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.

Weekly News In Review

HUB-Weekly-News-in-ReviewNovember is approaching, and in an election year, that means the campaign ad season is almost upon us. In states where hydrofracing or frac sand mining is a relevant issue, expect plenty of rhetoric surrounding regulation, public health and safety, the job market, and corporate responsibility as it pertains to the issue of frac sand and how it is excavated, stored, and transported.

In Manitowoc County, WI, the Town of Cleveland is one of the first to bring frac sand to the political stage as a recall election for the Town Board Supervisor seat is scheduled for August. In Winona County, MN, a three-way race is heating up as candidates present starkly different views on how the state’s booming frac sand industry should be managed and regulated. The frac sand issue even reached the Federal level this week as a House panel released findings on the economic stability of frac sand mining and hydrofracing states.

So this week, the news surrounding the frac sand industry began to take on a decisively civic tone as incumbents and challengers debated over an industry that, directly or indirectly, affects so many American lives.

Tiny Wisconsin Community Raises a Loud Voice over Proposed Frac Sand Mine
The Town of Currant, WI held a public forum this week to address concerns over a newly proposed frac sand processing plant. Officials from Manitowoc County, the Town of Cleveland (which has jurisdiction over Currant), and Wisconsin Proppants, LLC, attempted to offer answers on how the new facility will affect county well water sources and the overall risk of flooding. With a recall election for the Town Board Supervisor seat in Cleveland scheduled for August, the forum held great political significance for incumbent Town Supervisor, Joe Egloff.

Frac Sand Widens the Fissures between Candidates
The debate over frac sand mining regulation is the key issue in a recall election for the seat of Cleveland Town Board Supervisor. Cleveland, WI resident, Gerald Jenkins, is challenging incumbent Board Supervisor, Joe Egloff, in a referendum scheduled for Aug. 14 to coincide with the state-wide primary. Egloff, who supports a strict regulatory stance on frac sand mining, believes that a vote for Jenkins is a vote against public health and safety. Jenkins believes that frac sand mining should be largely deregulated, allowing land owners to do as they please with their properties should they possess a cache of valuable silica sand.

Houston County’s Moratorium on Frac Sand Mining Judicious, Cautious, and in Everyone’s Best Interest
Houston County (WI) Board Chair, Teresa Walter, made it a point this week to remind industrial leaders and constituents why the county has placed a moratorium on frac sand mining until March, 2015. The current frac sand mining ban is intended to allow a county-wide study on the effects mining would have on public health, soil and water, zoning ordinances, and other matters that could affect the quality of life in Houston County. Once completed, the compiled data will be used to safely commence frac sand mining operations, thereby minimizing the risks to the county’s residents.

Winona County Candidates Offer Starkly Different Views on Frac Sand Mining
It’s officially a three-way race for Winona County (MN) Commissioner as incumbent Wayne Valentine and challengers Marie Kovecsi and Jerry Moen faced off in a one-hour public debate over the current state and future of the county’s frac sand mining industry. Both challengers respectively criticized Valentine for creating division with the county board and ignoring public health concerns. Valentine defended his record in proclaiming that he has consistently voted in ways that “[reflect] the views of the majority of Winona County residents.”

County Officials Slow Traffic to Get a Better Look at Frac Sand Impact
Coinciding with election-year polls and the on-going debate over a proposed frac sand loading station in the North Branch’s (MN) ESSBY Business Park, county officials have announced the launch of a traffic study to determine alternate truck routes that would minimize negative impact on the surrounding communities. The proposed study is a response to on-going public concerns of traffic tie-ups, road degradation, and tax payer-funded construction projects.

Department of Natural Resources Launches New Online Tool for Those Curious about Frac Sand Mining
The Wisconsin Department of Natural Resources launched a new online tool to provide answers to ongoing questions about the state’s frac sand mining industry. The DNR’s new web page includes a breakdown of sand mines, processing centers and rail loading facilities in the state, along with an interactive map with information about the companies doing the mining. A real-time database provides residents with up-to-date information about frac sand activity in the state and its affect on the economy and quality of life. The site can be found at http://dnr.wi.gov/topic/Mines/ISMMap.html

House Panel Cites Fracing States in Better Economic Shape
From atop Capitol Hill, encouraging news came down this week on the economic health of states that sponsor emerging hydrofracing and frac sand mining industry. An economist confirmed to a House Energy and Commerce subcommittee that states engaged in hydrofracing and the companion industry of frac sand mining have exhibited faster job growth than in other states still struggling under a national recession that began in 2008. Bernard L. Weinstein of the Southern University’s Cox School of Business reported, “States that have chosen to pursue energy development [are experiencing] unemployment rates well below the 6.1 percent average.”

