Monday, July 16, 2012

Midwest Sand Rush Creates Jobs, Prosperity, and "Sand Millionaires," But Comes with Controversy

I spent the weekend along the Mississippi River in Buffalo City, Wisconsin, about 120 miles south of Minneapolis-St. Paul (across the river from Winona, Minnesota), where there is a growing controversy in sand-rich southeastern Minnesota and west-central Wisconsin ("America's Sandbox") about mining for frac sand (the silica sand used for hydraulic fracturing).  While starting my drive this morning to the Minneapolis airport, I took pictures of the two signs above that help tell the story of the controversy.

On one side are the frac sand supporters ("dig, baby, dig"), which include dozens of new "sand millionaires" who have reaped huge financial windfalls by selling or leasing their land for sand mining, or by selling their mineral rights for amounts typically exceeding $100,000 (in addition to royalties for each ton of frac sand mined). Frac sand mining has further stimulated local economies in Minnesota and Wisconsin by bringing many high-paying jobs (each frac sand mine employs between 10 and 20 people, while 40 to 50 people work at a typical sand processing plant, and dozens of truck drivers are hired to haul frac sand to processing plants and rail terminals), raising household incomes, bringing millions of dollars of new capital investments, and pumping revenue into area businesses and local governments.

One the other side are sand opponents, including those trying to stop a frac sand plant near the Cochrane-Fountain City (CFC) High School in Wisconsin (see photo above) because of the increased noise and congestion from constant truck traffic, health concerns about the airborne silica dust from sand mining, and environmental concerns about sand mining's effects on the local land, wetlands, and streams.

My timing was excellent, because after I arrived at the Minneapolis airport a few hours after taking the photos, I found an excellent, related article published today by the Minneapolis Federal Reserve titled "Sand SurgeIn Minnesota and Wisconsin, frac sand mining has lifted local economies--and stirred opposition," here are a few excerpts:

"High-grade frac sand commands a premium in the marketplace: $60 to $80 per ton, over five times the price of construction sand and gravel. Oil companies and oilfield service firms can pay over $300 per ton for processed sand delivered to the wellhead. No wonder that large mining firms, many of them based outside the region, have invested hundreds of millions of dollars in mines and processing facilities.

Unemployment in Barron County, Wis., topped 11 percent at one point during the recession. But since 2010, sand mining companies have invested hundreds of millions of dollars in the predominantly rural county—making its economic development director bullish on the future. “Frac sand is the biggest and best thing that’s happened in our lifetime in Barron County,” Bob Missling said. “I see frac sand becoming one of the county’s biggest sources of business revenue, moving forward.”

For rural communities struggling to recover from the recession, new and expanded sand mines are a boon; they bring relatively well-paying jobs, increased spending at local businesses and a stronger tax base. But not everything about frac sand is golden. Mining development also can impose costs, such as lost revenues in other industries, environmental harm and diminished public health and safety.

In many communities, new or proposed sand mines have provoked public outcry, leading counties and townships to pass moratoriums on new frac sand operations. As of June, moratoriums were in force in seven counties and several townships in Minnesota and Wisconsin.

The scale and pace of sand mining development in the region over the next few years depend partly on how communities adapt to mining activity, balancing the resource demands of mines against the impact of those demands on competing land uses, the environment and public welfare.  Logistics also has a bearing on where sand mining is likely to prosper and grow. In Minnesota, transportation bottlenecks, in particular a lack of rail capacity, may prove as big a barrier to mine development as pushback from mining opponents."

MP: Like all new technologies, energy sources, and emerging industries, there are costs, disruptions, negative externalities, and risks involved (just like the historical impacts of Midwest farming and logging, and the subsequent commercial barge traffic on the Mississippi River), and frac sand is no different.  As Thomas Sowell reminds us, "There are no solutions, only tradeoffs." 

Hopefully, the significant benefits of frac sand mining will outweigh the costs, and will continue to bring sand prosperity and shovel-ready jobs to "America's Sandbox."  It should also be pointed out that this emerging energy-related industry with all of its new shovel-ready jobs is taking place on private lands with private investment, and requires no government taxpayer funding or subsidies, and no government taxpayer loan guarantees.    


At 7/16/2012 4:51 PM, Blogger Pulverized Concepts said...

Even the NIMBYs far up the line are concerned:

At 7/16/2012 6:03 PM, Anonymous Anonymous said...

It'll take no time at all for the doom-and-gloom crowd to devise a new "peak fracking sand" theory.

At 7/16/2012 6:53 PM, Blogger joycelarue said...

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At 7/16/2012 6:59 PM, Blogger SteveH said...

The US is the only country in the world that allows private ownership of mineral rights. See:

This is the foundation of the success of our energy industry. Nothing like it in the entire world.

At 7/16/2012 7:01 PM, Blogger SteveH said...

This comment has been removed by the author.

At 7/16/2012 8:21 PM, Blogger NormanB said...

The increased employment where we are pulling energy out of USA ground is pretty close to decreases in outsourced jobs at energy businesses in foreign lands. Thus, if you want to reverse outsourcing, as Obama seems to want to do, you have to be for fracing. And it diminishes our Current Account deficit.

At 7/16/2012 9:20 PM, Blogger VangelV said...

This tells you how stupid and irrelevant the greens really are. I wonder how long it is until the voters figure it out.

At 7/17/2012 8:58 AM, Blogger Moe said...

Hello NormanB,

Your're employment/outsourcing equation is a little off, at least according to this from the WSJ:

"General Electric, Caterpillar, Microsoft, Wal-Mart, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, and Oracle — cut their workforces by 2.9 million people over the last decade while hiring 2.4 million people overseas."


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