Weekly News In Review

HUB-Weekly-News-in-ReviewNon-traditional frac sand states were creating headlines this week, confirming the frac sand industry’s boundless growth potential. There was plenty of activity in Iowa, as three separate counties announced autonomous legislation on frac sand mining. Outside the U.S., a non-traditional frac sand country was found to harbor substantial deposits of high-quality silica, thereby expanding the reach of frac sand mining as a global enterprise.

This week was a case of good news/bad news for American hydrofracking enterprises. The good news: One report announced that, because of hydrofracking, the U.S. is now the global leader in crude oil exports. The bad news: That status could be short lived if American supply of frac sand cannot fulfill American demand.

Three Iowan Counties Take Different Stances on Frac Sand Mining
Residents in three Iowan counties – Allamakee, Clayton, and Winneshiek – have formed a consortium to keep oversight of frac sand mining activities in the hands of local municipalities rather than allowing state-wide regulation. Two of these counties have enacted moratoriums on large-scale sand mining, while the third has opted to allow for mining activity to go on practically unimpeded.

One Iowan County Opts for a Greener Version of Frac Sand Mining
Under Allamakee County’s frac sand mining moratorium, production can proceed, provided a strict set of regulations are met. The county has forbidden the use of any chemicals or toxic substance and has banned mining within 1,000 feet of fresh water or any of the county’s other natural topographical features. Frac sand mining is permissible in Allamakee county, but a challenge.

Iowa County Intends to Limit Recently Restored Frac Sand Production
Despite the expiration of an 18-month moratorium on frac sand mining, Allamakee County, IA still intends to take a cautious approach to new frac sand mines. Researchers from the University of Iowa are still studying the long-term health risks of frac sand mining, suspending approval on the opening of any new mines. Currently, Pattison Sand Company is the only full-scale mine operating in the county.

Cleveland Town Board Supervisor Survives Frac Sand Fueled Recall
A recall for the Cleveland, WI Town Board Supervisor seat has returned the same results as the initial election. Joe Egloff will retain the seat, despite fierce opposition on the town’s frac sand mining policies, the single issue that prompted the recount.

Substantial Frac Sand Discovery in Southern Uruguay
Southern Uruguay became the newest member nation in the global silica sand community, according to a Canadian firm. U308 Corp. announced this week that they have staked mineral concessions over an area with good frac sand potential in southern Uruguay.

Quebec Quartz Informs the Public on Upcoming Silica Offerings
This week, the Canadian firm, Uragold Bay Resources, Inc., a wholly-owned subsidiary of Quebec Quartz, released information regarding recent developments in the province’s cache of silicon metal and high quality silicon quartz. Patrick Levasseur, President and COO of Uragold, was pleased to offer investors a first-hand look at what many believe to be the finest silicon deposits in Canada.

Resin Coated Proppant and Its Long-Term Value the Subject of a New Report
A study conducted by Fairmount Santrol, formerly Fairmount Minerals, has concluded that resin-coated proppants can greatly increase the value of hydrofracking wells. In a sampling of 23 wells where a resin-coated proppant was used and 23 wells where pure silica frac sand was used, the resin-coated proppant out performed the silica sand on average of $115,000 per stage, $2.6 million on the whole.

Athabasca Minerals Gets the Green Light on Production at SML 130021
Athabasca Minerals has received official approval to commence production at SML 130021 over a 10 year contract, the company announced this week. The Firebag Silica Project received approval after two major U.S. testing labs confirmed the deposits there are of high quality and suitable for use in hydrofracking.

Recent Study Looks at the Burden Frac Sand is placing on American Railways
The frac sand boom of recent years is placing a heavy burden on America’s rail infrastructure, according to a recent industry study. Major frac sand providers such as U.S. Silica Holdings and Hi-Crush Partners have tried to alleviate the stress placed on established rail systems by developing in-house frac sand transport systems, but more needs to be done to ensure that American railroads are capable of handling increased volume and traffic.

Hydrofracking Has Placed U.S. atop All Oil Exporting Nations
Hydrofracking has pushed the United States past Saudi Arabia and Russia as the world leader in crude oil exports, according to a report released this week. The U.S. produced more than 11 million barrels of crude oil in the first quarter of 2014, largely due to new technologies in the field of frac sand mining.

BLM Lays Out Its Plans for Safer, More Efficient Oil and Gas Production
California, not typically known for its hydrofracking activities, announced this week that it has drafted a comprehensive strategy for future oil and natural gas exploration. The U.S. Bureau of Land Management’s California state office announced that the strategy incorporates results from public scoping on oil and gas development, in addition to information from the CCST’s review, and provides internal guidance for processing drilling permit applications and sundry notices.

CD Corp Weighing Options Regarding Frac Sand Shipping
CD Corp, a major Wisconsin cargo and freight company, may be hampered in filling growing demand for frac sand by an environmental study on the effects of ambient frac sand dust. A Minnesota Pollution Control Agency’s recent decision to require an environmental review for a requested permit change to allow more shipping flexibility has led CD Corp officials to consider other transport options.

America’s Appetite for Frac Sand may go Unfulfilled
Should projections from Morgan Stanley prove accurate, the U.S. may not have enough frac sand to fulfill demand over the next five years. MS forecasts sand demand growth 0f 96% in 2016 from 2013, compared with just 76% of sand capacity growth.

Material Handling Equipment: Getting Frac Sand from the Mine to the Market

Material Handling EquipmentU.S. Silica Holdings sold 1.3 million tons of frac sand in just the first quarter of 2014. That’s just one frac sand mining company over the course of three months. You don’t do that with a shovel and pail. Much adieu has been made over the sheer quantity of frac sand – this new “white gold” – mined over the last few years, but there has been little mentioned about the manufacturing industry that makes all of this prodigious mining possible. Without material handling equipment and the companies that manufacture it, frac sand mining would not enjoy the status of being the fastest growing field in the history of American industry.

