Year in Review: Frac sand

By Emma Hughes
Published: Friday, 20 December 2013

The frac sand market experienced a turbulent 2013 as environmental concerns continued to hamper new development. This led to several moratoria being put in place across the US, but did not prevent a significant amount of new activity taking place in North America as well as further afield in Europe, the Middle East and China.

January

The beginning of 2013 saw industrial minerals delegates gather in Dubai for the IM’s Oilfield Minerals Outlook: Middle East roundtable discussion. Among the presentation topics discussed, the meeting looked at how the Middle East is about to embark on a new phase of oil and gas exploration and how this marks a potential new era of demand for oilfield minerals, including frac sand.

February

In February, the Oilfield Technology Group (OTG) of Momentive Specialty Chemicals Inc., opened a new transload facility in Colorado, US, that will be used to deliver resin coated frac sand to companies working in the hydraulic fracturing (fracking) industry.

March

During early March, New York’s Assembly approved a two-year moratorium on fracking after two previous attempts to block the practice failed. Governor Andrew Cuomo said that he would wait until the Health Department concludes a separate analysis of the issue before making a final decision.

Santrol, part of leading frac sand producer Fairmount Minerals, relocated its Texas-based Santrol Technology Center (STC) from Fresno to Sugar Land, US. The technology centre is now located closer to the company’s headquarters and has been expanded to conduct R&D into resin-coated proppants, required by the US fracking industry.

April

Victory Silica amended its loan agreement, signed in January with lender Nuinsco Resources, from $1m to $3m. The proceeds of the loan are to be used to upgrade the Seven Persons (7P) frac sand processing plant to a 400,000 tpa facility, following receipt of the necessary permits.

Northern Frac Proppants, LLC (NFP) announced a multi-year agreement to supply Northern White frac sand to CARBO Ceramics’ new processing plant in western Wisconsin, US. NFP is also building a 145-acre (0.58km2) sand mine and processing plant adjacent to CARBO’s sand processing and resin-coating plant in Marshfield, Wisconsin.

Later in April NFP acquired an area of land containing frac sand reserves and a processing site in Wisconsin as part of a newly-announced supply agreement with Goose Landing Sand Co. LLC. As part of the acquisition, NFP will gain access to premium ‘Northern White’ frac sand reserves which have an estimated life of more than 25 years.

Claim Post Resources Inc. acquired 100% of the Seymourville Silica Sand Deposit in Manitoba after making a final payment of Canadian dollar (C) $150,000 ($146,465*) to Char Crete Ltd. The company acquired the first 51% of the sand property, which contains nine contiguous silica sand quarry leases, for C$400,000 on 31 January.

At the end of April, London’s historic Stationers’ Hall played host to IM’s Proppant Prospects for Europe Roundtable, where among other topics, the security of proppant supply in Europe was discussed. Clive Mitchell at the British Geological Survey said: “The UK is nearly self-sufficient in silica sand (...) there are 40 sand quarries in the UK producing 4m tonnes of silica sand”.

May

In May, Hi-Crush Partners LP announced its intention to acquire D&I Silica LLC, a frac sand distributor, for around $125m. The acquisition will allow Hi-Crush to produce, transport and market Northern White frac sand among its oil and gas customers throughout the Marcellus and Utica shale plays.

NFP began shipping frac sand from its Alma centre, which consists of both a silica sand mine and plant, in Wisconsin, US. The plant will ramp up to full production capacity and will continue to supply Northern White frac sand to a variety of customers.

US Silica opened its 15,000 tonne silica sand storage and distribution facility in San Antonio, Texas, which was developed in partnership with BNSF Railway Co. (BNSF) and will begin operating at a capacity of 10,000 tonnes and ramp up over time.

Halliburton brought on stream the world’s largest dedicated frac sand transfer terminal in May. The 40m lb (18,143 tonnes) new sand storage and distribution plant is located at Windsor, Colorado, north of Denver. IM visited the site just prior to its opening.

June

June played host to the Oilfield Minerals Outlook 2013 Roundtable, which took place in Houston, Texas. Over two days the supply, demand, processing, and logistics of industrial minerals used in the oilfield market was discussed.

Keynotes included the US Energy Information Administration on global shale gas development, IHS Chemical on the world hydraulic fracturing market outlook, Accenture on proppant supply chain logistics, World Oil on oil and gas exploration trends, and Baker Hughes assessing the impact of industry change on industrial mineral consumption in drilling.

July

In July, a new Alberta, Canada-based frac sand terminal, owned by specialty chemicals company Di-Corp., begun to benefit from Canadian National Railway (CN) services. The 20-acre (0.08km2) frac sand terminal has an annual throughput capacity of 550,000 tonnes frac sand.

The storm water ponds of three silica sand (frac sand grade) producers in Trempealeau county, Wisconsin, US, flooded in early July, spilling water and sand onto the local streams and wetlands. The LaCrosse branch of the Wisconsin Department of Natural Resources (DNR), which covers Trempealeau County, assessed any damage caused.

Victory Silica received approval from the Alberta Energy Regulator (AER) for development of the planned 7P frac sand processing facility in Alberta. The company completed a C$300,000 payment towards the acquisition of 7P, as the AER approval was a condition of the purchase.

Claim Post also received regulatory approval to purchase nine silica sand quarry leases from Gossan Resources Ltd, located in the Winnipeg region of Manitoba, Canada.

