1. Frac Sand Mining in SE Minnesota Minnesota County Engineers Association January 24, 2013 David F. Kramer, P.E. Winona County Engineer

2. What is “Fracking”? Hydraulic fracturing of shale to release crude oil and/or natural gas. Inject “proppant” (usually “frac” sand), water and chemicals. Proppant props open the fissures and is a conduit for oil and/or gas to flow to the well. 2

3. Source: Wisconsin DNR, http://dnr.wi.gov/topic/Mines/documents/SilicaSandMiningFinal.pdf 3

4. Frac Sand Properties Grains of quartz (silicon dioxide or “silica”) High strength and hard Round Fairly uniform in size 4

5. Sources of Proppant Sandstone – St. Peter (“Ottawa” sand in the sand industry) – Jordan – Ironton/Galesville (“Wonewoc” in Wisconsin) – Suitable sand economically mineable (near the surface) is relatively rare (WI, MN, IL, IA) Synthetic Materials – Ceramics from China or Russia 5

6. Winona County Bedrock Geology 550 to 490 million years ago 490 to 450 million years ago AKA Wonewoc 6

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8. Frac Sand Processing Mining (surface or underground) Washing & Screening (at mine or elsewhere) – Unusable fraction may be returned to the mine and used in reclamation. Drying Shipping in sealed containers 8

9. St. Peter sandstone Ottawa, Illinois facility 9

10. Source: Mn DNR, http://files.dnr.state.mn.us/lands_minerals/silica_sand_fact_sheet.pdf 10

11. Winona County Timeline Fall 2011, eight mine CUP applications. – 5 returned as incomplete (not processed). – 3 denied due to excessive impact on roads. (3-2 vote) Jan – Apr 2012, 90 day moratorium – Main county board discussion was roadway pavement concerns Currently three mine have EAWs in process – 120, 600, and 600 truckloads/day respectively. Proposed Minnesota Proppant washing, drying & rail facility east of St. Charles – Purported by opponents that it would be the largest frac sand processing facility in the United States. 11

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13. Pre Moratorium (Fall 2011) 13

14. Source: http://www.mnproppant.com/docs/MNProppantInfoMtg.pdf 14

15. Source: http://www.mnproppant.com/docs/MNProppantInfoMtg.pdf 15

16. Source: http://www.mnproppant.com/docs/MNProppantInfoMtg.pdf 16

17. Primary Frac Sand Concerns Silica dust health concern (silicosis or cancer) Truck traffic concerns – Safety & congestion (traffic issues) – Roadway surface deterioration (Primary focus during Winona County’s moratorium) – Noise & exhaust Water – Significant use in processing affecting nearby wells – Contamination by sand, flocculants, etc. 17

18. Roadway Impacts Traffic Congestion Safety Concerns Pavement Deterioration On: State Highways (Interstate, U.S., Mn Highways) County Highways aka County Roads – County State-Aid Highways (state-aid & local funding) – County Highways (local funding only) City Streets Town Roads – Gravel – mine operator maintains while they use. 18

19. Pavement Impact One legal 80,000 pound GVW tractor- trailer truck does as much damage to road pavement as 9,600 cars. Source: Highway Research Board, National Academy of Sciences, 1962 19

20. Williston, North Dakota experience. NBC, Rock Center with Brian Williams, November 4, 2011 http://video.msnbc.msn.com/rock- center/45150953 20

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22. What are others doing about this? We queried County Engineers for the other 86 Minnesota counties. Multiple conversations with southeastern MN and western WI counties. – Chippewa County, WI has been dealing with this for a couple years, and has road use agreements that have been a template for other WI counties. 22

23. Paying for Pavement Impacts Things Considered & Discussed Additional road use taxes already collected. State-aid highways – use state-aid funds. Aggregate tax Bond – not a funding source; just insurance. Impact fee per road use agreement – Identify improvements & pay upfront Similar to Chippewa County, WI agreements – ESAL-mile & pavement cost consumed Similar to Jackson Co, Mn & Mn LRRB methodologies 23

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25. Minnesota Highway Users Tax Distribution Fund 2012 total $1,751,350,667 2012 Winona County State-Aid Apportionment $4,912,970 0.28% of total Roughly $3 per $1,000 of state road user taxes $28.05 per $10,000 of taxes 25

26. County State-Aid Highways Financed by both state-aid and local funding. – State-aid amount is fixed by MN constitution and statutes. – Any incremental increase in costs, if not collected from mine operations, will be borne by local taxpayers (or by shifts from other projects which are ultimately borne by local taxpayers). 26

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29. 6.375 cents/ton Net $0.06375/ton to County 29

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31. http://www.lrrb.org/trafcalc.aspx 31

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33. ESAL – Equivalent Single Axle Load ESAL Defined: One ESAL represents a single standardized load application. Each ESAL is known to cause a quantifiable and standardized amount of damage to the pavement structure equivalent to one pass of a single 18,000-pound, dual-tire axle with all four tires inflated to 110 psi. Source: Alaska Flexible Pavement Design Manual. 33

