Trucking contractors get a boost from fracking industry’s increasing appetite for a very basic mineral commodity
The hydraulic fracking boom in the oil and gas industry has created unprecedented demand for another underground commodity: silica sand. And the resulting “sand rush” has proven golden for contractors like Dennis Bednarek, the owner of Bednarek Trucking in Little Falls, Minn.
“Transporting silica sand is 100 percent of my focus right now,” says Bednarek, whose company was limping along until the fracking boom arrived. “My revenue was up more than 300 percent from three years ago. I’m running three trucks compared to just one, and they’re all running at full capacity. It’s a high-volume business with unlimited potential.”
Bednarek owns three, 38-foot-long APX 9 pneumatic dry-bulk tank trailers made by Polar Tank Trailer. They each cost about $95,500. Most of the time, he uses the trailers to carry silica sand from railside storage facilities to fracking sites in the Marcellus, Bakken and Utica shale regions. In some cases, he picks up sand at mining facilities in Illinois, Minnesota and Wisconsin and drives it to fracking sites.
Need the essentials
Silica sand – found most abundantly in Wisconsin, Illinois and Texas, and to a lesser extent in Minnesota – is essential to hydraulic fracking. It’s added to fracking slurry to serve as a proppant, which “props” open fissures created deep underground by the fracking process. Without the proppant, the fissures would close back up and prevent gas and oil from escaping.
Silica sand is an excellent proppant because it’s 99 percent quartz, an extremely hard mineral with a compressive strength between 6,000 and 14,000 pounds per square inch. In addition, it’s almost perfectly spherical, as well as resistant to high heat and high pressure.
“Think of the silica sand as very hard marbles,” says Michael Lawson, director of investor relations and corporate communications for U.S. Silica, one the country’s largest silica sand producers. “They don’t clump together like regular sand, so gas and oil can flow around them.”
Based in Frederick, Md., U.S. Silica went public on the New York Stock Exchange in 2012 – another repercussion from the silica sand boom. The company owns 15 sand mining facilities nationwide, including four that produce silica sand just for the oil and gas industry, he says.
On the rise
While exact figures are difficult to pin down, it’s safe to say that fracking a typical well requires thousands of tons of silica sand. As such, demand has grown dramatically. In 2011, the latest year for which data is available, producers sold 24.3 million metric tons of silica sand used for fracking — a 77 percent increase over the 2010 total. Moreover, overall tonnage increased 500 percent from 2006 to 2011, says Thomas Dolley, a mineral commodity specialist for the U.S. Geological Survey.
“I’ve never seen anything like this before with this commodity,” Dolley says. “The demand for fracking sand has taken off unbelievably. And we expect it to only increase. My colleagues keep saying this will blow over – that it’s a flash in the pan. But while we don’t do market analysis, in my heart, I don’t believe that’s true. Other proppants are man-made and very expensive, while silica sand is relatively inexpensive and performs pretty well.”
Sales at U.S. Silica mirror the national trend. In 2012, the company produced 2.9 million tons of silica sand for fracking, and it expects to produce 4.6 million tons in 2013 – a 63 percent increase. Moreover, the company’s revenue from silica sand sales jumped from $35.8 million in 2009 to $243.8 million in 2012. The current price for a ton of silica sand is about $70, Lawson notes.
Thanks to improvements in drilling technology, exploration companies are able to drill more wells per rig, as opposed to drilling one well, then moving a rig a couple miles away to drill another well.
“The drilling laterals are getting longer and longer because of improvements in fracking technology and that creates increased demand for proppant,” Dolley explains. “Exploration and production companies also are driving demand by drilling 24/7, as opposed to five days a week in two shifts, to meet increased demand.”
All that spells good news for sand truckers like Bednarek, who delivers the commodity to fracking sites in West Virginia, Pennsylvania, North Dakota, Montana and eastern Ohio. For a guy whose fleet of trucks decreased from 22 to one during the recession, the sand rush stands as a huge positive. In fact, business is so good that he’s considering buying one or two more trucks and trailers.
“It’s a demanding industry, but it offers great opportunities for people if they’re willing to endure the demanding schedule and working conditions, like driving in all kinds of weather at all hours of the night,” Bednarek says. “There’s nothing glamorous about it. We operate 24 hours a day, seven days a week. But along with the risks, there’s money to be made. That’s the challenge – weighing the risks against the benefits.”
Has your trucking/transport company broken into the silica sand industry? How do you manage this new commodity in the fracking boom? Leave a comment below.