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This Week’s Market Buzz

  • Six-year-low crude oil prices may have decimated new drilling activity, but market indicators show there is a more intense use of frac sand in the new wells that remain in the Eagle Ford and other shale plays. A June 11 report from global investment bank Jefferies shows that overall demand for frac sand is down in 2015 due to low oil prices but its use per well has been steadily increasing over the past three years.

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This Week’s Market Buzz

  • According to the investment website Seeking Alpha, long term, the market dynamics for frac sand are still in place. The amount of frac sand per well seems to be increasing for now based on the fact drillers are using more stages per well. As prices fall drillers are incentivized to increase the amount of frac sand they use per well to increase IRRs. Many drillers have shifted from a "total production at all cost" strategy to an IRR-focused strategy, which means they will likely keep increasing the amount of sand used per well. Short term, the number of wells drilled but awaiting completion may drive demand, but it is very uncertain if this will prove to be a lasting trend.

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This Week’s Market Buzz

  • According to madison.com, 30 workers at U.S. Silica’s Sparta, Wis., plant will be laid off July 15, when the plant cuts back production because of the trickle-down effect of the lagging oil market, a company spokesman said. “We will operate the plant with a smaller workforce because we’ve seen a significant decrease in oil drilling, which has reduced demand for our sand” used in drilling, the company said.

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This Week’s Market Buzz

  • According to the Winona Post, Arcadia, Wis.’s moratorium on nonmetallic sand mine operations will remain in place. Arcadia City Council members decided to not take any action to prematurely lift the city's moratorium on sand mining operations that was implemented last year and is expected to expire September 15, 2015.

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This Week’s Market Buzz

  • According to the LaCrosse Tribune, the Minnesota appeals court panel heard arguments from a sand mine owner protesting a Department of Natural Resources ruling that the mine cannot operate without a special permit because of its proximity to a trout stream. Asking that the state’s ruling be reversed, an attorney for mine owners Tracie and Michelle Erickson of Rushford, Minn., argued that the mine, in existence since 1992, should be exempt from the trout stream setback law passed by the Legislature two years ago. A lawyer for the state countered that the mine’s permit lapsed in early 2013, triggering the requirement that it meet new setback standards. The appeals court has 90 days to issue a ruling.

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