Of course material handling equipment, in one form or another, has been around for as long as mining itself. But because frac sand has its own native characteristics – it tends to be abrasive, produces excessive dust, and is generally difficult to handle – the standard hardware used to handle other common resources sometimes will not suffice. Fortunately, there are several companies that have built their reputations on innovations to serve this current trend in the mining industry.

With big operations come big equipment needs,” said one industry professional. Fortunately for the mining industry, those big equipment needs are fairly easy to meet. The top equipment manufactures in the industry – FEECO International, Almo Process Technology, Alston Equipment Company, and others – have been serving the mining industry in one capacity or another for decades, so adding a line of equipment suitable for frac sand excavation and production is second nature. Though equipment specs and accessories may vary slightly from one manufacturer to another, the basic design of a frac sand mining facility consists of three components: bucket elevators, a conveyor system, and rotary dryers.

Bucket Elevators

There are two classifications for bucket elevators: centrifugal and continuous. Centrifugal bucket elevators are better suited for quickly conveying larger quantities of material. The buckets are large-capacity and the system moves at a rapid pace to extract the maximum amount of material in the shortest possible time. This type of system is good if product demand spikes, but might lead to a compromise in frac sand quality. Centrifugal bucket systems are like the demolition crews of the material handling industry. Indeed, they are fast and effective, but they pay little regard to the physical composition of the material as they gouge, heave, and dump vast amounts of frac sand with all the delicacy of a sledgehammer. Since physical properties often separate sand suitable for hydrofracing from sand that would serve a better purpose on a beach, faster is not necessarily better.

A continuous bucket elevator system is designed to handle and preserve the physical nature of delicate materials. This type of bucket system is ideal for moving frac sand, an abrasive material which is graded on the symmetrical qualities of the individual grains. The system is designed to operate at slower speeds, and is therefore gentler when scooping and depositing materials. The buckets are spaced closer together than in the centrifugal bucket design, allowing much of the spillage from buckets to be collected by the buckets in their wake. This design consideration effectively minimizes the amount of production time lost for using a slower system, while maintaining the physical integrity of the frac sand. But whatever bucket elevator system is installed in a frac sand facility – fast or slow, careful or crude – nothing gets accomplished without putting the whole thing in motion.

Conveyor Systems

Putting the bucket elevator system in motion starts by choosing the appropriate conveyor system based on site topography, production demands, and other site-specific conditions. As no two sites share identical topographical specifications, customization is crucial in designing an effective conveyor system.

A prime example of a custom conveyor system can be found at EOG Resources of Chippewa Falls, Wisconsin. At EOG, nine (9) 30” wide belt conveyors and four (4) 30” x 108’ long reversing shuttle conveyors were installed. The system was designed to convey 250 tons per hour (TPH) of frac sand and deposit the material at any one of three different storage silo sites, depending on varying production streams. This custom system design was based on preexisting plant specifications and production demands, and could have been configured to handle more or less TPH and deposit material at greater or fewer silo collection sites.

Adding to the flexibility of this custom design are the various pieces of supplemental equipment that can be added to enhance production capacity. Depending on the plant’s production needs, any number of belt trippers, weighing units, delumpers, and reclaiming devices can be quickly added to the basic conveyor system. Since production can vary depending on the time of year, most top-of-the-line conveyor systems feature similar accessories to help accommodate heavier or lighter demand.

Rotary Dryers   

Thermal dryers that work well for agglomerated ore, ash, polymers, and other industrial materials would obliterate delicate silica. Unlike many other materials that absorb moisture during processing, silica sand carries most of its moisture on the surface. Drying such a material in a standard thermal processing unit would be tantamount to lighting a birthday candle with a flamethrower. Frac sand dryers must be precision-crafted to allow for stable heat transfer, incremental moisture control, bulk density, and atmospheric conditions.

If frac sand demand remains stable, U.S. Silica Holdings stands to ship more than 4 million tons of sand in 2014, give or take a few million tons during cold weather months. Part of what makes U.S. Silica Holdings one of the most prolific suppliers of frac sand in the world is the engineering prowess behind choosing not just any material handling system, but the right one. Many mining companies are anxious to take advantage of the recent surge in silica sand demand, but without installing the proper machinery for its efficient excavation, they might as well take their shovels and pails to the beach and enjoy the sunshine.

Weekly News In Review

HUB-Weekly-News-in-ReviewThis week’s activity in the frac sand and hydrofracking industries celebrates the achievements of companies that play by the rules, and takes a hard line on those that cut corners at the expense of the public. While one major fracking company executive projected a not-too-distant future where hydrofracking releases North America from the yoke of oil dependence, another major company incurred substantial penalties for the improper use of natural resources in an attempt to procure greater profits. While one community prepares to lift a year-long moratorium on frac sand production, an entire state puts a halt to a frac sand company’s production for failure to obtain proper authorization. Frac sand production and hydrofracking has proven to be an irresistible market force, but this week’s news confirms that there is a right way and a wrong way to gain market share and expand opportunity.

Leading Frac Sand Provider Fined for Unauthorized Wells
Hi-Crush Partners of Texas has been ordered to pay over $52,000 in fines for operating two frac sand wells in Augusta, WI without securing approval and proper licensing from the state’s Department of Natural Resources. Wisconsin Gov. Scott Walker commented on the incident by claiming that the League of Conservation Voters, rabid opponents of the state’s frac sand industry, is just looking to create some controversy in the midst of an election year. Gov. Walker was loosely connected with Hi-Crush when it was reported that he accepted substantial donations from the company to support his political campaign.

