The southeastern Minnesota facilities that produce and process silica sand used in hydraulic fracturing, or fracking, were booming a year ago. But now, natural gas prices are down — and so is the demand for the sand.
The slowdown in this emerging industry has changed the appearance of places like Winona. The rail terminal at the intersection of Wilson and Second streets in downtown Winona now sits empty.
Traffic is slow compared to last year, when a stockpile of frac sand filled the terminal. Some residents dubbed it 'Mt. Frac.' Nearby business owners complained the sand drifted onto their property. And activists saw the giant pile as a symbol in the debate over sand mining that was unfolding in the region.
But now that pile is gone and the Modern Transport rail terminal has shut down temporarily.
A few blocks away at city hall, Assistant City Planner Carlos Espinosa said the stockpile was one of nine active or proposed frac sand operations in Winona. But he said that in just a couple years at least half of them, if not more, have come offline.
Click for before and after views of Winona
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"They haven't been used at all. Also, the ones that are active right now, aren't seeing as much truck traffic as was occurring a couple of years ago," Espinosa said. "Overall, you're seeing quite a decline in the amount of truck traffic and the amount of activity at these operations."
REGULATIONS ENACTED IN LULL
Espinosa said the pile of sand in Winona's downtown spurred controversy and discussion. City officials drafted an ordinance that caps the size of existing operations. The city ordinance also requires any new operators to assess the traffic and truck routes of future projects.
Truck traffic still rumbles through Winona, but Espinosa said it's mostly sand coming from Wisconsin.
"Things are relatively quiet right now and it has actually worked out to the benefit of everyone," he said. "The lull in the industry happened while we were putting together our regulations and our response to what we saw a couple years ago. So I think if things pick up again, we'll basically be ready."
The rail terminal's owner, Steve Kohner, declined to comment on tape but said business has dropped considerably because of a drop in the price of natural gas.
Across the region, the frac sand rush has slowed considerably in the last 12 months as natural gas prices have dropped. This lull has given local leaders time to catch up on implementing rules for the industry.
In Winona County, officials imposed a usage fee on frac sand producers of $0.22 per ton per mile.
County Planning Director Jason Gilman said the proposed mine operators are also required to submit a traffic impact analysis, but even those have limitations.
"Where a traffic impact analysis will look at road capacity and level of service and where people's level of comfort is related to congestion, it doesn't necessarily address general comfort and aesthetic and the things that may concern a community that all of a sudden has 200 trucks coming through it," Gilman said.
Currently, three mines are under review in rural Winona County (see map). County officials will likely consider a conditional use permit for one of those mines on a 19-acre site near Saratoga township in the next few months.
OPPONENTS KEEP UP FIGHT
But while the demand for sand has dropped, some residents like 64-year-old Vincent Ready still worry about how the emerging industry may change the area's way of life. Ready raises cattle and Clydesdale horses near the proposed mine.
"To me, that amount of traffic of this type of matter is unhealthy for the community," Ready said. "It's bad for our children, it's bad for people that live here. It's bad for our entire farming community."
New regulations don't appease Ready, who continues to write letters to county officials and has testified at several committee meetings at the State Capitol.
"I hope that people in general will not remain apathetic about it," Ready said. "I'm surprised when I meet people who don't know about. I think people should know once the activity starts, it will be too late to flip a swich and make it go in reverse."
SMALLER OPERATORS UNDER PRESSURE
Industry analysts are also looking at how the current slowdown may affect smaller operators, who don't have direct access to a rail line and must transport sand by truck to a city like Winona.
"If they're too far away from a rail line, they're not even considered economically developable," said Dave Christianson, a senior planner in the office of freight and commercial vehicle operations for the Minnesota Department of Transportation. "Some of the smaller mines and the mines that have high transportation costs are just not going to be able to compete."
While the sand rush has slowed throughout the region, industry analysts expect a resurgence in sand demand in a few years. But it's still unclear how much of that sand will eventually come from Minnesota. Wisconsin produces nearly six times more sand a year than Minnesota, according to Christianson's rough estimate.
As demand increases, experts say the Badger state could essentially double its production with the permits it already has in place. Wisconsin produces 30 million tons of sand a year, compared to Minnesota's roughly 5 million tons.
View Frac Sand facilities in Minnesota in a larger map