34. What is an ESAL? 18,000 lb axle weight 34

35. THE CALCULATIONS If you think this equation is complicated…It is Flexible Pavement ESAL Equation Generalized Fourth Power Law http://training.ce.washington.edu/WSDOT/Modules/04_design_parameters/04-3_body.htm#esal 35

36. Axle Type Axle Load Load Equivalency Factor (from AASHTO, 1993) (kN)(lbs)FlexibleRigid Single axle 8.9 44.5 62.3 80.0 89.0 133.4 2,000 10,000 14,000 18,000 20,000 30,000 0.0003 0.118 0.399 1.000 1.4 7.9 0.0002 0.082 0.341 1.000 1.57 8.28 Tandem axle 8.9 44.5 62.3 80.0 89.0 133.4 151.2 177.9 222.4 2,000 10,000 14,000 18,000 20,000 30,000 34,000 40,000 50,000 0.0001 0.011 0.042 0.109 0.162 0.703 1.11 2.06 5.03 0.0001 0.013 0.048 0.133 0.206 1.14 1.92 3.74 9.07 ESAL Typical Load Equivalency Factors http://training.ce.washington.edu/WSDOT/Modules/04_design_parameters/04-3_body.htm#esal 36

37. Jackson County Construction Cost Trends Jackson County Rural Construction Costs Per ESAL / MILE Roadway Construction Year Location LengthProjectCost Per 20 year Design $ cost per ESAL per Mile MilesCostMileESALper ESAL CSAH 342000-2001Hwy 71 to East County Line6.89$2,618,066$379,980.55180,334$2.11 CSAH 342003-2004West County Line to CSAH 97$2,505,991$357,998.7182,653$4.33 CSAH 342004-2005CSAH 9 to Hwy 867$3,601,303$514,471.8677,644$6.63 CSAH 342006-2007Hwy 86 to HWY 719$5,754,281$639,364.5676,391$8.37 Cost per ESAL / Mile Forecasted for Year 2010$11.51 37

38. Assumptions for Funding Scenario Based on typical existing pavements with current 500 ADT and designed for 110,529 ESALs; pavement cost based on reclaiming and asphalt paving at $200,000/mile. 2 sand mines; 70 + 60 = 130 truckloads/day; 6 days/week; 7 months/yr; 23 tons on 80,000 lb truck that is 2.4 ESALs; trucks travel 10 miles on county roads. 38

39. Paving New Asphalt Over Reclaimed Asphalt Approximately $200,000 per mile. 39

40. Funding Scenario February 7, 2012 presentation to Winona County Board 1 Assuming 23 Tons on an 80,000 lb semi that is 2.4 ESALs. 2 Assuming 10 miles on County Roads (County Highways and County State-Aid Highways). 3 Assuming 2 mines, 70 + 60 = 130 truckloads/day; 6 days/week; 7 months/yr; 23 tons/truck. 4 Based on 2012 levy $16,972,674. 5 Aggregate Tax amount per ton to the County Road & Bridge Fund is $0.06375 per ton. 6 Based on current traffic of 500 vehicles per day; 20-year design; traffic grows to 550 vehicles/day during the 20 years. Note 5 Aggregate Tax 40

41. Example Roadway Surface Costs for Sand Mining Haul Routes Information for the Winona County Committee of the Board March 6, 2012 Prepared by David Kramer, Winona County Engineer $0.23/ton/mile, from Minnesota Local Road Research Board, Traffic Impact Calculator Tool Based on the Major Traffic Generators Impact Tool spreadsheet at http://www.lrrb.org/trafcalc.aspx, using default spreadsheet values and actual pavement design data from 2006 CSAH 6 and CSAH 33 repaving project plans in locations of plausible haul routes. Using calculation method 1 of 3, the “GE Difference Method.” Based on 300,000 tons of sand hauled; 23 tons/load on 80,000 pound gross-weight trucks; 13,043 loads. $0.22/ton/mile, from the funding scenario in the February 7 presentation to the County Board The funding scenario had an interim calculation of $0.19 cost/mile/ton. Based on a construction cost of $200,000/mile to reclaim and pave an asphalt roadway; based on a pavement design of 500 vehicles/day; 20- year design; traffic grows to 550 vehicles/day during the 20 years; 20-year design ESALs of 110,529; 23 tons/load on 80,000 pound gross-weight trucks that are 2.4 ESALs. The $200,000/mile cost is for the construction contract only. Adding 16% for preliminary engineering and construction engineering gives a cost of $0.22/ton/mile. $0.25/ton/mile, Buffalo County, WI draft road use agreement. In a draft road use agreement that had been verbally agreed to but as of February 13, 2012 had not been signed. Based on $1.00/ton; 4 mile segment of County Rd P impacted; $250,000/mile project necessary to upgrade the road to handle the mine traffic. 41