Energy Exec Optimistic that Fracking will Solve America’s Oil Dependency
Ken DeCubellis, CEO at Minnesota’s Black Ridge Oil and Gas, addressed the Hudson, MN Rotary Club this week with some very optimistic predictions for the hydrofracking industry and the impact it will have on America’s energy independence. DeCubellis believes that by 2020, the United States will only need to import 22 percent of its oil from the Middle East. Beyond 2020, DeCubellis predicts that a U.S., Canadian, and Mexican hydrofracking contingency could make North America completely energy independent.

North American Fracking Market Gets a Boost from Brisk D&C Activity
For at least the next two years, robust drilling and completion activity promises for a strong hydrofracking market, according to PacWest Consulting Partners. Nilesh Dayal, PacWest’s managing partner, reports that after more than three years of pricing pressure in the frac market, the dam has finally broken for pricing, and service providers are finally having success in negotiating higher prices.

Frac Sand Moratorium Winding Down in Trempealeau County
Frac sand production in Wisconsin’s Tempealeau County has been in limbo for the past year, but the production halt is scheduled to end in late August. In an 8-7 vote against extending the moratorium, the county board of supervisors opened the floodgates for the inevitable wave of permits to roll into the county’s licensing department. The moratorium was put in place so a health impact committee could study the effects frac sand mining has on public health and safety, water quality, air quality, and noise pollution.

Second Annual Conference Brings Together North American Frac Sand Producers
Pittsburgh, PA will play host to experienced and neophyte companies from the North American frac sand industry as the city prepares for the second annual Frac Sand Insider Conference and Exhibition, scheduled for November. The conference is a chance for manufacturers and consultants to meet with the leading decision-makers in the North America frac sand industry.

New Partnership Will Yield 2.4 Million TPY of Frac Sand in Northern Wisconsin
A new multi-year agreement joins Superior Silica Sands of Texas with CN Railway to construct an 85-acre silica sand processing plant and rail storage facility near Poskin, Wisconsin. The new facility is expected to produce up to 2.4 million tons per year of high quality frac sand.

DNR Considers Re-routing Wisconsin Waterway to accommodate Frac Sand Production
The Wisconsin Department of Natural Resources hosted a public forum this week to discuss the possibility of re-routing Trout Run Creek and other modifications to accommodate AllEnergy Silica’s construction of a sand loading facility and rail spur line. The forum was designed to allow the public to ask questions, voice concerns, and learn more about the permit process.

Colorado Partnership Explores Breakthrough Geomechanical Technology
SIGMA3 and FracGeo announced this week that they are joining forces to test revolutionary new technology that will help hydrofracking operators predict and evaluate the geomechanical response to hydraulic stimulation. The new technology predicts Microseismicity, determines optimal frac locations, and quantifies frac stage performance, while optimizing field development strategies in unconventional reservoirs.

Frac Sand Demand Still on the Rise, Prices Predicted to Follow
Fracking operations are expected to use 30 percent more silica sand than they did just one year ago, as demand for proppants continues to rise, The Wall Street Journal reports. With greater demand comes shorter supplies, so in turn, the price-per-ton is also expected to reach unparalleled highs throughout the coming year.

After Mining: the Processing of Natural Gas

After Mining: the Processing of Natural GasLooking at the number of pipes extending from the top of an established natural gas well, one might naturally assume that the gas was simply being piped straight from the well off to market. Given the number of valves, spools, fittings, and pipes branching off from the wellhead, it is also not surprising that workers began to call these complex well-toppers “Christmas trees.”

However, while those Christmas trees might function to draw up natural gas from deep underground, that gas arrives at the surface still contaminated with a number of impurities, which must be removed before it can be piped into cities and homes as “dry natural gas.”

Processing at the Gas Well Site

There are a number of steps in the processing of natural gas. The first usually occurs at the site of the gas well itself. If the natural gas is extracted from an oil well, it is called “associated-dissolved” natural gas, and must be disassociated from that oil before being shipped off to a natural gas processing plant. If the natural gas is “non-associated” with oil, then it will most likely be associated instead with water and lightweight hydrocarbon compounds. These also must be removed before the gas is shipped offsite for further processing. Some of those hydrocarbons, called condensate, are actually valuable fuels in and of themselves, such as propane and butane. These are further purified in processing plants of their own before being sold to help cover the costs of operating the natural gas well.

Processing at a Natural Gas Processing Plant

Once the raw natural gas has arrived at the processing plant, it undergoes a number of “unit processes” which remove specific impurities from the natural gas. These include:

  • Removal of acid gases, such as hydrogen sulfide and carbon dioxide. This is sometimes called “gas sweetening,” because the removal of hydrogen sulfide improves the smell of the natural gas. Traditionally, this process is done with amine treating, which involves using alkylamines (which are derived from ammonia) as a reagent to absorb the acid gases out of the natural gas. However, this process is not very efficient and there are environmental constraints on the process. Therefore, polymeric membranes are increasingly being used instead to separate these gases. The hydrogen sulfide is then converted to sulfur or sulfuric acid, both of which are useful in other industrial processes. The gases left over from this procedure are treated and often then incinerated.
  • Dehydration of the gas to remove water vapor. The most common and economical method for doing this is to use one of various liquid glycol compounds to absorb the water molecules. This is essential to prevent the water vapor from cooling to the point of liquefying, or even freezing, as it is being piped to market. Any water that collects in a transport pipe could also corrode the pipe system. After the water vapor is absorbed, the glycol is heated, causing the water to burn off and the glycol to be ready for cooling and re-use. Occasionally here also, newer membrane filters are used instead.
  • Mercury is removed, using activated carbon or a molecular sieve.
  • Nitrogen is also sometimes removed. This can be done using low temperature distillation, which might seem like a paradox, since distillation is usually done by boiling. However, the boiling point of nitrogen is −195.69°C, or –320.242°F. This means that nitrogen can be removed from the gas by subjecting it to extremely low, or cryogenic, temperatures. Activated carbon or molecular sieves are other methods used.
  • Natural gas liquids are removed from the gases. This final process is also done at cryogenic temperatures, using a turboexpander, which uses centrifugal force to separate gases pumped in at high pressure. This is the most efficient way to extract methane, a very short and lightweight hydrocarbon molecule, as well as smaller amounts of the heavier gases, such as propane and butane, which were removed in larger amounts at the well site. As before, these natural gas liquids are valuable in and of themselves, so they undergo further processing (often at a separate plant) before being sold.