Canada: The Next Hotspot for Frac Sand

Canada - The Next Hot Spot for Frac SandWhat happens when an industry is growing so fast that the infrastructure intended to support it is almost instantly obsolete? This seems to be the case for the Canadian frac sand industry as the discovery of new, rich, and untapped sources of silica sand has rendered the nation’s rail, storage, and transloading infrastructure inadequate and in desperate need of upgrading. This dilemma was brought to light earlier this year in Calgary when the entire Canadian frac sand supply chain came together at the Canadian Frac Sand Logistics and Market Forecast Summit 2014. The objective of the summit was to evaluate solutions for overcoming logistical challenges for transporting and storing frac sand at Canadian well sites and exporting frac sand for eager buyers in the United States and abroad.

This problem is more a cause for celebration than for panic for Canadian frac sand producers. What it all means is that Canada is uncovering some of the richest deposits of silica sand in the world, a pleasant surprise for a nation that assumed it was destined to languish well behind the United States in terms of usable frac sand deposits. So, where are these new deposits? Here’s a look at three of Canada’s hottest prospects for frac sand production, each promising to generate billions in revenue over the next decade.

Firebag River

About 500 miles north of Calgary, close to the Saskatchewan border, sits Ft. McMurray, Alberta, a mining community with a population of about 61,000. Athabasca Minerals, the largest aggregate supplier in Canada, does the majority of its work at the Susan Lake Gravel Pit, where it averages 6 to 8 million tons of excavated material per year.

Athabasca Minerals has also staked a claim to a frac sand deposit North of the Susan Lake site. Named the Firebag River project, deposits of silica have been extensively tested by Stimlab of Oklahoma. Stimlab’s findings confirm that the deposits at Firebag River are keenly suited for hydrofracing. With an estimated life-of-mine set at 25 years, the projected yearly revenue of $50 million will set this silica mine’s worth at well over $1 billion. If all expectations are met over the next half century, Firebag River will indeed go down as not only the most productive frac sand mine in Canada, but one of the most successful silica sites in the world.

Preferred Sands of Canada

Forward-thinking American mining companies have recognized the potential for high-quality silica sand coming out of Canada, and a few of them have had a stake in Canadian production for quite some time now. One of those companies, Preferred Sands of Randor, PA, has supported frac sand mining north of the border for decades, and its subsidiary – Preferred Sands of Canada – is the oldest and longest operating plant in a frac sand empire that spans the traditional silica hot spots of Minnesota, Arizona, Wisconsin, and Nebraska.

Preferred Sands of Canada operates in the Hanson Lake region of Manitoba, approximately 60 miles west of Flin Flon. The mine’s current capacity is over 850,000 tons with over 44 million tons of silica sand in reserve. Yet, despite this astounding production capacity, Preferred Sands of Canada is committed to ecological responsibility and striking a balance between industry and the environment. The unspoiled wilderness surrounding the Hanson Lake facility supports wildlife and pristine fresh water lakes. Preferred Sands of Canada not only strives to protect the environment in which it operates, but also monitors caribou populations for the Canadian Ministry of Environment, setting a refreshing new standard for eco-friendly frac sand operations worldwide.

Canadian Silica Industries

LaPrairie is one of the more diversified mining operations in Canada, conducting business throughout Western Canada as LaPrairie Crane, LaPrairie Works, LaPrairie Haul, LaPrairie Oilfield, and Canadian Silica Industries. Tapping into the vast silica reserves near the Horn River Basin region of British Columbia, Canadian Silica Industries produces at an annual capacity of 500,000 tons of silica sand products. The majority of Northern White is distributed to consumers in the oil and gas hydrofracing industry, but a small percentage of the product is reserved for water filtration, golf courses, and equine arena construction.

Operating near the town of Peace River, Alberta – a farming hamlet of around 7,000 – Canadian Silica Industries is keenly situated a mere 10 hours by truck from British Columbia’s Horn River Shale Formation, Canada’s largest natural gas shale field. The significance of the mine’s proximity to Horn River is that it eliminates rehandling stops in Fort Nelson, making LaPrairie’s silica product the most cost-effective alternative for domestic hydrofracing in Canada.