42. Winona County Board Consideration Fee/ton or fee/ton/mile is preferable over identifying specific impacts/improvement project and paying upfront – Cash flow issue for small mine operators – Numerous mines with relatively short durations and overlapping haul routes Go with fee/ton/mile – More equitable than fee/ton – More representative of impact 42

43. In addition to identified improvement costs per the final approved traffic impact analysis, a Roadway pavement impact fee shall be required of $0.219 (Jan 2012) per ton per mile, with the rate adjusted annually on January 1 to account for inflation using the Engineering News Record Construction Cost Index. Tons are net tons of material hauled in the primary hauling direction. Return of empty trucks or backhauling a fraction of the primary haul will not be counted if the return route follows the reverse route of the primary hauling direction. Per mile means per mile of paved public roads, not including trunk highways under the jurisdiction of the Minnesota Department of Transportation. The $0.219 per ton per mile is based on a construction cost of $200,000 per mile to reclaim and pave an asphalt roadway; including 16% for preliminary engineering and construction engineering the project cost is $232,000 per mile. Based on a pavement design for 500 vehicles/day; 20-year design; with traffic growing to 550 vehicles/day during the 20 years; 20-year design ESALs of 110,529; $2.099 per ESAL per mile. Based on 23 tons per load on 80,000 pound gross-weight trucks that are 2.4 ESALs; $0.219 per ton per mile. Winona County recognizes the presence of historic industries such as agricultural services, manufacturing and distribution as being accommodated by current public infrastructure and therefore it reserves the right to impose road impact exactions exclusively on new infrastructure-dependent industry having a disproportionate impact on county infrastructure due to a combination of high vehicular weight and traffic volume as determined by the Planning Commission and County Board. Any and all fees collected will be used exclusively for the purpose intended, not co mingled with any other funds, and refunded on a prorated basis should it be determined that the funds are over and above the amount needed for the intended purpose. Roadway Impact Fee approved by Winona County Board April 24, 2012 (Vote: Yes -5) 43

44. What about traffic from outside the county? CUP approval condition to require processing facility to collect Road Impact Fee for incoming sand trucks (where it’s not already collected). Cooperative agreements with adjacent jurisdictions. Last resort – load post roads & enforce to prevent damage 44

45. Can you convert that to an equivalent fuel tax? County Commissioner Query For a truck hauling 23 tons, the fee would be 23 x $0.219 = $5.037 per mile in the primary hauling direction only. This would equate to $2.518 per mile if one includes both the primary hauling direction (full) miles plus the return (empty) miles. Assuming the truck gets 5 miles per gallon both when full and when empty, the $0.219 per ton per mile would thus be equivalent to $2.518 x 5 = $12.59 per gallon 45

46. Is $0.219/ton/mile the right amount? Reclamation & repaving: $232,000/mile, 110,529 ESALs, $0.219/ton/mile Reconstruction & 8” concrete (NIC Engr & R/W): $1 million/mile, 3,400,000 ESALs, $0.031/ton/mile $232,000 may be low. Due to mine locations & depletion, and long-term global market factors, improved roads may or may not receive enough truck traffic to pay for improvements. 46

47. Wabasha County City of Wabasha has 1 trans-load to rail facility under construction, another seeking permits – Initially sand will come from Wisconsin – City is working cooperatively with Wabasha County regarding impact to CSAHs within the city that will be impacted. County moratorium may soon be lifted. Fillmore County Moratorium has been lifted. Four mines are in the application stage. Where We’re At in SE MN Most counties have or had a moratorium to set up adequate controls. 47

48. Olmsted Counties Adopted road use agreement and traffic impact statement requirements in the CUP process. Goodhue Goodhue had a study group that produced a report (link below). Moratorium was extended and the study group is revisiting the study. Houston County Moratorium in place. County successfully defended stopping an intensity change for an existing sand pit (that was originally permitted for a bridge project). 48

49. Winona County City of Winona – Moratorium currently in place. – 8 processing and/or loading facilities (existing or pre- moratorium facilities). Sand mostly from Wisconsin. – 1 mine: 100+ year old rock quarry went down into Jordan sandstone. County has 3 mines in EAW stage. No road use agreements (including $0.219 impact fee) have yet been drafted. – In practice we don’t know yet how well this will work, but we have a framework that doesn’t leave county property tax payers holding the bag. 49

50. 50 Other Resources http://www.dnr.state.mn.us/lands_minerals/silicasand.html http://files.dnr.state.mn.us/lands_minerals/silica_sand_fact_sheet.pdf http://dnr.wi.gov/topic/Mines/Silica.html http://dnr.wi.gov/topic/Mines/documents/SilicaSandMiningFinal.pdf http://www.wisctowns.com/education/frac-sand http://www.co.goodhue.mn.us/countygovernment/committees/MiningCommittee/Su mmaryReports.aspx http://www.mnproppant.com/ http://www.sandpointtimes.com/ http://www.co.winona.mn.us/