South Dakota plans to conduct a study to identify suitable sand resources within the state that could be tapped by the private sector to help meet growing demand for sand in hydraulic fracturing markets, primarily in neighboring North Dakota, Petroleum News Bakken has learned.
“It’s a study that’s being talked about; and it’s a study for which I have promised others that we will have a work plan in the coming months,” Derric Iles, a state geologist and head of South Dakota’s Geological Survey program, said in a recent interview.
Sand is a key component in fracking, which has grown into a multi-billion dollar business as U.S shale plays develop, including the vast Bakken system, the heart of which is situated in North Dakota.
In fracking, sand is pumped with water and chemicals at high pressure into perforated horizontal wells, or laterals, where it flows into cracks in the shale that are opened by the pressure and keeps them open, allowing oil and natural gas to flow out of the rock.
It’s no secret that South Dakota has huge sand deposits associated with the Ogallala aquifer in the southern part of the state, as well as in the Fox Hill sandstone area in northwestern South Dakota, which abuts the North Dakota border.
Suitability is unknown
“So those are two units that we will look at for sure.” Iles said. “But whether or not it (South Dakota sand) is suitable, I have no idea.”
Especially coveted is silica-based sand, pure white quartz sands of the upper U.S. Midwest, which are hard enough to withstand intense pressure and round enough to let oil and gas escape horizontal wells. Most of the sand comes from mines in the Wisconsin-Minnesota area.
There is said to be a huge — and growing — shortage of high-quality silica sand. Reportedly, the price for commercial silica has gone up an average of 9 percent since 2000, with an acceleration to double digits in the last year or so. This increased demand from drillers in turn has led to a race among sand mining companies to expand their operations.
In fact, an inquiry regarding South Dakota’s sand potential from a company that supplies frack sand out of Wisconsin is what sparked Iles’ interest in doing the study. By late 2011, Wisconsin alone had 31 sand processing plants planned or in operation, rising from 18 as recently as last August.
Potential mining
“There’s been no formal study, no comprehensive look at … all of our possibilities in South Dakota,” Iles said. “So what the Geological Survey program … is going to be doing is to begin to look at the surface and near surface sands that might hold some potential for being mined and used for the hydraulic fracturing process.”
However, the study will not cover other “proppants” used in hydraulic fracturing, such as manufactured ceramic beads or resin-coated sand,” Iles said, adding: “It will be just the sand — easily attainable type sand.”
There is no market for frack sand in South Dakota, simply because currently there is no hydraulic fracturing in the state. Therefore, because of its proximity and booming oil economy, North Dakota would be the primary market for South Dakota frack sand, Iles said.
“Certainly the customer — the one with the most clout in the room right now — is the oil industry in North Dakota,” he added.
In 2010, U.S. frack sand production doubled to 13 million tons as drilling activity increased and new mines opened. Hydraulic fracturing consumed about 40 percent of U.S. industrial sand output last year, up from 27 percent in 2009, according to the U.S. Geological Survey.
Demand soaring
Demand for fracking sand soared even more in 2011. Oilfield market research firm Spears & Associates reported it was about 22 million tons. Each drilling job can swallow up to 10 million pounds of sand.
One report predicts that the overall fracking sand market will grow about 16 percent annually to $5.1 billion in 2015. U.S. and Canadian demand for the specialty sand will grow 15 percent a year to $1.9 billion in 2015.
Moreover, while consumption has grown, the number of sand companies has quintupled in the past five years to about 25. The largest include Unimin, Fairmount Minerals and Badger Mining.
“I think the Wisconsin company was simply looking at what might be available to develop in South Dakota,” Iles said. “But certainly there are South Dakota firms that would be equally qualified to develop that resource as well.”
Boots on the ground
As far as the sand study goes, Iles said that “over the coming year we are going to be looking at this. That means boots on the ground, and we will actually be looking at the resource and its potential.”
He said the study will be conducted by the state Geological Survey program in the South Dakota Department of Environment and Natural Resources.
“It’s a little late in the game right now to actually get people into the field this summer; but for certain, next summer,” Iles said. “The fall is also a nice time to be out in the field.”
