When it comes to frack sand in the Permian Basin, one thing is for sure—concerns remain.

As some operators pump more than 5,000 tons of sand per well to help crack open rock to release oil and test new completion techniques, frack sand suppliers are racing to fill growing sand needs. They’re building new mines—Alpine Silica being among the latest to announce expansion plans—as doubts linger on whether projects will be completed on schedule.

Good news is that sand suppliers are working to ward off logistical nightmares as they aim to grow capacity.

A trio of frack sand mining operators took the stage at Hart Energy’s DUG Permian Basin conference and exhibition in Fort Worth, Texas, in late May to talk about the emerging use of in-basin sand from West Texas sand dune deposits for hydraulic fracturing in the world’s most active shale play. They also discussed how they are working to meet the oil industry’s needs while addressing challenges.

Permian players have stepped up use of in-basin sand, which has proven effective in fracking operations at a lower cost. But Northern White sand still has a prominent role, according to Hi-Crush Partners LP (NYSE: HCLP), which has five facilities—four of which produce Northern White (two with takeaway via Union Pacific) and its new Permian Pearl facility in Kermit, Texas.

RELATED: Shifting Sands: Prices, Supply, Demand Concerns Remain In Permian

“There is tremendous demand and a lot of that supply is still being built or constructed, which means demand for sand in the Permian Basin is still being largely filled by Northern White sand,” Laura Fulton, CFO of Hi-Crush, told DUG Permian attendees.

The company estimates that about 25 to 30 million tons of in-basin Permian sand will be available to the market in 2018—mostly 100-mesh sand. However, there will still be great demand for Northern White, which some say has better crush strength and turbidity than in-basin sand. But the pace of capacity additions is being pressured by a myriad of factors such as construction delays, access to financing, logistical constraints, labor market tightness and a lack of experience, Fulton said.

But the shift to in-basin sand has a potential savings of up to $500,000 per well, said Black Mountain Sand CEO Rhett Bennett. He pointed out that Northern White’s total market share has dropped an estimated 32% over the last five years as in-basin sand demand has increased.

Meeting Demand

Hi-Crush’s Kermit facility opened in 2017 and was the first to provide in-basin frack sand in the Permian, but others have arrived since then and more are coming.

Black Mountain Sand began delivering sand from its new El Dorado sand facility in Winkler County, Texas, in early second-quarter 2018. The company also has a 5-MMtpa Vest facility in the so-called “Winkler County Trend” between the Midland and Delaware—home of most of the basin’s sand mines. Combined, Black Mountain’s West Texas facilities have a mining capacity of about 10 MMtpa. That’s about 320,000 truckloads of sand per year, the company said on its website.

Speaking to the DUG Permian crowd, Bennett said more than 500 trucks per day leave the Vest facility on average. “Our record day last week was 775 trucks in a day in a 24-hour period,” he said.

Being in-basin means you have to always be on and robust, he added, noting the basin is trending toward finer grades of sand—40/70 mesh and 100-mesh at 40% each, followed by 30/50 mesh at 15% and 20/40 mesh at 5% in 2018. But the company anticipates 100-mesh, prevalent in-basin, to make up half of the basin’s frack demand in 2019.

Growth plans are on Black Mountain’s agenda as well.

Bennett said the company is adding a fifth dryer at both Vest and El Dorado and one more Permian mine is under development as the company works to support long-term development in the basin.

Besides aiding in the shift to slickwater frack designs, in-basin sand also has a shorter supply chain when compared to Northern White. “We’ve gone from about 1,200 miles to less than 200…It’s really fit for purpose at a very attractive price,” he said.

Another positive about in-basin sand is that it is “slightly more recession-proof,” said Hunter Wallace, COO of Atlas Sand Co. He pointed out how proppant usage has decoupled from rig counts as operators have increased loading, extended lateral lengths and implemented pad drilling.

When there was essentially a flat period of rig activity from 2011 until 2014, sand demand increased about 103%, Wallace said. When oil prices collapsed in 2014, the rig count plummeted by about 73% over the next two years; however, sand demand dropped by only about 33% before the rig count turned upward in 2017.

All panelists seemed to agree that costs and logistics were among the big factors in the growth of in-basin sand usage. Prior to the surge in-basin sand, Northern White and Brady Brown were the sands of choice at costs of about $85-$110/ton and $75-$95/ton, respectively, according to Wallace.

“The big thing to focus on here is that they are all fairly far away and that 60%-80% of that cost is purely transportation,” Wallace said.

‘All About Logistics’

But it is regional sand that is ultimately being displaced in Fulton’s opinion. Central Texas sands, for example, are increasingly being moved to the Oklahoma or Eagle Ford markets instead of the Permian Basin due to trucking costs.

“It truly is all about logistics. Logistics is the name of the game,” Fulton said. Northern White’s ability to get into the basin via rail is an advantage, but so is in-basin sand’s proximity, she added. It helps to have diversity of supply if transportation becomes an issue.

“Ultimately you still have to get the sand where the customer wants it to be,” she said.

But with all the sand being moved across the Permian Basin, “at some point there’s going to be some massive logistics issues,” Fulton said. She mentioned how sand trucks typically show up 20 to 30 at a time, so the more the industry can do to have quick turnarounds would be good.

The issue is one Hi-Crush is addressing with its PropStream last-mile proppant logistics solution, which aims to reduce cost and environmental impact by simplifying the proppant delivery process.

“We’re using containers to deliver the sand to the well site and then using the containers and conveyor systems to actually deliver sand into the hopper for our customers,” she said. “Essentially you have the containers and conveyors forming a barrier from the rest of the well site. It’s a very quiet operation. Virtually no dust is being generated from operation itself.”

PropStream has also helped to reduce truck traffic by enabling Hi-Crush to put more containers on each trailer. In some instances, the number of trucks traveling to and from specific well sites has fallen by 10%, she said.

Other efforts are also underway. A West Texas miners association is being formed to pull together resources to pinpoint high-traffic and unsafe areas, Wallace said. Hopes are to work with the Texas Department of Transportation to identify areas where improvements are needed, and then find and fast-track solutions.

Velda Addison can be reached at vaddison@hartenergy.com.