Currently, the Canadian frac sand market demand is around 2.5 million tons per year, and up until now, only about 30 percent of that demand was supplied by domestic silica mines. With just these three operations – Firebag River, Preferred Sands, and Canadian Silica – emerging as bonafide global hot spots for frac sand production, Canadian demand could be easily satisfied and leave enough surplus frac sand to position Canada as a formidable competitor in the global silica sand market. But first, the nation is in need of a makeover – its transportation and storage infrastructure – to accommodate its newly found and brimming silica supply. In light of what newly found silica sand deposits could bring to the nation’s economy and industrial stability, needing a few infrastructure upgrades can hardly be called a problem. Many in the Canadian frac sand community would rather call it an opportunity.

Weekly News In Review

HUB-Weekly-News-in-ReviewThe frac sand mining industry is, without a doubt, exciting, progressive, and charged with human emotion. This week’s activities in the industry supported these characteristics as established companies expanded their production reach, newcomers were welcomed into the marketplace, and communities found common ground with frac sand companies and local governments after months of charged debate.

Canadian Company Extends Its Reach in Frac Sand Production  
As the Canadian frac sand market heats up, one company is poised to become the nation’s premier provider of silica. Rainmaker Resources Limited announced this week that it has agreed in principle to acquire three additional quarry permits that cover roughly 1,280 additional acres, adjacent to the company’s Jayjay Lake site in North-Central Saskatchewan.

Previous excavation of the new sites confirmed that the sand consists of well-formed, spherical grains, ideal for hydrofracing. The acquisition could very well position Rainmaker Resources as the preeminent provider of frac sand to much of Canada and parts of the Northwestern United States. Final approval of the deal is in the hands of the Toronto Stock Exchange.

Traditional Mining Operations Turning to Frac Sand for Solvency
The market for precious metals may be slow, but the frac sand market seems to be taking up the slack. Many mining operations suffering through the doldrums of a sluggish quarter are looking at the prospect of venturing into the “white gold” market.

Companies that are known for traditional mining operations are looking to get in on the brisk frac sand market to help shore up a weak demand and lost revenue while waiting for the ore and precious metals markets to rebound.

Winona Citizen’s Group is set to Present Frac Sand Recommendations
After month of debate over a hotly contested set of frac sand regulations, a third party has stepped in to insist that the city council put the measures to a vote. This week, Citizens Against Silica Mining requested a list of recommended regulations bypass lower level legislative bodies and go directly before the city council.

The recommendations include the continuous monitoring of frac sand dust in ambient air, no fewer than two air quality studies from the Minnesota Pollution Control Agency, and the city of Winona to adopt a best practices list drawn up by the Minnesota Environmental Quality Board.

Thumbs Up for Mondovi, WI Frac Sand Washing Plant
This week saw yet another manifestation of the growing frac sand industry come to fruition in Western Wisconsin. In a 2-1 vote, the Buffalo County Board of Adjustment approved a proposal from Buffalo White Sands to modify a site for use as a frac sand washing plant. The approval was based on certain conditions, namely a specific amount of transported frac sand per day and restrictions on operational hours.

Texas Frac Sand Company Agrees to Sell its Outstanding Shares to U.S. Silica
Cadre Services of Voca, TX, operator of an 800,000 ton-per-year frac sand mining operation, has agreed to sell its outstanding shares to U.S. Silica, expanding the fastest growing oil and gas basin in the country. U.S. Silica will acquire a fully operational frac sand mining facility with an estimated 65-year life span. Purchase price for the facility, less $1.4 million in deferred tax assets, was approximately $84 million.

Preferred Sands Expands its Silica Empire with a New Plant Opening
With a footprint that already encompasses Arizona, Nebraska, Minnesota, Wisconsin, and Manitoba, Preferred Sands has announced the opening of yet another Northern White frac sand plant at an undisclosed location. The new plant, slated for a 2015 launch, is expected to increase Preferred Sands’ annual production capacity by 4 billion pounds.

Stalled Minnesota Truck Route Gets a Jump Start, Again
The lights are back on at the frac sand transloading station in North Branch, Minn. Superior Silica Sand is depending on the station for loading and shipping its cache of frac sand, but the project has encountered public opposition over the effects it would have on the communities of St. Croix Falls and Taylors Falls.

It was the city of North Branch, not Superior Silica Sand that revived talks of the proposed dispatch, as the city council announced that it plans to draft a developer’s agreement and conduct several public hearings to gage and address public concerns.

