Background

Current and future Status of Frac Sand Mining & Processing in Minnesota

February 2013

Hydraulic Fracturing, or fracking, uses sand and water to pressurize, fracture, and prop open deep oil and gas shale fields to release petroleum. This technology, in partnership with the new technology of horizontal drilling, began to release extremely large volumes of new gas and oil in areas across the U.S. that were not previously considered to have oil potential, including western North Dakota. The oil production growth has the potential to make the U.S. energy independent. Most of this exploration and new production, and the demand for sand, have occurred in just the last three years. The sudden huge growth in demand for high quality ‘frac sand’, characterized by consistently round and extremely hard grains of pure silica sand, created a boom in new sand mining and processing in Wisconsin, the epicenter of large deposits of high grade sand. Minnesota interests also became active, with several existing silica sand operations expanding operations, and significant deposits available for new mining.

Over the last two years, Wisconsin went from 15 mines and processing plants to a potential including almost 110 permitted mines and 35 processing plants. Most of these locations are on or near rail facilities capable of loading full (unit) trainloads, making it economic to ship long distances overland. Minnesota in the same time began with 7 mines and currently has requested permits or active mines totaling no more than 20 sites, with a half dozen processing plants.

The new oil and gas production has saturated the gas market and significantly lowered the prices for petroleum on the oil market. Because of market corrections, the number of active drilling rigs working these fields has dropped from a high of over 400 to about 200, with a proportionate drop in demand for frac sand. Market analysts had posited a total U.S. sand demand of 40-60 million tons per year; the current best estimate of demand is for 34 million tons by 2015. The current markers of this trend include:

• Wisconsin is producing 28 million tons per year (2012), against proposed capability of 70 million tons.
• New permitting has essentially stopped in Wisconsin; almost half of permits have not been exercised.
• Minnesota, with 20% of Wisconsin’s activity, has reports of at least four mine or processing proposals being suspended.
• Minnesota, currently producing 2-4 million tons per year, has only a potential capacity of 8 million through requested permits, not all of which may be implemented.
• Current production of both states roughly equals current U.S. demand, other states such as Missouri and Illinois have shut down mines with lower quality and/or higher costs.
• Market is approaching maturization and stabilization, with dropping sand prices and profits.
• Wisconsin sand originally destined for Minnesota loading sites is being gradually diverted to more economic rail-sited plants in Wisconsin.

Future new mine sites will depend on large-scale, efficient, and cost-competitive operations with long-term supply contracts. Smaller operators and speculators will retire or be absorbed. While oil and gas prices will rebound in future, available supplies of sand should be sufficient to meet demands under most scenarios without further expansion.

Outstanding and unresolved, or ongoing, issues driven by health concerns and concentrated heavy truck traffic include the following:

• Unresearched effects of ambient airborne silica dust in PM-4 particle size for general public (occupational exposure and effects are well documented, regulated, and manageable)
• Wear and tear on local roads and infrastructure on designated routes, beyond the financial capacity of local governments to absorb, but negotiable with sand companies if damage potential is identified and costs shared
• Conflicts with safety and community or cultural nature due to trucks threatening non-motorized vehicles, historic locales, or public safety

DRAFT Southeastern Minnesota Frac Sand Facilities Map (PDF 2.0 MB)

This map, in draft form, shows the approximate extent of potentially mineable silica sand formations at or near the surface, as well as the current, proposed, and prospect silica sand facilities in Minnesota.
Information on the location and status of the displayed silica sand mines, processing plants and transload facilities was compiled from combined MnDOT, DNR and MPCA data.

Location data for silica sand deposits was provided by the Minnesota Geological Survey, with the disclaimer that it is an unreviewed product that is being released now because of the urgent need to share information that can help cities, counties and the state better respond to issues surrounding silica sand mining.