In Fracking, Sand Is The New Gold

  • Date: 08/12/13
  • Alison Sider and Kristin Jones, The Wall Street Journal

The race to drill for oil in the U.S. is creating another boom—in sand, a key ingredient in fracking.

A conveyor at a Pattison Sand Co. mining operation in Iowa. Stephen Mally for The Wall Street Journal

Energy companies are expected to use 56.3 billion pounds of sand this year, blasting it down oil and natural gas wells to help crack rocks and allow fuel to flow out. Sand use has increased 25% since 2011, according to the consulting firm PacWest, which expects a further 20% rise over the next two years.

In Wisconsin, the source of white sand perfectly suited for hydraulic fracturing, state officials now estimate more than 100 sand mines, loading, and processing facilities have received permits, up from just five sand mines and five processing plants operating in 2010.

And the stocks of publicly traded companies that deal in sand have soared. Shares of Houston-based Hi-Crush Partners have jumped 59% since it began trading in August 2012. Shares of U.S. Silica Holdings Inc., based in Frederick, Md., have doubled since it went public in 2012, giving it a stock market value of $1.9 billion.

Less than a decade ago, U.S. Silica focused on sand for industrial and consumer products—plate glass for windows and, more recently, glass for iPhone and iPad screens. Now those uses account for just half the sand the company digs out of its open pits and even less of revenue.

During the first nine months of this year, the more than $245 million in sand sold to energy companies accounted for 62% of U.S. Silica’s sales, up from 53% during the same period in 2012 and 33% during the first nine months of 2011.

Hydraulic fracturing is the process of pumping a mixture of sand, chemicals and water down a well at high pressure to break up dense rock formations so that oil and gas can flow to the surface. The sand left behind in the fracking process props open those tiny pathways so trapped fossil fuels can escape.

Railroad operators are carrying boxcars filled with sand to shale fields including the Permian Basin of West Texas and New Mexico, the Bakken formation of North Dakota and the Marcellus Shale of Pennsylvania.

While some of these places might seem to have plenty of sand of their own available, many fracking outfits prefer Wisconsin white sand, which is bigger and has rounder grains better suited for holding open larger pathways.

Union Pacific Railroad shipped 94,000 railcars of frack sand in the first half of the year—a 20% increase over the same period of 2012.

Canadian National Railway Co. is spending $68 million over three years to upgrade and restore more than 100 miles of track in Wisconsin so it can boost sand shipments out of state.

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