FTS International (FTSI) entered into an agreement to sell all of the assets of its proppant business and related logistics assets to Fairmount Minerals. The agreement saw FTSI hand over its sand mining operations, resin-coating plants, railroad transload sites, distribution terminals and various other properties and facilities to Fairmount.

At the end of July, Baker Hughes Oilfield Operations, Inc. (BHOO) terminated a frac sand supply agreement with Hi-Crush Operating, LLC as the result of Hi-Crush’s alleged breach of agreement. Following the end of the contract, Hi-Crush filed a lawsuit against BHOO on 12 November in the 129th Judicial District Court in Harris County, Texas.

August

In August, Dakota Plains Holdings Inc. and Unimin Corp. announced plans to develop a new frac sand transloading facility under a joint agreement. The facility will have a throughput capacity of approximately 750,000 tpa frac sand and is expected to open by January 2014.

In further logistics developments, a new breed of bulk transport system for the US frac sand and kaolin industries, named Jumbo Bins, was been launched by Arrows Up Inc. Made principally of galvanised steel and with a volume of 375-400 cubic feet, the bins are designed to carry ‘flowable’ bulk cargoes.

Preferred Sands announced a new partnership with Mexico-based E Proppants in the first week of August to help Preferred with the development of its RCS product line, which consists of non-phenolic resin-coated products, used in fracking. The partnership extends through 2023.

Wildcat Minerals LLC, a privately-held Wyoming company that has facilities in 10 oil-producing states, has signed a multi-year agreement with US Silica Holdings, Inc. Under the agreement, US Silica will benefit from potential sand storage and rail capacity at 16 of Wildcat’s storage facilities, which are located near several major unconventional shale oil and gas basins.

At the end of August, the US Occupational Safety and Health Administration (OSHA) published proposals for two new crystalline silica safety standards, aimed at reducing the risks of working in an environment where silica particles are present. The OSHA has proposed a new permitted exposure level (PEL) for respirable crystalline silica as well as new provisions for measuring how much silica workers are exposed to. According to IMA-NA, the total economic impact of halving the current PEL would amount to $5.45bn/year.

September

In early September Wildcat Minerals partnered with CHS Inc. to develop sand-unloading sites alongside a group of grain elevators near North Dakota’s Bakken shale formation and other oilfields. Financial terms of the partnership were not disclosed.

Also in September, Wisconsin frac sand regulators buckling under the pressure of a booming industry filed an appeal for eight more state employees to help with the workload.ÊAssembly Bill 306 calls for eight individuals to work within the Department of Natural Resources for monitoring industrial sand mining and processing operations.

October

The University of Iowa, US, received a grant to conduct a health study into the potential impact new and existing projects could have on air quality.

Residents in the Barron and Chippewa counties of Wisconsin pressed state agencies to publicise information on the link between frac sand mining and health. Two frac sand processing plants are located near New Auburn, Wisconsin, and its inhabitants called for the Department of Natural Resources (DNR) and the Department of Health Services to provide clear information on the health effects of crystalline silica dust.

Claim Post Resources announced an amendment to its non-brokered private placement share offering, the proceeds of which will be used to develop its Seymourville frac sand project located in Manitoba, which contains 20-40 mesh and 40-70 mesh sand used for fracking in the Bakkens in Southern Manitoba and Saskatchewan and also 40-70 mesh and 100 mesh sizes suitable for use in the Montney, Horn River and Laird River basins along the Alberta-British Columbia borders.

Towards the end of October, Hi-Crush reached an amicable settlement with BHOO after the alleged breach of agreement led to the termination of a 500,000 tpa frac sand supply contract between the two companies. In connection with the settlement, Hi-Crush and Baker Hughes have entered into a six-year supply agreement for the sale of Northern White frac sand by Hi-Crush to Baker Hughes.

November

Victory Silica’s 7P frac sand plant is set to upgrade to a 400,000 tpa production facility after sending the final site remediation report to the Alberta Energy Regulator. After what the company called “unavoidable delays” in completing the site remediation, the company is now on track to begin frac sand production at the site in the first quarter of 2014.

In technology news, Santrol announced that self-suspending proppant production was underway at its plant in Texas, ready for expansion in 2014. The company acquired the new technology from Soane Energy in May 2013, and applied it to its 99.8% quartz frac sand from Northern White Jordan and Ottawa.

The US National Industrial Sand Association (NISA) has urged the OSHA to implement new stringent regulations on monitoring workers’ exposure to crystalline silica, but has strongly opposed a lower PEL.

After months of controversy over frac sand mining in Minnesota, the Winona planning commission agreed to monitor air quality and sand dust levels with the Minnesota Pollution Control Agency (MPCA) on roads used to transport frac sand.

By the end of November US senators asked for an extension on the OSHA bill that will determine the safe levels of crystalline silica in the workplace. The letter urged OSHA to “convene a Small Business Advocacy Review (SBAR) panel”, to discuss concerns from the small businesses. The deadline for written comments is 27 January 2014, and public hearings are scheduled for 18 March 2014.

December

Finally, to end the year on a high note, PacWest published a report in December that showed frac sand demand had risen 25% since 2011. The consulting firm outlined further that demand is expected to continue to rise, increasing a further 20% over the next two years.