Texas Frac Sand Boom May Hurt Wisconsin Mines

A frac sand boom in west Texas could cause pain for Wisconsin mines, especially when demand is low.

Eleven new sand mining operations are being developed in the Lone Star State just down the road from some of the nations busiest oil fields. Companies with plants in Wisconsin, including Hi-Crush Proppants, U.S. Silica, Unimin and Fairmount Santrol are spending hundreds of millions of dollars to buy sand reserves and build processing facilities in Texas.

According to some estimates, the new Texas mines could produce 45 million tons of sand each year with much lower transportation costs than sand coming from western Wisconsin.

“The bad news is that the supply closer to Texas obviously takes away market share from the guys who have to rail it and then transload it, etc.,” said Samir Nangia, a Houston-based oil field services analyst, “It’s very hard for a Wisconsin mine to compete with a mine here.”

While not all Texas mines may materialize within the next couple of years, Nangia said, the surge of southern sand will impact Wisconsin.

Currently, Wisconsin mines are busy because national demand for frac sand is outstripping supply, said Nangia. Also, Wisconsin frac sand has an advantage over sand from Texas and other states because it is exceptionally round and hard, which makes it better at unlocking oil from deeper deposits of rock. But Nangia said some energy companies have been getting increased production using larger volumes of the cheaper Texas sand.

“Some of the people will be willing to accept some of this lower-quality sand. So, it’s definitely going to displace the Wisconsin sand but the impacts of that will not be felt until 2018, 2019,” Nangia said.

Kent Syverson chairs University of Wisconsin-Eau Claire’s geology department and also works as a consultant for the frac sand industry. He called the investments in Texas a seismic shift in infrastructure development but said there will likely be challenges on the ground with that much growth.

“Probably the greatest challenge would be the trucking logistics because many of these mines are highly clustered and they would be feeding the same or similar roads to kind of get the sand out to the mines and then when they go to these fracking sites, they will be kind of funneled into similar roadways as well,” Syverson said.

Only a handful of new mines in Wisconsin are currently under development. Wisconsin’s frac sand boom reached its peak just before oil prices crashed in late 2014. Over the following two years, demand for Wisconsin sand for oil production plummeted causing plant closings and layoffs at mines around the state.

The Wisconsin Department of Natural Resources estimates there are 92 active facilities related to the frac sand mining industry.