In general, frac sand sells for about $53 a ton in the Midwest. Cost of production is $25 a ton. Sand at the wellhead goes for about $200 a ton.By Joe Taschler The Wisconsin State Journal (1/17/15)
Wisconsin is smack in the middle of a high-stakes hydrocarbon fistfight.
The Badger State finds itself in this spot by virtue of its status as the nation’s top producer of sand used to unlock vast amounts of energy held in shale rock formations.
All of a sudden, the price that a barrel of oil can fetch on global markets matters in small towns across western and central Wisconsin.
So far, the state’s sand patch shows few signs that crashing oil prices are having an effect. Sand plants and mines are still looking for workers, and development plans for new sand mines are moving forward.
Still, folks are wondering how the state can avoid the aftershocks of a price collapse that has seen benchmark U.S. crude oil lose nearly two-thirds of its value since summer as the OPEC cartel acts to protect its market share and drive U.S. producers out of business.
Neither side has shown much willingness to back down, and oil prices have continued to fall, although they have shown signs of leveling off in recent days.
Whether that oil price collapse reaches Wisconsin’s booming sand patch is a question even petroleum market experts are hard-pressed to answer.
“Unlike the oil market, we do not have monthly production statistics, benchmark prices quoted in real time, or active and liquid futures markets for sand, so this is what you would call an inefficient and opaque market,” said Ethan Bellamy, managing director and chief oil industry analyst at Milwaukee-based Robert W. Baird & Co., in an email. “We know we cannot see all the moving pieces, so we expect to be surprised.
“The only thing we can say for sure is that the go-go days are over.”
The sand mining state
What hasn’t changed is the desirability of Wisconsin frac sand. The state is home to no less than half the frac sand mines in the nation. Perhaps more.
“If I had to guess, I would say maybe two-thirds of total production of frac sand in the U.S.” occurs in Wisconsin, said Samir Nangia, a principal at PacWest Consulting Partners, the Houston energy consulting division of global consulting firm IHS.
The state is home to at least 63 active sand mines, 45 processing facilities and 27 railroad loading facilities. Five years ago, there were just five mines and five processing plants.
No one knows for sure how many jobs are tied, directly or indirectly, to sand mining in the state.
“Everything happened so fast, it was really difficult to quantify,” said Eric Bott, director of environmental and energy policy for Wisconsin Manufacturers & Commerce, the state’s primary business lobby.
The state Department of Natural Resources places the state’s sand mining capacity at about 12 million tons a year, calling that a “conservative estimate.” …