Transporting the Natural Gas to Market

Once the natural gas is cleaned and dried, it is ready for use. Because it is a volatile gas, it is transported in a completely sealed environment of pipes and storage facilities that extend as a network across the US and beyond our borders. 305,000 miles of these pipes weave themselves across the continent, with 1,400 compressor stations keeping the gas moving through the system. There are 11,000 delivery points where the gas leaves the pipeline network to enter local distribution networks and municipalities, as well as to feed industrial and electric power plants.

In 2012, the US used about 25.46 trillion cubic feet of natural gas, for everything from generating electric power for traditional Christmas tree lights, to heating hot water for showers. None of this would be possible without the complex series of chemical processes which have been developed to clean and dry natural gas for safe and efficient distribution across the nation.

Weekly News In Review

HUB-Weekly-News-in-ReviewIn terms of growth, is there any end in sight for the frac sand industry? Despite a few minor lulls in production and sales during the colder months, it seems that this is an industry with almost infinite growth potential. In the news this week, there’s a new Canadian player entering the frac sand industry with an aggressive plan to become one of the top frac sand providers in both its own country and the world. In the United States, frac sand production is still growing in the place that already possesses the finest known silica deposits. Massive growth continues to spill over as peripheral industries enjoy the residual success brought on by frac sand. It’s true that every trend and new industry has its natural cycle, but it doesn’t appear as though the frac sand industry has peaked yet. It just keeps climbing.

Victory Nickel Completes First Successful Step toward Entering the Frac Sand Market
Victory Silica, a whole subsidiary of Toronto’s Victory Nickel, announced this week that it has secured 20 percent of the production capacity near Medicine Hat, Alberta, with the objective of securing an additional 30 percent in the near future. With a capacity of 500,000 tons-per-annum, controlling such a large stake in 7 Persons plant production would position Victory Silica atop its Canadian competition and ensure its competitiveness in the American market.

Victory Nickel Contracts with Canadian Pacific to Move Frac Sand
The agreement reached last year between Victory Nickel and the Canadian Pacific railroad appears to be an anticipatory stroke of genius as the transportation contract secures a direct pipeline from Victory’s Alberta-based mine and the heart of the U.S. frac sand market. In light of Victory Silica’s purchase of 20 percent of the production capacity at the 7 Persons mine and this new artery between U.S. and Canadian frac sand interests, it appears that Victory Nickel is growing at a commensurate rate with the frac sand industry itself.

Ottawa Poised to Increase Frac Sand Shipping
Ottawa, Illinois, home of the coveted Northern White frac sand, will soon be able to provide more buyers with white gold through increased shipping capacity. Northern White LLC entered into negotiations this week with La Salle County to repurpose the Cargill Barge facility along the northern bank of the Illinois River. The next step for both parties is to outline Cargill Barge upgrades needed to accommodate increased traffic. The changes will be amended to the current lease between Northern White and the county.

LaSalle County Public Hearing Brings Residents and Industry Together on Frac Sand Construction
La Salle County residents and Northern White LLC convened in a public hearing this week on the issue of the company’s proposed sand drying and processing facility. Public concern ranges from frac sand spills along U.S. Route 6, to unbridled construction infiltrating many residential areas.

Frac Sand Industry Producing a Growing List of Quiet Beneficiaries
As frac sand mining enterprises such as Emerge Energy LP, U.S. Silica Holdings, and Hi-Crush Partners LP have topped Wall Street’s list of mega-earners so far this year, their success has spilled over into peripheral companies and industries. The transportation industry, particularly rail transport, is enjoying a banner year of profits as the result of high-demand for silica sand throughout the United States and a good portion of Western Canada.

Wisconsin Court of Appeals Gives Frac Sand the Green Light
A three-judge panel on the Wisconsin Court of Appeals this week granted a permit that would allow more than 100 truckloads of frac sand per day to be transported on local roads. After conducting a safety impact study, the court assessed that local roads, primarily Highway 88, is still capable of handling the increased traffic, despite some needed minor repairs. Opponents of the permit argued that the increased traffic would present a community safety issue, a notion that the panel unanimously dispelled.

Wisconsin Residents Nervous Over Location of New Frac Sand Mine
Residents of the Glenwood City, WI area have made a second appeal for the right to vote on frac sand production in the state. Citizens petitioned three state legislators to convince them to reverse their support for Vista Sand and its proposal to build a new frac sand facility in close proximity of a public school. Citizens fear that if Legislative Bill 3408 is passed, local control of frac sand production would transfer to the state, effectively silencing the community voice on where and how frac sand mining is conducted.

92 Resources Corp. Begins Frac Sand Mining in the Canadian Pacific Southwest
Not to be left out of a thriving Canadian frac sand market, British Columbia’s 92 Resources Corp. announced this week that it has commenced a first phase work program on its 100 percent owned Zim Frac high purity/silica quartz property near the town of Golden in south-eastern British Columbia. This first phase is limited to obtaining test samples in order to fully assess the quality of frac sand and the viability of long-term production.

