Mine 1

Dust from a blasting operation at Pattison Sand’s surface mine in Iowa is seen from across the Mississippi River in Bagley, Wis. Homeowners Jim and Kathy Kachel say that dust from the mine has gotten inside of their home.

Wisconsin’s frac sand mining industry isn’t going away, but industry experts say not all mines will survive as market forces change the business model.

Advances in a gas and oil mining technique known as hydraulic fracturing created enormous demand during the past decade for the round, silica sand prevalent throughout western Wisconsin, Minnesota and Iowa. In response, the number of mines jumped from just a handful to 129, according to the latest count by the Department of Natural Resources.

But when oil prices fell, so did demand for silica, and some experts say the new economics will leave some operators in the dust.

“There were a lot of mines that should never have been built,” said Joel Schneyer, managing director for the investment banking firm Headwaters MB. “There were mines built that don’t make sense.”

Schneyer was the keynote speaker for a two-day industry convention at the La Crosse Center. He spoke to about 70 people, noting attendance was much better than recent industry addresses he gave in New York and Minneapolis.

The convention, put on by the trade publication Rock Products, is billed as a beacon of hope for producers weathering “a sandstorm,” as low oil prices have sapped demand for the fine-grained sand used to open cracks in underground rocks, releasing hard-to-reach oil and natural gas reserves.

Keith Rauch, a mining geologist and La Crosse-based consultant, offered a briefing on how to open a mine, though he conceded there is not much interest in that now.

“It’s a tough business,” he said. “We’re at the low point — hopefully.”

Schneyer estimates consumption of frac sand was near 40 percent of capacity last year and will fall to around 35 percent in 2016 — “which is the reason it’s so painful out there,” he told conference goers.

But the industry is not dead, Schneyer said: With oil prices below $40 a barrel, producers are concentrating on their most productive wells, drilling farther and using more sand; EOG Resources, one of the nation’s largest oil and gas producers, is using about twice as much sand per well as its competitors.

“Shale is not going away,” he said. “Each well you drill you gain a little more knowledge.”

With lagging demand and depressed prices, there is no longer enough profit margin to support both mines and shippers, or the existing model, where efficient mines attempt to supply the entire industry.

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“That’s not how we sell the sand anymore,” Schneyer said.

During the boom, when frac sand was a $33 billion industry, publicly-traded mining companies were making a profit of $35 per ton. By the end of 2015, that pre-tax margin had fallen to $7 a ton.

Now successful mines need to own loading terminals and sell their product in the shale basins where they can ship it most efficiently. For producers in the upper Midwest, that means sending sand to the Bakken formation of North Dakota, where product can be hauled directly on major railroads like Canadian Pacific and BNSF.

A million tons of sand on a rail line is worth more than a billion tons 20 miles away, Rauch said.

But it’s not enough to be near a rail line, Schneyer said.

To maximize efficiency, producers need to fill entire trains with their product, and even some of the mines with rail terminals can’t accommodate these mile-long “unit trains.”

Mines that rely on trucks to haul their product to a rail terminal are “too high on the cost curve,” Schneyer said, adding that local officials should have been asking potential operators tougher questions about their business models.

Most operations are located along rail corridors, but a Tribune analysis of DNR data suggests there are at least 30 permitted facilities — and another two with pending applications — more than five miles from a rail line.

Schneyer said there will likely be consolidation, re-adjustment and re-alignment as the industry recovers, as mines can easily be re-opened when demand returns, so long as the permits don’t expire.

But not every mine will be viable.

“There’s a lot of mistakes out there,” Rauch said.

“There were a lot of mines that should never have been built.” Joel Schneyer, managing director for the investment banking firm Headwaters MB

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(12) comments


I'm sure the unqualified puppet running the DNR is wracking her brain figuring out how to keep them in business. Perhaps she can dump truckloads of liquid manure in them from all the CAFOs.


first, I agree with easy that Badger Mining is exemplary for good business practices including natural resource extraction business practices. They are a great company that cares about they're people, the environment and the future.

On a more negative note, however, I'm puzzled by this statement in the article: "Mines that rely on trucks to haul their product to a rail terminal are ?too high on the cost curve,? Schneyer said, adding that local officials should have been asking potential operators tougher questions about their business models."
How in Hades does Schneyer expect local government officials, or talk in towns and counties in rural Wisconsin, to be more informed about the Frac sand mining business model? It strikes me that the business managers opening and running the tracks and should have been more informed about the business model! What an absurd and condescending attitude! What a a jackalope! "What a macaroon!" to quote Bugs Bunny. Jeeessch!


'Many of these mines should not have been built.' I'm sure a lot of people in North Dakota are wailing that 'a lot of these wells should not have been drilled.' When there is a boom in any commodity there is always overdevelopment by people wanting to make a fast buck and then get out of town. And has anyone noticed the huge wildfire in Alberta is in the middle of the Canadian oil sand area. Is someone trying to send a message in order to raise oil prices.


A lot of these people who live in these areas were lured into voting for Walker, based on his promise to create 700 jobs and boom the economy in Northern Wisconsin.

They were also promised everything would be restored to it's original condition when they were done stripping the Earth of it's sand.

Just like posted below.... who will pay for this when these companies go bankrupt to protect the CEO's golden parachute payouts?

P.T. Barnum said it best..... "There's a sucker born every minute"


The proposed sand mine to go in near us is run by people out of Atlanta, GA with no ties to the area and don't care about the area residents. All they can think of the almighty dollar and not about peoples health.


It's all but lost in the shouting, but apparently many forget that we have, and have had, a thriving frac sand market in Wisconsin since long before the recent issues came up.

There are several companies that do things right, and one is especially easy for La Crosse residents to check out. They are one of the best, whom I know well from business dealings over several years. They started in 1949, and have since been quietly producing sand for the industry, and doing it in a way that is safe for their employees, and the environment.

Here's their website, but it could just be a nice Sunday drive to go to Taylor and check it out. (Make it part of a casino run.) The plant is located on a large tract of land that they own (and any employee is free to hunt it during the season), it is clean and modern, is purposely located on a rail line, and every pound of sand moves by rail -- they do not inflict their neighbors with those hardly closed open top trucks that blow sand off all the way from the mine to the rail siding. At Badger, all the sand is cleaned, washed, and dried right at the plant before it goes into the rail car, and the car's bottom doors are carefully sealed to prevent leakage. I have been with them while they do that.

And they provide something desperately needed in that hardscrabble area of the state -- good, steady, year-round, FAMILY SUPPORTING jobs, and all the benefits. The employees there love them, and all residents are glad to have them there.

Been around since 1949:


And they are also expanding the local economy by new development, as they are big in the new and growing ceramic proppant market. A proppant is what "props" the holes open inside the earth, to allow the oil out. Check out Atlas Resin Proppants, same company, same location:


There are other responsible sand companies, who are good for Wisconsin. But these out of town fly by nighters could care less about local concerns for quality of life, and therefore, we should care less about them.


Sorry, the first link should have been to Badger's home page:



When the boom goes bust, these folks will all declare bankruptcy and all promises to restore the land will be nullified and forgotten. They really don't care.


I hope none of these mines survive...


I share your thoughts. Tourism is a multi-million $ business but who wants to spend their vacation looking at vacated sand mines.


Apparently you don't connect the dots. Frac mines help get every drop of oil out of a well. Oil is responsible for every aspect of our lives. Without oil we would still be living in caves.


there also were govenors elected that don't make sense.

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