Out in the west Texas plains, Greg Edwards runs a sand mine. Silos that dot the horizon out here mark the ever-growing competition in his field, which didn’t exist just one year ago. In an interview with Bloomberg, he provided a timeline for those entering the Texas sand sector. That’s right, there’s an industry designed around mining and shipping Texas sand.
According to reports, there are approximately 11 companies in place throughout west Texas for this industry, all of which popped up in the last 12 months. Roughly 10 more are in the process of trying to establish themselves. In terms of output, close to 22 million tons of Texas sand will be mined and shipped by these companies this year alone. It will be sent to shale drillers throughout the Permian Basin, which is now a hotbed for oil.
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The amount of output these companies will achieve is close to a quarter of the entire U.S. supply, and according to reports, that could grow to more than 50 million tons. All of this over something that just last year was, well, worthless. It now goes for $80 per ton. The original frac sand capital of the U.S. was northwestern Wisconsin, but this boom in west Texas appears to be outpacing that. Industry analysts are advising caution, however. Wall Street is of the opinion that, though things may look great today, you can’t assume it will last.
In Texas, our sand particles had been widely ignored for years due to their jellybean-like shape, as opposed to the popular marble shape found in Wisconsin, regularly used in fracking. In the summer of 2014, however, the price of oil dropped considerably. Cost-cutting in the industry became a priority, and the Permian Basin became the “it-place” to pump shale oil for cheap. In order to reduce costs further, the concept of using the sand which was local to the area came up for review, instead of paying for shipment from Wisconsin. Black Mountain is the largest frac sand business in west Texas. The company manages two mines which are just months old, yet they’re supplying sand at a pace which equals approximately 5 million tons per year.
Photo: Wikimedia
With all the hub-bub, the Texas sand mining sector is being likened to a similar industry of days gone by: a gold rush. Many people are only interested in acquiring land prior to a mining company’s arrival, then flipping that land to make a quick profit, like the speculators of olden days. What will it mean for west Texas and the Permian Basin? We’ve all seen how a boom-bust situation has resulted in prior sectors, including the gold rush. How will it play out for the Lone Star State?