Frac Sand: a Blockbuster Market for Traditional Mining

Traditional Mining Companies Look to Frac SandRegardless of the industry, companies that fail to diversify in the midst of a hot new trend often spell their own demise. Take Blockbuster video, for instance. When Netflix arrived on the scene with a robust catalog of downloadable movies, Blockbuster held fast to its traditional brick-and-mortar business model. As the video download trend grew, Blockbuster eventually launched an online service, but the company was too late to the party. Blockbuster filed for bankruptcy on September 23, 2010, and closed its last stores in January, 2014.

Video rentals and frac sand may be worlds apart in every respect, until they are analyzed through the lens of market share. Percentages are universal, and just as Blockbuster Video misjudged the evolution of its market, there are companies in the mining industry that may be missing out on an industry trend that could be a foreshadowing of what mining will look like over the next 10 to 20 years. To coin a phrase, they may be ‘blockbustering’ themselves out of the marketplace. If Blockbuster Video teaches industry anything, it’s to seize the opportunity to diversify when it presents itself, since no one knows precisely what the future will hold.

With the demand for frac sand on the rise and the ore markets taking a temporary nosedive, it would behoove mining companies with the resources to venture out of their copper, nickel, or precious metals markets and start shoveling a bit of sand. Before the frac sand boom of recent years and America’s drive toward energy self-sufficiency by 2020, mining companies that previously thought of shale deposits as just a barrier between their drills and their ore now find themselves courting a lucrative commodity. Harvesting this white gold, however, does not necessarily come easy.

Victory Nickel

When CRU makes a prediction on metals, every sector of the mining industry takes notice. CRU has been consulting the mining, metals, and fertilizer industries for over 40 years, so when they announced an impending downturn in the nickel market through 2015, Canada’s Victory Nickel took heed and acted swiftly. Victory Nickel is Canada’s premier mid-tier nickel producer with mines in Manitoba, northwestern Quebec and, as fortune would have it, a substantial frac sand deposit at its Minago project North of Winnipeg. Ambition has been the driving force behind Victory Nickel’s success in the ore market, so its foray into frac sand has been no less enterprising.

But drive and determination are not enough to make this transition. Victory Nickel, operating under the name, Victory Silica, is facing a long-term, billion dollar project of such an imposing breadth that it needs to be divided into three complex phases. Though the recent news is certainly optimistic, it only marks the completion of Phase 1 of the company’s overall frac sand plan: the opening of a 5,000 ton-per-annum frac sand processing plant. Though a high-capacity processing plant positions Victory Silica as an important player in the Canadian frac sand market, the company is depending on the successful completion of Phases 2 and 3. Phase 2 involves a joint venture with its current suppliers with access to Wisconsin’s Jordan Formation to construct a wet plant/sand concentrator near its Minago mine in exchange for vending permits at some of Wisconsin’s top-producing sand mines. Phase 3 completes the plan with the construction of a 1,000,000 ton-per-annum dry plant at Winnipeg, Manitoba. So nothing is yet written in stone, as it were.

Victory Silica intends to invest the next 18 to 24 months in seeing the overall plan through. Though there are risks involved with any venture of this magnitude, the company believes they are minimal and calculable. Says Victory Nickel’s CEO RenéGalipeau, “[t]his is a very exciting time for Victory Nickel and Victory Silica. It is important to remember, though, that this is only the first step in our three-phased plan to enter the frac sand market. The immediate goals are to expand sales and marketing activities and to continue to implement Phases 2 and 3.” But however cautious these next steps may be, Victory Nickel/Victory Silica has no intention of being crowded out of a market that it is fully capable of competing in, no matter how difficult the transition. At the moment, however, breaking into the frac sand market appears to be a pretty painless process for a company like Victory Nickel, but what about a smaller company with limited capital?

Bryan Rock Products

With Minnesota being part of the epicenter of the frac sand industry, it should stand to reason that a mining company operating in that state would already have a firm foothold in the industry. There are a few stragglers, but Bryan Rock Products is making moves that would take them out of that category. A leader in limestone mining for decades, Bryan Rock discovered a substantial frac sand cache completely by accident just three years ago.

“We drilled too deep,” said company CEO Bill Bryan when describing how they struck frac sand. At the time, there was no reason for optimism, though. “We just didn’t understand the market until a few years ago.” Bill Bryan understands the frac sand market now, and he also understands the fortunate position his company finds itself in.

When the housing bubble burst in the mid 2000s, the demand for limestone decreased dramatically. With revenue dipping and its sole market at a standstill, Bryan Rock was in need of a big-time opportunity just to remain solvent. That opportunity presented itself while drilling past a limestone deposit into a bed of pure silica sand. At the time it was just an oversight, but since the frac sand boom of recent years, this discovery has turned out to be a lifesaver for Bryan Rock. What makes this discovery particularly fortunate is that it is located on the Union Pacific railroad line, making it possible to extract the sand, process it, and ship it all from one location. Many companies need to mine the sand, ship it to a distant processing center, and once again ship it to market, a cycle that consumes millions of dollars annually. Being able to accomplish the entire mining/processing/shipping cycle in one location stands to save Bryan Rock a fortune, making a multi-million dollar investment in equipment upgrades a lot easier to bear for the cash-strapped enterprise.

But if it were just a matter of money in making the transition from traditional mining to frac sand mining, there should be more companies like Victory Nickel and Bryan Rock Products lining up to claim a stake of this hot new market. It’s not so simple. It does take more than money, a lot more, as DeWitt, Ross and Stevens will attest to. This law firm holds the definitive document on frac sand mining and regulations in the State of Wisconsin, which is loosely based on Federal EPA regulations, making the language therein practically universal from state to state.

