They got burned on their sensationalist claims that hydraulic fracturing caused flaming faucets. They were sunk by their own studies showing that fracking was responsible for groundwater contamination. They’ve sent in the Justice Department to harry the biggest names in the industry over so-called anti-competitive practices. Now the government’s newest assault on the practice comes from the Occupational Safety and Health Administration, which is proposing new, stricter regulations on the sand that’s used in the fracking process.
Fracking, which has been done for more than 60 years, is a process in which drillers pump large amounts of water, fluids, and chemicals deep into the ground under high pressure and cause the shale rock to crack. The fluids contain sand or ceramic beads called proppants that prop open the fissures and allow the gas and oil to flow more freely.
U.S. Silica Holdings Inc (NYSE:SLCA) is the second largest domestic producer of fracking sand behind privately held Unimin, a division of Belgian giant Sibelco, while CARBO Ceramics Inc. (NYSE:CRR) is the world’s largest ceramic bead maker, though it also provides sand. Where it saw ceramic proppant volumes decline 14% in the latest quarter, sand volumes surged fivefold. U.S. Silica Holdings Inc (NYSE:SLCA) saw its volumes jump 15% to 2 million tons.
According to the Minnesota Department of Natural Resources, some 10,000 tons of silica sand are used in each well. So important is material to oil and gas drilling that EOG Resources Inc (NYSE:EOG) sought to become more vertically integrated by buying its own sand mines in 2008.
But as the practice has grown exponentially, environmental activists and regulators suggest that the sand itself presents a health hazard to workers much the way asbestos does. Silica isn’t like beach sand, but rather is a much finer, purer material. Imagine clouds of dust billowing up when a saw cuts through concrete, and you get the idea of what they’re suggesting workers are breathing in.
While the Obama administration estimates 700 lives a year can be saved by putting new rules in place, industry representatives say the current regulations already adequately protect workers because they reduce or completely eliminate the risk of breathing in the fine particulates. Moreover, the cost of the new regs would be huge. The new rules also apply to industries outside oil and gas, and the metal-casting industry alone says they will cost about $1.5 billion annually to implement.