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News Briefs - November 2014

According to the latest PacWest Consulting Partners ProppantIQ market study, North America proppant consumption is expected to increase at 23 percent per annum through 2016, from 80 billion lb. in 2013 to 153 billion lb. in 2016, with much of the growth occurring in frac sand consumption. Growth in proppant consumption is driven by an increasing number of horizontal wells fracked and increased proppant intensity (i.e. increased mass/well).The RCS and Ceramic markets will both grow at 9 percent and 2 percent per annum, respectively. Supply of all proppant types is expected to increase moderately through 2016, after substantial capacity increases between 2011 and 2013. Logistics will be challenging into the next few years, causing significant price increases at the well pad. This is due to shortages in railcars, built-for-purpose frac sand truck trailers and other factors. However, there should be improvement by 2015.

The Winneshiek County, Iowa, Board of Supervisors has extended a moratorium on frac sand mining until October of 2015. At a recent meeting, the board made the motion in order to give the Iowa Initiative for Sustainable Communities enough time to finish and compile the results of several studies it has contracted with the county to complete. The original 18-month moratorium on the issuance of any conditional use permits for frac sand mining was due to expire Dec. 3, according to the Decorah Journal.

Carbo Ceramics expects ceramic proppant sales to take a hit as drillers try new techniques that require sand proppants. The company also noted increased price competition on ceramic proppant sales from domestic and international manufacturers, especially in the Bakken play. "We plan to manage the current competitive pricing environment, caused by proppant oversupply, by focusing on sales volumes and introducing new technologies," CEO Gary Kolstad said in a statement. Some Carbo clients are also seeing delays with well completion, pushing some sales the company expected to make in September to later in the year. The company sees third-quarter ceramic proppant sales volumes of 375 million lb., similar to first-quarter sales, as demand for frac sand rises.

Frac sand in ambient air does not pose a health concern for Winona residents, according to the Winona Daily News. The first look at eight months’ worth of air monitoring data in downtown Winona, Minn., showed silica sand was, for the most part, undetectable. Only two samples taken from state monitors between January and August detected silica in the air, and both were well below the health standard set by the Minnesota Department of Health. “There isn’t a silica-related health issue in Winona at this time,” said Minnesota Pollution Control Agency spokesperson Jeff Hedman during a special meeting with local officials and the public, where MPCA officials presented results taken from air monitors on top of the YMCA.

As Williston Basin operators accelerate the use of sand for hydraulic fracturing – as much as 6 million lb. per well in some cases – there is an even bigger ramp up in new sand mines in Wisconsin and unloading terminals in North Dakota, according to Big Sky Business. EDG Resources, for example, uses 1,000 lb. of sand per lateral foot – about 2.5 to five times higher than proppant used on the average Bakken well. Some estimates put the proppant market in North America to exceed one billion pound worth $10 billion by 2017. One projection from PacWest, estimates the Bakken, Eagle Ford, Permian and Appalachia plays will account for 83 billion lb. by 2015 – accounting for 75 percent of the total U.S. proppant consumption. Even with the expansion, operators still cannot get enough sand. “They are bringing in sand by trucks from Wisconsin,” said Gabe Claypool, president and CEO of Dakota Plains Holdings, Inc. “because they cannot get enough sand cars. The railroads cannot keep up with the demand.”

Carbo Ceramics recently reported that average selling prices per lb. for proppants sold during the second quarter of 2014 were as follows: Ceramic $0.33; Resin Coated Sand $0.21; and Northern White Sand $0.03. Primarily due to the change in product mix, the average selling price per lb. of all proppant was $0.21 during the second quarter of 2014 compared to $0.30 for the same period in 2013. In addition to product mix, average selling prices can be impacted by sales prices, geographic areas of sale, customer requirements and delivery methods.

Hi-Crush Partners LP announced the appointment of Jeffery A. Johnson as director of environmental compliance, with the responsibility for maintaining and administering the regulatory compliance programs for all Hi-Crush facilities. Johnson brings more than 15 years of experience to the company, with the majority working within the environmental regulatory programs at the Wisconsin Department of Natural Resources. Johnson will have a senior leadership role in the continued development and implementation of Hi-Crush's environmental programs. “Hi-Crush continues to be fully committed to operating in an environmentally responsible manner and strives not only to meet, but to exceed, environmental regulatory requirements in the communities where we operate,” said Robert E. Rasmus, co-chief executive officer of Hi-Crush. “We are excited that Jeff has joined the Hi-Crush team and believe that Jeff's extensive experience and leadership in regulatory and environmental matters is a great fit for Hi-Crush as we continue to expand our operations.”

Canadian National Railway’s net income surged 21 percent to $853 million in the third quarter as revenues reached a record $3.12 billion. Revenues grew 16 percent from $2.7 billion as car loadings increased 11 percent to 1.47 million and revenue-ton miles were up 13 percent. “Clearly we are growing much faster than the economy, which is our game plan,” said CEO Claude Mongeau. The railway saw its volume reach a record high in the quarter on robust grain shipments and strong growth in energy markets. Analysts foresee strong growth prospects for CN in crude oil and frac sand.