There are contracts that need to be drafted between mining companies, construction firms, and landowners. There are zoning approvals to obtain, as well as state-approved mining permits, emissions- and water-related testing to conduct, and state fees and taxes that could amount to hundreds of thousands of dollars. So no, just because a company has operated in the mining field for generations does not mean that the transition into the frac sand industry is easy or sure; certainly not as easy as an entertainment company like Blockbuster transitioning into the world of video downloads. But there is one universal truth held by all companies, regardless of whether they deal in movies or minerals: standing pat is very often a step in the wrong direction.

Weekly News In Review

HUB-Weekly-News-in-ReviewThe news surrounding the hydrofracing and frac sand industry is dynamic, controversial, and apparently heedless of international borders. This week’s news has a distinctive Canadian flavor as fracing activities north of the border ran the gamut of topics and issues that have constituted U.S. fracing news for the better part of two years. While one major player in Canadian frac sand announced a profitable Q2, another confident player entered the game. While one Nickel giant inadvertently entered the frac sand market, another received a Grade-A for its stockpile of silica sand from the American Petroleum Institute. There was high drama as 10 Nova Scotia communities voiced their concerns over the surging Canadian fracing industry, a government official was derided for his pro frac sand appointee, and an Alberta First Nation group lost its bid to reclaim land slated for fracing production, but gained consultative privilege on future production. In short, this week’s news should sound strangely familiar to those who live in the “deep-south” fracing states of Minnesota and Wisconsin. It’s pretty much the same wherever it happens, eh?

New Canadian Player in the Frac Sand Game
Two years of preparation seems to have paid off for Toronto-based Claim Post Resources. Over that time, the company has been exploring a substantial frac sand deposit in Manitoba, and is now set to become a major supplier of white silica to both the U.S. and Canada.

Q2 Results Amount to Happy News for Canadian Firm
After a lull in production during some harsh winter months, Athabasca Minerals, Inc. of Alberta, bolstered its frac sand stockpile and is now sitting on an inventory with a net worth in excess of $10.3 million. This increased production, according to the company’s CEO, is the result of increased construction activities initiated in Q3 of 2013.

Increased Rail Traffic is a Boon or a Burden, Depending on Perspective
While many in Wisconsin and Minnesota are concerned by increased rail traffic brought on by the frac sand transport industry, Montreal’s Canadian National Railway is reveling in this newfound revenue source as the company announced an additional $200 million in earnings as the result of frac sand hauling.

Victory Mountain Adds More Frac Sand Expertise to Its Advisory Board
After acquiring Alberta Frac Sand earlier this year, British Columbia’s Victory Mountain has added an old pro in the field of frac sand development to its advisory board. Troy Sidloski, CET, joins the Victory Mountain board and in doing so, brings over 20 years’ experience in mining, processing, and shipping frac sand.

Victory Nickel Discovers Lucrative Diversification Opportunity
Toronto’s Victory Nickel, a world-leader in nickel ore production, may inadvertently enter the frac sand industry thanks to a recent find at its Minago mine. To tap into the underlying nickel ore, Victory Nickel needed first to remove a 10 meters thick layer of sandstone, which could bring the company millions on the frac sand market.

Hanson Lake Confident that its Frac Sand is among the Best
Though Ottawa White Sand might sound as though it originates from somewhere near the capital of Canada, it actually comes from near Ottawa, Illinois, the geographic center of the St. Peter sandstone. That’s okay, because Canada has its own high-grade sand. Saskatchewan’s Hanson Lake Sands Corp. has a stockpile of silica sand that the American Petroleum Institute graded on par with sands found in Texas, Minnesota, and Wisconsin.

Public Concerns have No International Boundaries
As public concern over the risks of frac sand mining fuel debate in places like Wisconsin and Minnesota, the same drama is playing out in places like Nova Scotia. Public hearings on the risks of hydrofracing and frac sand mining came to a close this week in Whycocomagh, Nova Scotia, the last stop on the panel’s 10 community tour. The consensus reached by residents was also strikingly similar to those reached by people south of the border: more research and testing on the risks of hydrofracing are in order.

New Brunswick Energy Minister Defends His Appointee, Despite Fracing Conflict of Interest
With his appointee under scrutiny by the people of New Brunswick, Energy Minister Craig Leonard stood firm in his choice of Maurice Dusseault as the newest member of the province’s scientific advisory board on energy issues. Leonard, a known proponent of the province’s shale gas industry, was criticized for selection based on Dusseault’s ownership of patents for certain methods of hydraulic fracing.

Alberta First Nation Loses Bid against BC Oil and Gas, but Gains Consultative Rights
The Dene Tha, an Alberta First Nation, lost its bid against the B.C. Ministry of Energy and Mines, Nexen Inc., Penn West Petroleum Ltd., and Vero Energy Inc. The group claimed it was not adequately consulted on the sale of 21 parcels of land intended for shale gas fracing development. The presiding judge did, however, grant the Dene Tha consultative privileges before any future development can take place.

Frac Sand vs. Manufactured Proppants

Frac Sand vs Manufactured ProppantsFinding the perfect proppant is a type of holy grail for those employed in the hydraulic fracturing, or fracking, of oil and natural gas reserves trapped in shale beds deep underground. To quote one person in the business, “The ideal proppant is one that has the specific gravity of water, the strength of iron, and is cheaper than dirt!” So far, it’s been difficult to find proppants that meet all of these characteristics.

What are Proppants?