How Frac Sand Is Transforming The Transportation Industry

How Frac Sand is Transforming the Transportation IndustryFracking has become a well-known concept in the US. The ability to increase production levels from oil and natural gas wells through hydraulic fracturing has literally transformed the energy picture in America. US crude oil production in 2013 hit a 25-year high, reducing the need for oil imports and leading forecasters to state that the US will be the world’s largest producer in 2015.

The good news for the US economy is much broader. The old adage that rising water floats all boats is certainly true with the ripple effects being created by the fracking industry. In addition to pushing the US toward energy independence and lowering the cost of heating with oil and natural gas, there are a number of ancillary industries which are benefiting from the fracking revolution. One of these industries is transportation.

The Geography of Frac Sand

Not just any sand can be used for fracking. Frac sand grains must be of high purity, extremely strong, uniformly shaped and sized, and able to withstand the stresses of being pumped into shale fissures at high pressure, then the weight of gravity once the pressure is removed. The best frac sand in the US is mined from the St. Peter Sandstone formation in the upper Midwestern states of Wisconsin and Minnesota. This formation is far from the shale being fracked, which is located in areas such as Texas, Oklahoma, North Dakota, and the Appalachian Basin.

The Logistics of Frac Sand

Transporting frac sand to the wellhead is a major logistical challenge. Unlike oil and natural gas, frac sand is not transported by pipeline. It is also heavy, which limits both the types and volume of transportation options. While frac sand is often hauled short distances by truck, there has been significant concern expressed in local communities about the impact on roadways and bridges, and the safety of other vehicles. There are also not enough trucks and drivers available to haul the average of 1 million pounds of sand needed for fracking each well—as well as the volumes of water, cement and pipes needed at each wellhead. This means that there are plenty of opportunities for enterprising individuals and companies to grab a piece of the transport action.

When it comes to hauling frac sand longer distances, from sand processing plants to wellheads, the best choice is to use the railroad. The advantages of rail transport have to do with scale. A “unit train” of 100 cars or more, usually similar to cement cars, can be filled entirely with frac sand, improving efficiency as it also bypasses crowded rail yards designed to switch various cargoes from one train to another.

The Impact of Frac Sand

The financial impact on railroads of shipping frac sand has been significant. Frac sand itself costs around $50 per ton, but the cost of transport on these unit trains is now around $80 a ton—in part because the transport time has been cut from weeks to days. Frac sand shipments rose from 4.9 to 20.9 million tons in just five years (2007-2012), and railroads hauled 25 percent of the frac sand shipped in 2013. That percentage could double in the coming years.

And it’s not just the volume of frac sand that is rising. Net income for the Burlington Northern Santa Fe railroad (BNSF) rose 12 percent to $3.79 billion in 2013, on a 5.7 percent gain in revenue. Union Pacific saw its 2013 net income rise 11 percent to $4.39 billion, on a 5 percent gain in revenue.

Reinvesting in Frac Sand

Railroads have recognized the long-term value of this frac sand boom, and of collaboration with frac sand companies. Railroads are repairing disused rail lines and building transloading and storage facilities in strategic locations near both sand mines and shale wells. For example, Union Pacific has teamed up with US Silica to construct a $12 million frac sand storage facility in Odessa, Texas. BNSF constructed a collaborative offloading facility in San Antonio, Texas, that has already reached capacity and will soon be expanded.

The logistical issues can be significant, as each driller can request frac sand with different mesh sizes and other characteristics to meet their particular needs. In fact, fracking companies are increasingly asking the frac sand processing and transport companies to take care of the logistics involved with storage and transfer. The result is that US Silica is now selling 70 percent of its frac sand from the silo, rather than the mine.

And while the storage silos being constructed may appear similar to those which hold grain, the contents are by no means identical, and the tanks, as well as transloading mechanisms, also must be specially constructed in order to handle the heavy and abrasive sand.

It is clear that the hydraulic fracturing of oil and natural gas wells is transforming both local and national economies on a massive scale. From trucking to silo tank construction, there are numerous opportunities for the transportation industry to benefit from the boom in fracking.

Weekly News In Review

HUB-Weekly-News-in-ReviewIf there is a theme running through this week’s activity in the frac sand industry, it would be growth, growth, and more growth. While The Wall Street Journal is expecting aggressive growth in frac sand and other proppant stocks over the next decade, Germany is growing at its own pace through new legislation to help its burgeoning hydrofracing industry. Canada’s list of frac sand producers grew by one as Claim Post Resources applied for a permit to conduct frac sand exploration in Manitoba. As Winona CD Corp of Wisconsin seeks to grow its fleet of frac sand barges by 60, US Silica, the nation’s largest frac sand supplier, announced that it is boosting production to meet an ever-growing demand.

