Seeking Alpha

In fracking, sand is the new gold, but health concerns rise

  • The U.S. shale bonanza is creating a boom in fracking sand, whose use has increased 25% since 2011, with a further 20% rise expected in the next two years, WSJ reports.
  • It takes 25 railcars of sand, on average, to frack one well, and companies are experimenting with increasing the amount of sand they use to see if it boosts output.
  • Sand mining companies have benefited greatly: Shares in Hi-Crush Partners (HCLP) have jumped 59% since Aug. 2012, while U.S. Silica (SLCA) has doubled since the company went public in 2012.
  • But concerns are growing over pollution from silica dust, which has been linked to cancer and lung diseases; the huge increase in demand for sand has some believing that some companies are operating with a sharper focus on production than on how that production is achieved.
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Comments (9)
  • Bob de'Long
    , contributor
    Comments (698) | Send Message
     
    Seeking Alpha's Michael Filloon had a great article on this on November 3rd. The WSJ is a month late.

     

    Sand is not a rare commodity. The capacity to produce it is in temporary shortage.

     

    Here is Mr. Filloon's article: http://seekingalpha.co...
    3 Dec 2013, 11:22 AM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2522) | Send Message
     
    Oh boy...sand causes cancer. So much for a day at the beach.
    3 Dec 2013, 11:40 AM Reply Like
  • kujhawk80
    , contributor
    Comment (1) | Send Message
     
    Silica sand mining is regulated just like every other industry. The EPA holds strict standards for these companies and requires constant (active) monitoring of particulate release. There is likely more risk in the mining industry due to OSHA violations than EPA related violations.
    While I agree that silica/quartz sand is not necessarily a rare commodity. What makes the sand that is used in fracking so valuable is the fact that it must be spherical (not angular as a majority of silica/quartz sand is) as well as the fact that it must have a minimum specified crush strength in addition to some additional technical requirements. In consideration of these requirements, mined silica sand used for fracking (supply) is far outweighed by silica sand consumed in fracking (demand). If you believe that fracking is going to slow down dramatically in the near term, you should short the sand miners. Given the drilling technology and the continued increase in silica sand as the proppant of choice for oil-field servicers, I am going to continue to be long (in full disclosure, I am long SLCA).
    3 Dec 2013, 12:08 PM Reply Like
  • Hendershott
    , contributor
    Comments (1558) | Send Message
     
    Everything in excess causes cancer, sunlight included.
    3 Dec 2013, 03:18 PM Reply Like
  • 745
    , contributor
    Comments (195) | Send Message
     
    Just when things were going so good someone has to poop in the pool! Long both companies.
    3 Dec 2013, 04:26 PM Reply Like
  • Storecounter
    , contributor
    Comments (29) | Send Message
     
    Wear a mask if anyone is that concerned.
    3 Dec 2013, 04:27 PM Reply Like
  • RoOnTheRun
    , contributor
    Comments (67) | Send Message
     
    Meanwhile HCLP was up about $1.20 today. I think the market picked up not the cancer but the need for more tracking and therefore more sand.
    3 Dec 2013, 06:10 PM Reply Like
  • manfredthree
    , contributor
    Comments (1824) | Send Message
     
    SLCA's true long term strength is that it has mastered the supply logistics in a way that puts them in the spotlight of the major drillers involved. They will enjoy secure growth and leveraged profitability from this Best Available Technology.
    4 Dec 2013, 09:29 PM Reply Like
  • Jake37
    , contributor
    Comments (25) | Send Message
     
    Someone check with SLCA, they have been mining silica sand for 100 plus years. If silicosis is a problem they will know about it,right? Sounds more like brad pitt or Michael Moore shooting their mouth off.

     

    P.S. SLCA produced the sand that PPG used in the window you are sitting next to.
    8 Dec 2013, 11:00 PM Reply Like
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