Proppants are tiny granules which are pumped into shale seams deep underground during fracking to prop open very small fractures in the shale so that oil and natural gas can flow out and into the main wellbore for extraction. Over the years, everything from walnut shells and plastic pellets, to glass beads and steel shot have been used, and as a result of these experiments, the following ideal characteristics of proppants have been developed:

  • Strong enough to withstand high shale closure pressures when the fracking fluid is removed from the well. If proppants are crushed, just a 5 percent increase in fines (tiny bits of fractured proppant) will clog the fractures and decrease the flow of oil or natural gas by 60 percent.
  • A uniform, spherical shape will increase the proppants’ ability to withstand the enormous pressures.
  • Low specific gravity will allow fracking fluids carrying the proppants to be lighter—and therefore less expensive. They will also flow more easily into the newly formed fractures.
  • Compatibility with fracking fluids and wellbore contents is essential to keep the process moving. Proppants must not be soluble in acid or they will break down before they reach the shale seam and cloud the fracking fluid, harming its flowing ability.
  • In composition, proppants must be chemically inert so that they do not bond with other materials, environmentally benign since they will remain within the shale, and thermally stable.

Today, two types of proppants have met these criteria and cornered over 99 percent of the market: round, hard grains of silica sand and manufactured ceramic beads, mostly made from bauxite and/or kaolin. Here are some of the differences between these types of proppants.

Specific Gravity of Water

When it comes to being light and buoyant, manufactured proppants have the edge. Because they are manufactured, they can be created in particular sizes and specific gravities that perfectly match the fracking fluids in which they will be immersed for their trip into the shale. In contrast, frac sand grains naturally vary in size and shape, even after being sorted through specific mesh screens. Frac sand grains are also higher in density than manufactured proppants, meaning that the fracking fluid will need to have more viscosity, and be pumped under higher flow rates and/or pressure, in order to transport the sand into the shale fractures.

The Strength of Iron

In terms of strength, manufactured proppants also have the edge. Manufacturing proppants takes place by calcining or sintering powdered minerals at high temperatures in a rotary kiln. This process creates uniform grains composed of very strong materials that are much less likely to fracture under stress and introduce fines into the shale fractures. In fact, manufactured proppants can increase the production of a well by as much as 30 percent.

Cheaper than Dirt

This is where frac sand clearly has the edge over manufactured proppants. Perhaps because they come naturally from that dirt, frac sand grains are much less expensive to prepare and transport. For example, literally tons of high quality quartz sand is available, near the earth’s surface, from the St. Peter Sandstone formation in Wisconsin and Minnesota. All that is needed is to break up the sandstone into its composite grains, wash it clean from fines, dry, sort, and size it, then ship it off to shale well locations by the train carload.

In contrast, proppant sintering involves a complex manufacturing process using raw minerals that can be more difficult, and expensive, to source. This means that ceramic proppants cost three to six times as much as frac sand. Some of this cost is also due to the fact that much of the manufactured proppants come from other countries, such as China.

Manufacturing ceramic proppants close to the oil and natural gas well sites would significantly decrease the cost of transportation—decreasing the overall cost differential—and thus states like North Dakota are analyzing local clay deposits for suitability in proppant manufacturing.

The Best of Both Worlds?

Today a middle ground of sorts is also in use, in which grains of sand are being coated with resins, some of which are pre-cured and others which cure once they are lodged in the shale. These resins bond individual grains of sand together, resisting flowback, and the resin coating captures any fines which might break off from the main sand grains under pressure.

Ultimately, the decision between frac sand and manufactured proppants is made based on the specific needs of each individual well, and whether the increased cost of manufactured proppants can be offset by increased production from the well over the course of its active lifetime.

Weekly News In Review

HUB-Weekly-News-in-ReviewThis week’s news in the world of frac sand places a heavy emphasis on rail traffic: the benefits, the shortcomings, and every stop in between. While frac sand has helped to pull some railroad companies back from the brink of extinction, communities are banning together to protest the burden of 21st Century demand on 19th Century infrastructures. Commercial rail traffic has even been immortalized in a DVD that gives viewers a glimpse into the interworking of frac sand production and shipping in hopes to spin some positive PR for this misunderstood and often maligned enterprise.

Increased Frac Sand Production Again Raises Ire of Lobby Group
The Price of Oil, a lobby group that has long questioned and criticized the oil and gas industry, has a new target: frac sand. Prompted by the recent explosion in frac sand production, Price of Oil has jumped on the reactionary bandwagon to reiterate (and fortify) the ongoing claims that dust from frac sand is a significant threat to human health and welfare. The group continued to cite allegations against the industry, despite recent EPA claims that more data is needed to confirm any health risks associated with silica sand dust.

Pelican Sandstone Given a Clean Bill of Health
What was formally just a theory has proven to be good news for DNI Metals of Alberta, Canada. It has been confirmed that much of the Pelican sandstone formation, in which DNI has staked a major claim, contains course, clean, spherical sandstone suitable for hydrofracing. Prior to the confirmation, test samples suggested that the formation was fit for frac sand mining, but full scale production could not begin without 100% certainty. With this week’s good news, DNI can begin rolling trucks, steam shovels, and all the other heavy equipment needed for large scale frac sand production.

New DVD shows Wisconsin’s Chippewa Valley Frac Sand Industry in Action
The flurry of activity surrounding the Chippewa Valley frac sand industry is now available for all to see. Frac Sand Mining & Trains in Wisconsin’s Chippewa Valley is a new DVD that showcases how the frac sand industry has affected truck and rail traffic, as well as the daily production schedules of five frac sand mines along the 37.5 mile stretch called the Mainline Track. Produced by Plets Express of Altoona, WI, this 1 hour and 42 minute video is an enlightening glimpse into a mysterious industry that has inspired so many questions in a very short period.

High Frac Sand Demand Sends Mining Companies Scrambling for Supplies
With demand for frac sand so intense, mining operations are scrambling to fill orders and often coming up short of the requested supplies. A Wall Street Journal report clarified that oil and gas drilling companies can increase natural gas production by 30 percent simply by pouring more silica sand into the fractures. Now, frac sand mining enterprises find themselves caught between an extremely lucrative proposition and angry protestors who question the wisdom and safety of such massive production.

