Newsmakers, September 14, 2017

After a downturn in Wisconsin’s frac sand mining industry, there’s some evidence of a turnaround.

Frac sand production expanded heavily in parts of rural western Wisconsin from 2012-2014 because of energy companies use of the sand to extract oil from underground.

The domestic oil market has been depressed since 2015, shuttering Wisconsin frac sand production as a result.

Fairmount Santrol Vice President of Sand Operations Rich Budinger said production isn’t at 2014 levels yet, but Wisconsin is seeing a return of business.

“A lot of mines that had been idled during part of 2016 are running now,” he said. “We’re coming back strong. A lot of jobs are coming back.”

The state Department of Workforce Development doesn’t track sand mining jobs specifically, but a job search website shows many frac sand jobs are available at Wisconsin mines and experts predict a growing frac sand workforce is approaching.

Budinger, who is also past president of the Wisconsin Industrial Sand Association trade group, said while frac sand production has been down, the state’s industrial sand industry has still been producing sand for glass, foundry and recreational uses.

Demand for sand remains strong nationally, and with oil prices rebounding, it could grow exponentially.

James Wicklund, managing director of equity research at Credit Suisse, a financial services company, tracks the sand and oil industries. He said sand production for the gas and oil industry could set records in 2018.

“It turns out the more sand you put in these unconventional shale wells, the more oil comes out,” he said. “If the cost of doubling the amount of sand results in doubling the amount of oil, then oil companies’ returns are still significantly higher.”

Frac sand produced in Wisconsin has been thought to be some of the best in the country for oil production, but that theory is about to be challenged based on what’s happening in Texas.

In Texas, there are 11 mines being built that could produce between 40 million and 57 million tons of sand that would be used in the Permian Basin in Texas, where an estimated 35 percent of the country’s oil drilling is currently happening, and could grow to 40 percent by 2020.

While the Texas sand could save energy companies a lot of money in transportation costs, Samir Nangia, director of consulting for IHS Energy Insight, said Texas sand is considered inferior to Wisconsin sand, which could hurt oil production.

“Yes, it’s cheaper,” he said. “But there’s also a lot of people on the sidelines waiting to see what the well results look like in terms of production a year or two down the line.”

Wicklund said Wisconsin shouldn’t lose its frac sand market in the northeast, Appalachia or the Bakken oil fields in North Dakota and Canada, but oil production isn’t expected to grow in those areas like it will in Texas.