Central Texas sand mines closing
Permian competition sweeping them away
The construction of new sand mines in the Permian Basin in West Texas is causing the closing or mothballing of mines in other parts of Texas, as well as in other states such as Wisconsin.
Operators said this week they will close three mines in Central Texas. The Permian sand mines have an advantage by being closer to the center of U.S. oil production, where companies are using vast amounts of sand to hydraulically fracture, or frac, oil wells. The sand, which is mixed with water and chemicals, holds open cracks in shale rock to allow oil and gas to escape.
The rush to build sand mines in recent years as the oil industry came back to life following the recent oil bust has created a glut of sand, even as production companies use greater volumes. Almost 20 new West Texas mines opened in the past two years.
Pioneer Natural Resources, a Dallas exploration and production company, said Thursday it is shuttering its Brady mine, while Ohio’s Covia Corp. will close two nearby mines in Voca. Covia, however, has opened two new mines within the Permian near Kermit and Crane.
Pioneer, which focuses almost exclusively on Permian oil production, will lay off dozens of workers at the mine.
“Our Brady sand mine and other Brady sand sources have been an integral part of Pioneer’s success and were critical in our transition to horizontal shale development,” said Pioneer Chief Execu-
tive Timothy Dove. “However, new West Texas sand mines with their low cost of mining and proximity to our Permian acreage position have provided us a more cost-effective, long-term source of sand supply.”
Dove said Pioneer will save about $400,000 per well by relying on sand mines recently built within the Permian. The Brady mine will close early next year.
Covia Chief Executive Jenniffer Deckard said Wednesday she is “taking decisive actions in response to challenges faced in our energy segment.”
Covia has two Voca mines because the company was formed through the recent merger of two rivals, Fairmount Santrol and Unimin, each of which owned a Voca facility.
Earlier this fall, Covia said it temporarily shuttered four plants in four states — Minnesota, Missouri, Michigan and Illinois. Covia also reduced its activity at its East Texas mine in Cleburne and at two other plants, in Missouri and Wisconsin.
Nationwide, the demand for frac sand skyrocketed from roughly 40 million tons in 2016 to about 100 million tons this year. Analysts initially projected that demand this year would rise to about 110 million tons, but Permian pipeline shortages have led that estimate to be revised downward as companies delay completing new wells.
As drillers have pushed to become more efficient in producing oil, wells have become deeper and longer, and the amount of sand used to frac each has surged. The largest wells now consume up to 25,000 tons — 50 million pounds — of sand each, up from 1,500 tons, or about 3 million pounds, just a few years ago. Companies can afford the increase because the sand is cheap, selling for $30 to $50 per ton.