Frac Sands 2014: The frack fight

By Kasia Patel
Published: Wednesday, 29 October 2014

Frac sand demand is expected expected to triple, though regulations may hinder industry growth. Delegates at IM’s 2nd Frac Sands Conference discussed how the industry should deal with its opposition.

Delegates at IM’s 2nd Frac Sands Conference in Minneapolis at the end of September were broadly excited about the growth in the silica (frac) sand industry, but this optimism was tempered with concern regarding activism and regulation, which many believe are holding back growth in the sector.

With demand for frac sand expected to grow threefold by 2019 owing to increased activity in hydraulic fracturing (fracking) activity, both those involved in the industry and protesters outside the conference stressed the importance of evaluating the costs and benefits of increased frac sand mining for the future.

Shale oil and gas is extracted by fracking, which involves pumping water and minerals like frac sand, barite (barytes) and bentonite into shale rock at high pressure. Increased activity in fracking would mean higher demand for these minerals.

Mark Kruminacher, principal and senior vice president of GZA GeoEnvironmental - which provides environmental and construction consulting services - addressed the conference by discussing the economic benefits and the apparent negligible costs of frac sand mining to meet increasing demand.

“The number one concern that’s raised with any industrial sand mine, or indeed any non-metallic mine, is that the mine will decrease property values,” he said. “That’s always the number one issue - but you can’t find a study that backs this up and that’s quite simply because it doesn’t exist.”

He also expressed frustration that many anti-frac sand mining lobbies accuse mining companies of promising the benefits and jobs created by mining, without addressing the costs to the community or to the environment, while failing to address economic costs of not allowing mining to go ahead.

Among the benefits which Kruminacher claimed are ignored by anti-mining campaigners are the jobs created both directly and indirectly by the mining community.

According to a 2012 study by IHS Global Insights, funded by the petroleum industry, Wisconsin firms employed 20,000 people supporting the unconventional oil and gas business, which was expected to rise to more than 33,000 by the end of 2020.

However, only around 10%, or 2,200, of those jobs are directly tied to the fracking industry, with the rest accounting for spinoff jobs such as at restaurants and bars that have benefitted from increased sand-mine activity in local communities.

Misguided moratoria?

Moratoria on fracking have been imposed in various states around the country including in Minnesota, New York and Colorado.

However, while some bans on frac sand mining have since been lifted, many remain in place as various states study the health and environmental risks of mining and fracking.

Houston in south eastern Minnesota is one county that extended its moratorium on frac sand mining in February and it could now run until 5 March 2015.

In response, several industry bodies are now working on crystalline silica classification, and earlier this year, OSHA proposed updated crystalline silica safety standards aimed at reducing the risks of working in an environment where silica particles are present.

Inhalation of respirable crystalline silica particles can lead to the lung disease silicosis, and OSHA recommended a new permitted exposure level (PEL) for respirable crystalline silica as well as new provisions for measuring how much silica workers are exposed to.

Not in my back yard

According to Krumincher, the opposition and alternatives proposed by the anti-frac sand mining campaigners boils down to one thing: NIMBYism.

Many campaigners are concerned regarding the implications of relying on shale gas as an energy source and one movement which is certainly more than a NIMBY response to fracking is that of Greenpeace, which is pushing for a shift to clean, renewable energy sources.

“According to international experts, we need to keep two-thirds of known fossil fuel in the ground to avoid ‘runaway climate change’ - the point at which global warming becomes irreversible,” the organisation said as part of its anti-fracking campaign.

“Rather than scraping the bottom of the fossil fuels barrel and building up costly infrastructure that will lock us into a high-carbon future for decades to come, we need strong government investment in clean, renewable energy,” it added.

Fracking concerns

Aside from concerns regarding the mining of frac sand, a major worry for locations considering fracking is additional water pressure and contamination of groundwater, which can occur through various pathways such as surface spills, well integrity failure - such as leaks or poor construction - the fracking process itself and natural geology faults.

As a result, New York’s highest court ruled in July that towns can use zoning ordinances to ban fracking, which enables towns to rule whether or not to frack in different parts of the state, as well as upholding the current state-wide moratorium on fracking.

