Expert predicts more Wisconsin frac sand mines may close
MADISON, Wis. (AP) — The impending bankruptcy of a major frac sand mining company is a sign of the financial woes that could cripple more Wisconsin-based mines due to a nationwide oversupply of sand, according to an industry expert.
Emerge Energy Services entered into a debt restructuring deal with its lenders last month, Wisconsin Public Radio reported. The company owns Superior Silica Sands, which has frac sand mines in Chippewa and Barron counties.
CEO Rick Shearer said it’s premature to comment on the deal and that restructuring negotiations are ongoing.
The company could file for bankruptcy if a settlement isn’t struck out of court.
Up to 75% of Wisconsin mines that supply oil and gas producers might have to close due to the oversupply of sand, said Samir Nangia, energy consulting director at analytics firm IHS Markit.
Nangia said frac sand companies have built up more than a dozen mines closer to oilfields in Texas and Oklahoma within the last two years. Oil drillers are able to get local sand for less than the cost of shipping it from Wisconsin.
Texas mines alone are producing more than 100 million tons of sand per year, which is close to the estimated demands of oil and natural gas producers throughout the country.
“I don’t think we’re going to get a big enough demand number that simply absorbs all this excess supply this time,” Nangia said. “I think what we need is an actual reduction in supply and that means the painful bankruptcy process that you’re seeing, which has already started actually, but this is definitely one of the larger companies.”
Nangia anticipates that more mines will need to temporarily close, while some companies may decide to leave the state.
Wisconsin frac sand mines could see relief by producing sand for industrial purposes, such as foundries and glassmaking, he said, noting that the sector isn’t as profitable as oil and gas drilling.
Information from: Wisconsin Public Radio, http://www.wpr.org