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Region's frac sand mines struggle amid industry changes

A relatively new industry to west-central Wisconsin continues to give area residents a modern-day lesson in old-fashioned economics.

The regional frac sand industry, which burst onto the scene about a decade ago, already has gone through at least two boom-and-bust cycles and is in the midst of a bust that has idled several mines.

The source of the strife comes down to the basic economic principle of supply and demand.

While demand for frac sand remains strong, the supply has expanded dramatically in the last two years as energy companies have built a number of mines closer to oilfields in Texas and Oklahoma, said UW-Eau Claire geology professor Kent Syverson, who also serves as a consultant for the frac sand industry. The production expansion has pushed down prices and enabled oil drillers to get local sand for less than the cost of shipping it from Wisconsin.

“I think the boom years are over,” Syverson said, referring to the period from 2011 to 2014 when sand mines, processing plants and rail loading facilities were popping up like dandelions across west-central Wisconsin to take advantage of the region’s silica sand reserves.

“The capital has already been invested in Wisconsin,” he said, “so the real questions are how much of this sand will still be needed and how many of these higher-cost operations that are taken off line will never come back.”

Ryan Carbrey, senior vice president of shale research for Rystad Energy in Houston, said Upper Midwest mines with annual capacity of 18 million tons of frac sand already have been idled this year, and his company projects that total will rise to 30 million tons by the end of 2019.

The vast majority of the mines producing what is known in the industry as northern white sand are in Wisconsin, with the bulk of them located within 80 miles of Eau Claire.

The sand is used in hydraulic fracturing — the drilling technique commonly known as fracking that involves injecting a mixture of sand, water and chemicals deep into underground wells to force oil and natural gas to the surface. The sand is used to hold open fissures in the rock.

Northern white sand, prized by fracking companies for its coarseness, durability and the spherical shape of its grains, is still considered to be of higher quality than the sand produced in Texas, but producers have developed methods to make the lower-quality sand work well enough to satisfy their needs, Carbrey said.

Most importantly to producers, the Texas sand is cheaper because it doesn’t have to be shipped more than 1,000 miles by rail from Wisconsin to the oil and gas deposits in the Permian Basin in west Texas and southeast New Mexico.

“Wisconsin sand is still the Cadillac of all sands, but these companies in the Permian Basin are saying they can make more money driving a Chevy than a Cadillac,” Syverson said. “It’s all a cost-benefit analysis.”

As a result, demand has dramatically increased for the finer grain sand, which is much more plentiful than northern white sand, he said.

“The demand structure has flipped, and it appears right now that the industry has moved toward the finer sand and it’s hard to imagine that going back,” Syverson said. “It was just kind of mind-blowing to have this seismic shift from coarser to finer grain sand in just a couple years.”

All of this is important, Carbrey said, because the Permian Basin accounts for about half of the nation’s shale energy production. He added that the relatively new west Texas mines already have the capacity to produce more than 70 million tons of frac sand per year.

Region hit hard

The impact of the demand shift is evident across west-central Wisconsin, with once-booming sand mining and processing facilities sitting dormant.

• Superior Silica Sands has idled three of its five frac sand mines in Chippewa and Barron counties, said Sharon Macek, the company’s manager of mine planning and industrial relations in Wisconsin. Superior Silica is still producing sand at a mine near Chetek and one in the Barron County town of Arland, and its dry plant near Barron is fully operational.

Emerge Energy Services, which owns Superior Silica, entered into a debt restructuring deal with its lenders in April, so company officials can’t comment further on operations at this time, Macek said.

• Covia, created by a merger of Fairmount Santrol and Unimin, announced in a filing with the Securities and Exchange Commission that it was idling operations in Maiden Rock as well as several mines across the country.

A company spokesman also confirmed Covia has reduced production at its mine in Menomonie.

• Hi-Crush idled its Whitehall frac sand production facility in September but then announced early this year it was resuming operations at the Whitehall mine and halting production at its facility in Augusta. The Houston-based company said its Augusta workforce would be moving to the Whitehall plant, which is about 30 miles away.

The decisions were based on increased demand from oil and gas industry customers, predominantly in the Northeast, that are more efficiently served by Hi-Crush’s Blair and Whitehall facilities located on the Canadian National Railway, CEO Robert Rasmus said in a news release. Hi-Crush was the first sand company to establish a mine in the Permian Basin.

A company spokesman said Hi-Crush mines in Blair, Whitehall and Wyeville are fully operational and that the firm’s Wisconsin employment is down about 9 percent this year, with about about half of the decline resulting from attrition.

The Augusta facility remains dormant, Mayor Delton Thorson said Thursday.

“They’ve got a lot of investment here, so it’s hard to imagine this shutdown will be permanent, but if they have sand sources closer to the oil fields, you can understand why they would go there to get it,” Thorson said. “My guess is that sooner or later the wheel will spin back to here.”