But with growth usually comes challenge. Wisconsin, the epicenter of frac sand production, faces some such challenges as the industry grows at an unprecedented pace. The Wisconsin rail industry chimed in about the frac sand industry with a candid report on the effects this new demand is having on the transportation infrastructure. But despite a few bumps in the road, this week in the frac sand industry was marked by a trend that many have come to accept as the fundamental nature of the frac sand industry…growth.

Aggressive Growth Rate for Proppants Expected Over the Next Decade
There’s rarely a sure thing in the stock market, but the Wall Street Journal’s MarketWatch is calling frac sand and proppants in the 2014-2015 trading cycle the next best thing to a slam dunk. MarketWatch points to vast, untapped natural gas reserves in North America, Argentina, and China as the driving force behind ever-increasing proppant sales throughout this year, and into the next decade.

Political Forces in Germany Struggle over the Nation’s Use of Hydrofracing
New guidelines set forth by Germany’s Social Democratic Party are designed to loosen the nation’s hydrofracing moratorium and test the waters of public opinion. With domestic gas production down by 10 percent in both 2012 and 2013, a German public that was once nearly unified against hydrofracing may be more amenable to utilizing the country’s 2.3 trillion cubic meters of shale gas reserves, and these new guidelines are designed to test that theory.

Another Player Enters the Canadian Frac Sand Arena
As Canada begins to emerge as an up-and-comer in the frac sand mining business, more and more Canadian enterprises with a background in mining are turning their attention to silica sand and the potential it offers. The latest is Claim Post Resources, Inc., which recently applied for a Mineral Exploration Work Permit to conduct mining operations in Manitoba. The permit is good for one year, but based on recent discoveries of Northern White in the Great White North, it should be a very profitable and productive year indeed.

American Petroleum Institute Responds to Public Concern with New Guidelines
Concerned citizens in close proximity to frac sand mining operations can start to breathe a little easier in the wake of new standards drafted by the American Petroleum Institute. These new standards specifically address the risks associated with frac sand mining and the impact that the exploration and development of unconventional oil and gas resources has on surrounding communities. Three years in the making, these standards are designed to build a lasting, successful relationship between the hydrofracing industry and the communities in which it operates.

Winona CD Corp Hopes to Add 60 New Frac Sand Barges
To keep up with increased demand during peak shipping months, Winona CD Corp. is seeking permission from the Winona, WI city council to add 60 more frac sand barges to its fleet. The additions are intended to give Winona CD a better response time, should inclement weather disrupt its shipping schedule, as it tends to do in the months of March and April.

US Silica Boosts Production to Meet Growing Demand
US Silica increased its frac sand production capacity by a whopping 50 percent between 2012 and 2013, and it looks as though this pattern of growth will continue through the remainder of 2014 and into next year. This year, the company expects to launch production at its new Utica, Ill plant and Fairchild, WI plants. Together, these new operations are expected to yield 4.5 million tons of Northern White per year.

Largest US Frac Sand Supplier is Still Growing
The rich get richer. Preferred Sands of Randor, PA, the nation’s largest producer of frac sand, announced plans to increase its presence in the market by opening yet another Northern White processing plant. The new venture will increase the company’s production capacity by more than four billion pounds of frac sand annually.

Effects of Frac Sand on Wisconsin Rail Being Evaluated
While the recent frac sand boom has been a financial windfall for mining operations invested in the highly touted commodity, another industry may be struggling under the weight of ever-increasing demand. The Wisconsin rail industry has noted that transporting heavy volumes of frac sand will inevitably clog and foul machinery, adding substantial maintenance cost to its already sizable operating expense. The Wisconsin rail industry has launched new study to determine the effect of frac sand as a fouling agent.

Superior Silica Hopes to Set Up Shop in North Branch

Amid questions and concerns surrounding Superior Silica’s proposed North Branch frac sand facility, the company announced this week that it intends to move forward with the project. Public opposition earlier this year persuaded Superior Silica to shelf the project, but recent talks between the company and city officials have restarted the project. Talks will continue as production is slated to begin later this year.