Frac Sand Hauling Opens New Door for CDL Drivers Looking for Work
As is the case with every industry, there are only so many jobs to go around. CDL licensed truck drivers shut out of contention for lucrative employment in the mining and crude oil industries are beginning to see new opportunities as frac sand haulers. In this example of the trickle-down effect frac sand is having on certain regions, these opportunities represent hundreds of 60k to 80k jobs.

Frac Sand Lending New Identity to the Transportation Industry
Residual effects of the prosperous frac sand industry are beginning to ripple through other industries and in fact, may be saving some from extinction. The rail industry, once poised to sidle up to the barge industry in terms of obsolete commerce, has been reborn in frac sand and is now enjoying annual profits in the billions.

Victory Nickel One Step Closer to Becoming Top Frac Sand Producer
Canada’s Victory Nickel this week proved its intent to become a world leader in frac sand mining as it announced that it’s Seven Persons frac sand plant near Medicine Hat, Alberta is ready to begin full scale production. With the opening of Seven Persons, Victory Nickel secured business from 70 percent of Alberta’s oilfield service companies, making Victory Nickel by far the top Canadian provider of hydrofracing proppants.

Frac Sand Pushing Rail Freight Traffic past Commuter Traffic
Passenger train travel has been declining exponentially from one decade to the next for two generations. The fact that the rail industry showed a 63 percent increase in revenue between 2002 and 2012 might prompt a visit from the IRS, if not for the explosion of frac sand transport that has revitalized the rail industry. Amtrak, the nation’s premier passenger rail line, is even starting to place a greater importance on moving proppants than people.

Charting the Changes in Sand Pricing

Charting the Changes in Sand PricingOn February 1, 2012 there was a “first” on the New York Stock Exchange: US Silica became the first frac sand company to go public. This was an unusual move for a company that was more than a century old. The second-largest producer of frac sand at the time, US Silica also raised $42 million in the process of going public. Add to that the fact that they were selling sand at twice the cost of production, and it’s no surprise that some are calling frac sand “gold dust.”

US Silica has lived up to the hype in the months since. In October, 2013, it was #8 in Forbes’ list of America’s Best Small Companies. It has recently announced plans for major new investments in its work in both Texas and Illinois. At the end of March, 2014, it was trading at over $37.50 a share—a one-year growth rate of 58.6 percent. Since US Silica has a long history of providing sand to numerous industries, including glass making and building products, they would seem to have a natural cushion in place to absorb any bumps in the road which might be created by fluctuations in natural gas and oil demand or controversies related to mining this newly-precious commodity. They are also sitting on 283 million tons of sand reserves.

A Brief History of Sand

Those million tons of sand have been around for millions of years, and have been used for centuries in a wide variety of industries. Agriculture has relied on sand for growing certain varieties of plants and for livestock bedding. Sand is added to bricks, mortar, concrete, and paint. Sand is used to create molds for casting, as an abrasive for cleaning and polishing, and in sandboxes, aquariums, golf course sand traps, and sandbags. Sand is also the principle component in glass production.

For all of these applications, however, the particular characteristics of the individual sand grains are generally unimportant. Part of the reason for US Silica’s recent success is its ability to produce frac sand, the uniformly sized and shaped grains of strong quartz sand that are ideal for pumping under pressure into shale beds deep underground. Once lodged in the newly fractured shale, these sand grains allow previously trapped oil and natural gas to flow from the shale into the main wellbore for extraction. The need for frac sand has transformed a strong and steady sand industry with an atmosphere reminiscent of that gold rush boomtown mentality.

The Recent Expansion of Sand Mining in the US

With the boomtown mentality has come an explosion in the number of players, investors and landowners seeking to profit from sand. With a market of just over $1 billion annually and a growth rate of almost ten percent per year since 2005, sand is a profitable business—if you have the right kind under your feet.

The upper Midwestern states have been home to the largest percentage growth in frac sand mining, with Wisconsin leading the way. This is because of the St. Peter Sandstone formation, which naturally produces sand with ideal frac sand qualities. Six years ago, Wisconsin had only a handful of sand processing facilities; in 2013, the state had 131 mines and plants either permitted or proposed.

The Explosion of Sand Pricing in the US

The production rate for natural gas from shale exploded during the early years of the twenty-first century, climbing an astounding 2,400 percent between 2002 and 2012. Predictably, the price of sand rose along with it—especially as the use of hydraulic fracturing increased, and the supply of frac sand could not meet the demand.

In 2008, most types of industrial silica sand could be purchased for an average of $30.82 per ton. By 2012, that price had risen to an average of $44.78 per ton, with the high-quality frac sand bringing as much as $55 per ton. In 2013 that frac sand price hit an average of $75 per metric ton. The amount of sand being mined, processed and transported also increased exponentially during that time, from 30.4 to 49.5 million tons. In 2011 alone, the fracking industry purchased $3.7 billion worth of frac sand.

All this activity has brought a number of other companies into frac sand. Hi-Crush Partners joined US Silica on the NYSE in August, 2012 and its shares had jumped 59 percent by December, 2013. Railroads are teaming up with sand suppliers to haul the sand to drilling sites, and drilling companies like EOG Resources are purchasing sand mines in order to keep their own frac sand costs in check.

The Future of Sand Pricing in the US

It appears that the price of frac sand may have peaked, at least for the moment, as supply is catching up with demand. The U.S. Geological Survey Mineral Commodity Summaries states that, for the first time in years, the average value per ton of all types of sand dropped, from $52.80 to $49.60, in 2013. Industry experts do not expect the demand for frac sand to disappear, however, given the proven effectiveness of fracking. The boomtown mentality may pass, but established sand producers will continue to find a ready market for their products.