Outlook unclear

Samir Nangia, director of energy consulting at analytics firm IHS Markit, told Wisconsin Public Radio last month that as much as 75 percent of Wisconsin sand mines might need to be closed temporarily or even permanently. Nangia couldn’t be reached last week for further comment.

Carbrey offered a glimmer of hope for Wisconsin frac sand producers by pointing out that other major shale energy deposits in North Dakota and Pennsylvania continue to rely on northern white sand.

“In those regions, there’s not really much good local sand,” he said.

Despite the major shift to using sand found closer to oil fields, the long-term outlook is unclear because the finer sand leads to wells in which production declines faster than those using northern white sand.

“It is cheaper, but it doesn’t produce as high quality of a well,” Carbrey said. “No one really know yet if in-basin sands provide positive economic value. We really don’t know how it will all shake out.”

Trump postpones nationwide immigration enforcement sweep

WASHINGTON — President Donald Trump on Saturday delayed a nationwide immigration sweep to deport people living the United States illegally, including families, saying he would give lawmakers two weeks to work out solutions for the southern border.

The move came after House Speaker Nancy Pelosi called Trump on Friday asking him to call off the raids. But three administration officials said scrapping the operation was not just about politics. They said Immigration and Customs Enforcement leaders had expressed serious concerns that officers’ safety would be in jeopardy because too many details about the raids had been made public.

The officials spoke on condition of anonymity to speak about private discussions.

“At the request of Democrats, I have delayed the Illegal Immigration Removal Process (Deportation) for two weeks to see if the Democrats and Republicans can get together and work out a solution to the Asylum and Loophole problems at the Southern Border,” Trump wrote on Twitter. “If not, Deportations start!”

The operation, which sparked outrage and concern among immigrant advocates, had been expected to begin Sunday and would target people with final orders of removal, including families whose immigration cases had been fast-tracked by judges.

The cancellation was another sign of the Trump administration’s difficulty managing the border crisis. The number of people crossing the U.S.-Mexico border has risen dramatically under Trump, despite his tough rhetoric and hard-line policies. Balancing a White House eager to push major operational changes with the reality on the ground is a constant challenge for the Department of Homeland Security.

Trump gave the first public word of the planned sweep earlier this week, saying in a tweet that an operation was coming up and the agency would begin to remove “millions” of people who were in the United States illegally. Later, leaks to the media included sensitive law enforcement details, such as the day it was to begin, Sunday, plus specific cities and other operational details.

On Saturday, ICE spokeswoman Carol Danko criticized the leaks in context of their potential impact on ICE personnel, saying in a statement that “any leaks telegraphing sensitive law enforcement operations is egregious and puts our officers’ safety in danger.”

Pelosi called Trump on Friday night and the two spoke for about 12 minutes, according to a person familiar with the situation and not authorized to discuss it publicly. She asked him to call off the raids and he said he would consider the request, the person said.

It’s unclear what else was said during the call. But in a statement Saturday before the president’s decision was announced, Pelosi appealed to the same compassion Trump expressed in declining to strike Iran because of the potential for lost lives.

“The President spoke about the importance of avoiding the collateral damage of 150 lives in Iran. I would hope he would apply that same value to avoiding the collateral damage to tens of thousands of children who are frightened by his actions,” she said.

She called the raids “heartless.”

Pelosi responded to Trump’s announcement with her own tweet, saying: “Mr. President, delay is welcome. Time is needed for comprehensive immigration reform. Families belong together.”

Halting the flow of illegal immigration has been Trump’s signature campaign issue, but Congress has been unable to push his proposals into law with resistance from both Democrats and Republicans. Bipartisan talks over the immigration system have started and stalled but are again underway among some in the Senate.

Lawmakers are considering whether to give $4.6 billion in emergency funding to help border agencies struggling to manage a growing number of migrants crossing the border. The measure passed a Senate committee on a 30-1 vote. But the House is considering its own measure. Funding is running out and Congress is trying to approve legislation before the House and Senate recess next week.

Earlier Saturday, Trump hinted the operation was still on, saying the people ICE was looking for “have already been ordered to be deported.”

“This means that they have run from the law and run from the courts,” Trump said.

Coordinated enforcement operations take months to plan, and surprise is also an important element. ICE officers don’t have a search warrant and are working from files with addresses and must go to people’s home and ask to be let inside. Immigrants are not required to open their doors, and increasingly they don’t. Officers generally capture about 30% to 40% of targets.

The planned operation was heavily criticized by Democratic lawmakers as cruel, and many local mayors said they would refuse to cooperate with ICE. Immigrant advocates stepped up know-your-rights campaigns.

Another complication is that ICE needs travel paperwork from a home country to deport someone, so immigrants often end up detained at least temporarily waiting for a flight. ICE was reserving hotel rooms for families in the event the operation went off as planned Sunday.

The adult population of detainees was 53,141 as of June 8, though the agency is only budgeted for 45,000. There were 1,662 in family detention, also at capacity, and one of the family detention centers is currently housing single adults.