The Best Locations in the US for Finding Frac Sand

The Best Locations in the US for Finding Frac SandThere is no question that fracking has become the new standard for getting the most out of an oil or natural gas well. Two and a half years ago, 95 percent of wells were being fracked, and a total of about 82,000 such wells were operational in September 2013. With fracking occurring in 17 different states, the need has also multiplied for appropriate proppants, such as frac sand, to prop open those shale fractures deep underground. Fortunately, there are a number of locations around the US where frac sand is being mined and processed for use in the hydraulic fracturing of fossil fuel wells.

The Characteristics of the Best Frac Sand

The best frac sand has a number of very specific properties which make it more difficult to obtain than just taking a front loader and dump truck to the nearest beach. Frac sand must be very strong in order to withstand the pressure of gravity when the pressure of the fracking liquid is removed from the well. The sand grains must be of uniform size and round shape in order to flow easily into the shale seams when they are cracked open, without linking together and preventing the oil and natural gas from escaping into the main wellbore for extraction. The frac sand grains must also be light enough to be transported within the fracking liquid, and impervious enough not to disintegrate when immersed in that fluid.

The Locations of the Best Frac Sand

Fortunately for US fracking interests, there are a number of states with high quality frac sand in the US.

Wisconsin and Minnesota

Arguably the best frac sand in the US is found within bluffs of silica sandstone in the Upper Midwest that were once the sandy floor of an ancient ocean bed. 500 million years ago, the tidal flows slowly wore down these grains of silica, shaping them into uniform, strong, round, nearly perfect frac sand. That sea bed is now known as the St. Peter Sandstone, and, in Wisconsin alone, there were 115 frac sand mines and plants spread along the western and southern portions of the state in October 2013. In the southeastern portion of neighboring Minnesota, frac sand from the St. Peter and similar formations is being mined in nine different locations.

The frac sand mine owners in these states are quite different, however, perhaps because of the number of mines involved. In Minnesota, the mine owners are local companies, while in Wisconsin, major players from out of state have purchased multiple mines and processing sites. Superior Silica Sands, for example, is headquartered in Fort Worth, Texas, but owns plants in Clinton and New Auburn. Hi-Crush Partners of Houston, Texas, operates mines in Wyeville and Augusta, and is proceeding with plans to open a third mine location along the border between the towns of Whitehall and Independence. Houston’s EOG, which is primarily a drilling company, works a number of frac sand mining locations in Wisconsin, as well as a central processing plant. Wisconsin Industrial Sand, a subsidiary of Fairmount Minerals, owns three frac sand mining sites in the state.

Illinois

The St. Peter sandstone belt extends into Illinois where, at the LaSalle anticline, the stone has been uplifted by geological forces, making it accessible to open pit mining. Sand has been mined in this area for 150 years for a variety of industrial uses. US Silica is active in this area—and in fact owns one of those historic sand mines—as is Missouri-based Mississippi Sand. Unimin, which is the largest quartz proppant producer in the world, has 44 mining and processing facilities in North America, including Illinois. With five mines in operation and three more proposed in 2013, frac sand mining is on the move in Illinois.

Michigan

While Michigan ranks third in the US for industrial sand production, the frac sand boom has not been as prevalent in this area. Along the Great Lakes there are a large number of sand dunes, but these do not always contain frac sand quality granules. None of the major frac sand producers are listed amongst the eleven active sand dune mining sites, although a subsidiary of Fairmount Minerals, Technisand, owns three active sites.

Texas

Good quality frac sand is not limited to the Midwestern US. Another major source of sand is found in Texas, where the Hickory Sandstone Formation has been mined for decades by Texas Silica. Two types of sand are mined by this company. The first type, Fredonia, is comparable to much of the Midwestern frac sand. The sand grains of the second, Brady, are not as strong as the Midwestern quartz, but they are suitable for fracking situations which require slate closure pressures of less than 4500 pounds per square inch.

Both types of sand are also naturally much less expensive to transport to nearby drilling sites in the south and western US. Another major player in Texas is Fairmount Minerals, although their main presence in Texas is in the transportation business, with over a dozen terminals scattered across the state.

Activity in Other States

The hunger for frac sand has led most states to take a good look at their geological formations to ascertain whether they can join the fracking boom. Frac sand is being mined from Virginia to California, North Dakota to Florida. In fact, only 15 of the lower 48 US states have no frac sand activity. However, whenever possible, thoughtful mining companies are likely to choose established and proven frac sand grains for their fracking operations.