(Festus, Missouri) — For better or worse, depending on your view, Missouri has largely missed out on the hydraulic fracturing revolution that has turned energy markets upside down in recent years.
There’s little doubt homeowners and businesses are benefiting from cheaper natural gas, which is helping hold down winter heating bills and reinvigorate American manufacturing. But the drilling boom that’s sweeping across other states is conspicuously absent here.
But if nature didn’t bless the Show-Me State with vast reserves of natural gas, it did leave behind another mineral that’s playing a bit part in the new energy boom – huge quantities of nearly pure silica sand.
Several companies across eastern Missouri in recent years have emerged as suppliers of so-called frack sand. It’s a commodity in wide demand among energy producers who rely on the tiny granules to prop open the cracks in shale rock, allowing oil and natural gas to escape.
The sand companies include Mississippi Sand LLC, a venture formed in 2008 by a group of partners that included Fred Weber Inc.
The road construction company, based in Maryland Heights, subsequently sold its interest to a former employee, Tony Giordano, and his business partner. But Fred Weber still supplies the raw sandstone from its quarry just south of Festus – a mine developed decades ago that provided materials to help build Interstate 55.
Inside the quarry, the 65-foot layer of yellowish rock is easily identifiable from the edge of a large open pit.
Every few minutes, a 50-ton truck hauls a load of clumpy sandstone up a dirt road and deposits it at a processing plant that occupies a small patch of the 400-acre quarry.
“When they dump it, that’s when we start with it,” Mississippi Sand plant manager Mike Cochran says.
Every truckload is run through a series of humming machines linked by conveyors that in a sense function like a giant Rube Goldberg machine.
At each stop, clumpy sandstone is broken down into smaller bits and eventually into tiny spherical grains. They’re washed and dried to remove almost every bit of moisture. Finally, it’s run through mesh screens that sort it by grain size.
Quality is critical for petroleum producers spending millions of dollars to drill and complete a well. So every hour, an employee carries a plastic bag full of sand to a small lab in a nearby metal building, where it’s tested to ensure the granules meet American Petroleum Institute specifications.
Hydraulic fracturing, or fracking, isn’t new. The process involves injecting huge quantities of water and sand and some chemicals into the ground under high pressure to break apart shale rock and release the natural gas.
“We’ve been fracking wells forever,” said Shari Dunn-Norman, associate professor of petroleum engineering at Missouri S&T University in Rolla. “The technology really was perfected in the ’80s or even the late 1970s.”
But only recent advances that made the technology more economical for oil and gas producers allowed it to be deployed widely and triggered the boom unfolding across the country today.
The sand produced in eastern Missouri is prized for fracking because it’s nearly pure silica, or quartz, allowing it to maintain its integrity thousands of feet below ground. The sand grains are also almost perfectly spherical, another important characteristic that allows gas to flow more easily.
“Mother Nature has done a lot of work on this material,” said Thomas Dolley, a mineral commodity specialist for the U.S. Geological Survey. The sand “is not perfectly round, but it’s as good as you’re going to get.”
This sand comes from the St. Peter Sandstone, a geologic formation created by what was a shallow inland sea that covered parts of the country’s midsection hundreds of millions of years ago. The layer of rock, which crumbles easily, extends down the backbone of the United States, from Minnesota to Arkansas.
It’s the most widely mined geologic formation for silica sand, with probably at least 100 mines in the Midwest that produce it. “It could be as high as 200,” Dolley said.
A metric ton of the material sells for about $40 to $50, he said. But that excludes transportation costs, which can push the total cost for an oil and gas producer above $200 a ton.
And enormous quantities of sand are being produced to feed the gas drilling boom. A single frack job in the Barnett Shale formation in northeast Texas can require 100,000 to 300,000 pounds of sand, and a single well can be fracked numerous times, requiring some 3 million pounds of sand, Dunn-Norman said.
The USGS, which voluntarily collects production data, won’t report final 2011 production estimates until later this year. But industry estimates put the sand volumes at about 30 million tons, several times what was used even a few years ago. It’s enough that the oil and gas industry, once a small niche of the market for industrial silica sand, now dominates it.
“In the past three or four years, at least, frack sand has taken off like a meteor,” Dolley said.
Not surprisingly, the demand has led companies to open dozens of new mines or seek permits for new operations in Wisconsin and Minnesota, raising concerns among environmental groups about the cumulative impact of the frack sand frenzy.
Environmental groups, in fact, have challenged Mississippi Sand’s plans to develop a new sand mine near Starved Rock State Park in Ottawa, Illinois.
Missouri hasn’t seen the boom or the controversy that’s unfolding further north.
Mining of the St. Peter Sandstone in Missouri goes back to the 1870s. More than 65 million tons of sand, with an estimated value of $2 billion, have been sold over the years, according to the Missouri Department of Natural Resources.
In fact, Crystal City exists today because of the sandstone formation that led to the development of the PPG glass plant, which was the dominant employer in town until it was shuttered two decades ago.
Today, there are currently four quarries in eastern Missouri where silica sand is mined from the St. Peter Sandstone, according to the DNR. They’re all situated along a narrow, arc-shaped band where the formation is accessible by pushing or blasting away layers of soil and limestone.
Beside Mississippi Sand, other players in Missouri include US Silica, a Maryland-based company that became the first publicly traded sand producer. The company has mined and processed sand in Pacific for 25 years, though the quarry itself is much older.
Another company, Texas-based FTS International, opened a Perryville sand facility that began shipping sand five years ago.
Of course, mining sandstone and processing sand is only half the job.
At Mississippi Sand’s plant, finished sand is stored in a half dozen large silos. From there, it’s loaded onto trucks and then hauled to terminals for the next leg of its journey by rail or barge.
Mississippi Sand, for instance, also has storage facilities in Arkansas, Louisiana and Colorado, and sells both to drilling companies and natural gas producers operating across the country, from Texas’ Barnett Shale to Fayetteville Shale in Arkansas to Marcellus Shale in Pennsylvania.
When the company got into the business, larger and more established competitors left transportation up to their customers, Giordano said. But Mississippi Sand made logistics key to its business model.
“Our strategy has been to bring tha
t sand to the shale market,” he said.
And proximity to the Mississippi River has helped the company accomplish that.
“Utilizing the river we found to be very reliable,” he said. “The market was very dependent on rail, and we were the first ones to really rely on water as our primary means of transportation.”
In a perfect world, Mississippi Sand could produce about 1 million tons of sand a year. But 800,000 is a more realistic number at Festus, Giordano said.
These days, the company is shipping less than it once did. And processing operations that used to run around the clock have cut back to 16 hours a day.
“Our business ebbs and flows with gas prices,” Cochran said.
The reason: Mississippi Sand’s product is used mostly for dry gas – the stuff St. Louis area residents use to run their furnaces during winter.
But natural gas prices remain depressed amid a supply glut. And producers have scaled back drilling activity and set their sights on shale oil and natural gas liquids, such as propane.
But energy analysts generally agree that these prices won’t last, especially if there’s a cold winter and economic growth accelerates. The Energy Information Administration, in fact, predicts prices will steadily march higher for years to come.
When that happens, and gas drillers get back to work, Mississippi Sand says it will be ready.