Fracking policies have also been debated across Europe, with the environment agency in Germany recommending that that countrywide moratorium imposed in 2012 be maintained while its environmental risks are assessed.

The decision, which could limit the fracking process to rare cases rather than implementing a national policy, comes as a blow to business leaders in the country who have lobbied to lift the moratorium on fracking all together.

Increasing dialogue

The 2nd Frac Sand Conference was also attended by local activists who staged a protest outside the conference hotel.

IM spoke to activist, Joe Kruse, who expressed his hope for an increased dialogue and awareness of the thoughts and opinions of activists at industry meetings.

“I think there is a big disconnect with how the communities are actually being impacted, how they feel that fracking and frac sand mining are affecting them,” Kruse told IM. “Because we have a lot of very human and raw pain that people are experiencing as a result of frac sand mining and fracking.”

Rather than looking to ban frac sand mining outright, Kruse said he hoped that organising such protests would create a space for both sides to enter into a discussion and look for a mutual solution.

“The other big message we want to get across is that we see frac sand mining as participating in a fossil fuel that’s ultimately a dead end that doesn’t have a future if we hope to sustain life on the planet,” he told IM.

“We need to seek alternatives to fracking, as fossil fuels will be used rapidly. The reality of climate change is really dire and people are already suffering from the impacts of it,” he added.

In terms of alternatives to fracking, Kruse suggests pooling together all resources rather than looking to a single solution.

“I think we need to implement at a rapid rate all of the possible alternatives, I don’t think there’s one alternative fuel that’s going to be the silver bullet, I think we’re going to have to do a whole bunch of things at the same time,” he said. “And I think what’s stopping us from doing that are folks who have influence in our government who have a lot of money and with that money are able to sway laws.”

Oilfield Minerals News Review

Potential frac sand shortage

US-based financial services company Morgan Stanley has suggested that frac sand supply could be a strong growth limiting factor for the rapidly expanding fracking industry.

“We believe the industry now sits on the verge of a prolonged frac sand supply shortage,” said Morgan Stanley in a research report. The report follows US Silica Holdings’ prediction in September of this year that demand for silica sand could triple over the next five years.

The supply constraints are being compounded by the trend of putting greater volumes of frac sand in each well, which enables a higher yield of petroleum products per site for the operator.

Fracking in Argentina

US-based Halliburton, the oilfield services company, has opened a frac sand storage and loading facility in Argentina, which has the second largest potentially recoverable shale gas reserves in the world, according to 2013 USGS data.

Located in La Meseta, North Patagonia, the multi-million dollar facility is 10.46km from the company’s Neuquen operations base. It includes a warehouse, three storage silos, and a quick, gravity-based loading system for trucks.

“This new facility helps us solve the logistical challenges that occur when moving to the development phase of the production cycle,” said Halliburton Argentina country manager, Fernando Rearte.

Argentina has been suggested as a possible leader for the shale gas market because of its large reserves and low water risk supply position

UK fracking

The UK government has said it will continue its support of the fracking industry despite widespread opposition from the UK public.

In a report published at the end of September, the government said it had not changed its stance on its Proposal for Underground Access for the Extraction of Gas, Oil or Geothermal Energy, despite a public consultation in which the majority of respondents opposed fracking or the change to underground access legislation.

The change to land guidelines propose to simplify existing regulation by offering right of access to rock beneath properties to companies looking to drill for shale gas and oil by fracking.

However, according to the government’s response statement, around 90% of the total responses did not address the consultation questions.

Baker Hughes revenue up

Oilfield services provider Baker Hughes saw its revenue increase year-on-year (y-o-y) to $6.25bn for the third quarter of 2014, driven by demand from both Latin and North America. Net income for the quarter also increased to $375m in Q3, up from $341m in Q3 2014 and $353m in the second quarter or 2014.

Increased revenue was driven partly by Latin America owing to increased activity in Argentina and offshore Mexico. Revenue growth in North America was driven by an increase in service intensity in the company’s pressure pumping product line and the seasonal rebound of its Canadian business.

However, disruptions in Libya and Iraq, the declining Russian rouble and activity delays in the Gulf of Mexico all negatively impacted the business.