Wisconsin frac sand is losing ground to sand produced in states like Illinois, Missouri and Arkansas as the market continues to retract.
At the peak of the U.S. oil boom of 2014, demand for Wisconsin frac sand meant drillers were willing to pay for it to be shipped to their wells around the country. Now, with the market in its second year of decline, energy companies are turning to cheaper, lower quality sand mined closer to the oil fields.
“We have seen more young upstarts of local sand guys, whether it’s in Mississippi or Texas, being able to capture some market share versus bigger producers in Wisconsin because they can undercut them,” said Joel Schneyer, of investment banking firm Headwaters MB.
Stay informed on the latest news
Sign up for WPR’s email newsletter.
To be able to compete, Wisconsin frac sand companies have had to build expensive transload facilities to unload sand from rail to trucks near oil fields like the Permian Shale Basin in Texas and New Mexico and the Bakken Shale of North Dakota.
Rick Shearer, CEO of Superior Silica Sands, which has operations in Chippewa and Baron counties, said building transload facilities costs tens of millions of dollars.
“A lot of companies don’t have the financial wherewithal to set up that type of network of transload terminals around North America. It’s very expensive and it also requires a whole new skillset of having people in your company who are very knowledgeable about logistics and that’s a change that we’ve all had to deal with,” he said.
Shearer said building these facilities at a time when frac sand companies are only making around $7 per ton compared to the $35 per ton they made two years ago is painful.
“In this market as tight as things are, basically people are not getting paid to do this, they’re not making any money at it. They’re breaking even and some are even losing money to do these logistic services,” he said.
But there is good news for Wisconsin frac sand producers, according to Shearer. He said he’s heard from energy producers that cheaper sand from southern states hasn’t worked to free up oil as well as Wisconsin’s hard, round Northern White. He said he expects demand for Wisconsin frac sand to rise once the price of oil surpasses $60-$65 per barrel.
Trustworthy news, world-class music and Wisconsin stories … made possible by people like you.
Wisconsin Public Radio, © Copyright 2024, Board of Regents of the University of Wisconsin System and Wisconsin Educational Communications Board.