Photo: Brett Coomer, Staff / Houston Chronicle Photo: Brett Coomer, Staff / Houston Chronicle Photo: Brett Coomer, Staff / Houston Chronicle Photo: Brett Coomer, Staff / Houston Chronicle

An influx of West Texas sand mines, coupled with a production slowdown in the booming Permian Basin resulting from pipeline shortages, has led to two companies suddenly idling five sand mining plants in the Midwest, eliminating hundreds of jobs, at least temporarily.

The sand mining services hydraulic fracturing, or fracking, in oil and gas wells. However, the demand for sand is weakening as companies delay fracking operations until more pipeline capacity is built to bring their oil and gas to Gulf Coast markets.

With pipeline projects unlikely to be completed until next year, many companies are drilling but not completing wells, opting to leave the oil and gas in the ground for now.

The federal government estimates the number of drilled but uncompleted wells — known as DUCs — in the Permian has jumped more than 40 percent, from 2,500 at the beginning of this year to more than 3,600 at the end of August.

On HoustonChronicle.com: Has fracking reached peak sand?

The fracking slowdown coincides with companies opening several new sand mines within the Permian, creating an oversupply that led sand companies this summer to slash prices by almost 40 percent, energy analysts said. The ripple effects are now cutting jobs as far away as Wisconsin and Michigan.

“I think there’s more idling and shut-ins to come,” said George O’Leary, director of oil services research at Houston energy investment firm Tudor, Pickering, Holt & Co. “The Permian is just now starting to crack.”

On Wednesday, the Houston company Hi-Crush Partners said it is idling one of its Wisconsin sand mining plants. Thursday morning, Ohio’s Covia Corp. said it is temporarily shuttering four plants in four states — Minnesota, Missouri, Michigan and Illinois. Covia also is reducing its activity at its East Texas mine in Cleburne, and at two other plants in Missouri and Wisconsin.

The sand, known in the industry as proppant, props open the fissures in fractured shale rock, helping oil and gas flow into the wells.

Nationwide, the demand for frac sand skyrocketed from roughly 40 million tons in 2016 to about 100 million tons this year as oil prices rebounded and the volumes of sand per well continued to rise. Analysts initially projected that demand this year would rise to about 110 million tons, but Permian pipeline shortages led that estimate to be revised downward, O’Leary said. In addition, fracking activity has slowed in natural gas shale plays in the Northeast.

That demand compares to about 150 million tons in U.S. sand production capacity by the end of this year. The Permian alone will soon account for almost 50 million tons of annual sand production capacity — astonishing growth for a new West Texas mining sector that was virtually nonexistent until two years ago.

West Texas brown sand is putting a lot of pressure on the higher quality, but more expensive, “northern white” sand from Midwestern states such as Wisconsin. The Midwest sand must be shipped more than 1,300 miles by rail to the Permian.

“The idling of these facilities is a difficult but necessary step,” said Covia Chief Executive Jenniffer Deckard, “and we regret the impact that this has had on our people, their families and the local communities.”

Covia was created in June through the merger of sand mining firms Fairmount Santrol and Unimin.

On HoustonChronicle.com: Fast growth of sand mining is ‘real deal’

The Permian is the fastest growing oil-producing region in the world, accounting for nearly one-third of the record U.S. oil production of 11 million barrels a day. That growth is starting to plateau as companies race to build and expand pipelines to refining and port hubs near Houston and Corpus Christi.

Most those projects, however, won’t start for about another year. Even with the added pipeline capacity, the oversupply of sand from the rapid expansion of mining operations should continue, likely causing some Midwest mines to close permanently, O’Leary added.

As drillers have pushed to become more efficient in producing oil, wells have become deeper and longer, and the amount of sand used to frac each has surged. The largest wells now consume up to 25,000 tons — 50 million pounds — of sand each, up from 1,500 tons, or about 3 million pounds, just a few years ago. Companies can afford it because the sand is cheap, selling for $30 to $50 per ton.

Northern white sand from mines in states such as Wisconsin is most desired by oil companies, but companies like Covia and Hi-Crush also are building more mines in West Texas to provide sand at lower costs, in part because it’s much closer to the wells.

jordan.blum@chron.com

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