it’s strong enough to handle the pressure and depths involved in fracking. Beach sand is too angular and full of impurities.
The Midwestern “Northern White” sand of Wisconsin, Minnesota, Illinois and Missouri is the best sand for fracking and is at the heart of the boom. The hickory, or brown, sand of Central Texas, mined near the town of Brady, is less desirable but has the benefit of being close to some of the top oil and gas fields in the nation.
The mining could expand to sand deposits in at least a dozen other states, including South Carolina, North Carolina, New York, Virginia, Vermont and Maine, according to a new report from the Boston-based Civil Society Institute, the Environmental Working Group and Midwest Environmental Advocates.
The report warned of water pollution from mining chemicals and the risk of silica dust to people living near frac sand operations. Breathing in small silica particles can cause lung damage and disease. There has been a backlash against sand mining in some communities, particularly in the Midwest, while others have welcomed the jobs and money that it brings.
“The rapidly expanding growth of frac sand mining is a hidden and little understood danger of the fracking boom in the United States,” Grant Smith, an author of the report, told reporters in a conference call.
Many local governments in Wisconsin have passed zoning laws keeping new mines out, which is concentrating the mining growth in two counties, PacWest Consulting’s Samir Nangia said in a call last week. Minnesota can also be tough for permits, he said.
“Texas continues to be the easiest state to do business in but perhaps doesn’t have the highest quality frac sand mines,” Nangia said.
A few companies long dominated the sand mining industry, which before the fracking boom was focused on producing sand to make window glass. But smaller outfits are getting involved as profitability soars.
“I think for the foreseeable future production is going to continue to increase,” said Thomas Dolley, mineral commodity specialist for the U.S. Geological Survey.
Some oil and gas companies have even started operating their own sand mines to ensure supply, Dolley said.
“As a driller or producer, the last thing you want is to be sitting on a rig with no proppant,” Dolley said, referring to the sand that is used to prop open the cracks that fracking makes in the shale rocks. “Because then you are shut down.”