Wisconsin Frac Sand Producers Bullish About Market Rebound

Wisconsin frac sand producers say they are poised for another sand boom after an agonizing two-year lull.

It’s been a tough couple of years for frac sand miners. Oil prices crashed in early 2015 and sand producers were forced to mothball facilities and lay off workers. But Superior Silica Sands CEO Rick Shearer said oil prices are recovering and drillers are using up to 30 percent more sand per well in order to extract more oil and natural gas.

Also, the Organization of Petroleum Exporting Countries (OPEC) agreed this week to cut oil production by 1 million barrels per day, which caused oil prices to surge Thursday, though some analysts are skeptical the countries will abide by the agreement. Still, Shearer said the announcement has already had a psychological impact on energy producers in the United States that will lead to more drilling.

He said with more drilling comes more demand for Wisconsin frac sand.

“We’re thinking that the market will probably be about 33 (million) to 35 million tons of frac sand in 2016, and we think there’s a very good likelihood that the frac sand demand in 2017 will be at least 50 (million) to 55 million. So, that would take us back to 2014 levels,” Shearer said.

During the two-year lull in oil prices the remaining drillers started turning to less costly alternatives to Wisconsin’s prized “northern white” sand. While its quality is among the best in the nation in terms of roundness and hardness, shipping Wisconsin frac sand across the U.S. was cost prohibitive.

Many companies found they could use cheaper “brown sand” from places like Texas. But Shearer said with oil company profit margins growing he’s getting more calls from drillers wanting to come back to Wisconsin for proppant. Because of this, Superior Silica Sands has put more resources into its New Auburn facility.

“We brought on 12 more employees and we’ve opened up, full time, one of our plants that had been operated on a block basis.”

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