Web Exclusive: Pit & Quarry Roundtable

Pit & Quarry’s annual Roundtable & Conference was held in Oak Brook, Ill., and following are the combined, edited transcripts from the two roundtable sessions.

Session 1

Participants
Brian Barlow, BMG/BMG Green
Evan Clarke, Kleemann
Darren Constantino, Pit & Quarry
Tripp Hammett, Hammett Gravel
Lee Heffley, Bramco-MPS
Jerad Higman, Masaba Mining Equipment
Mike Hinrichsen, Caterpillar
Darin Matson, Rogers Group
Shawn McKinney, Illinois Assn. Of Aggregate Producers
Dave McLaughlin, Astec
Carl Metzgar, Industry Safety Consultant
Hunter Moore, Boxley
Alan Parks, Memphis Stone & Gravel
Andrew Philp, Weir Minerals – Linatex
Geoff Simon, MDU Resources
Tom White, White & Associates

CONSTANTINO: As always we’ll begin with a discussion about the economy, which hasn’t changed much since we met in Nashville last fall (2010). We’d like to hear from you about how the economy is affecting your business and other businesses in your market area. What effect is this having on you and your customers? Is equipment financing still a concern?

PARKS: Overall, we’re still producing at nearly half of what we were before the recession, but when I looked at our fiscal year, which ended June 30, our material sales had improved slightly. If I compare the last three quarters to last year, we’re dipping a little bit, so by year-end I expect we’ll be flat. Our sister company, which makes and lays asphalt, has seen production increase year over year, thanks in large part to a single large job that they were the successful bidder on. And because our sister company is our single largest customer, that’s helped us — that relationship has helped us weather this downturn to keep both of our companies competitive. New home construction, which significantly affects our business, is still very slow, and I’ve seen some improvement in heavy commercial and industrial investment taking place. But you still see a lot of “For Lease” signs where there used to be small businesses.

MOORE: I’m with Alan (Parks). Our volumes are about 40 percent down from the peak of 2008. Right now, virgin asphalt is rocking and rolling, so to speak. However, on the quarry end, we’re making a lot of clean stone for that asphalt and base is just piling up. There’s not a lot of new construction going on, unfortunately. Base inventory is becoming an issue.

McLAUGHLIN: As an equipment manufacturer, we peaked in 2008 also and saw a big downfall in 2009. And we’re slowly climbing back to those levels, but our growth is international – a little bit in North America but mostly international. So we’re looking overseas until this market recovers, and that’s a challenge. We’ve seen steady growth the last three years and we expect another good year this year, but we’re still not to the level that we were in the aggregate divisions of our company before the downfall.

CONSTANTINO: Dave (McLaughlin), where overseas are you seeing most of the growth?

McLAUGHLIN: We’ve got 19 companies in our organization, so we’ve got hot spots for all of them right now and they’re different. They’re not all the same. I think all manufacturers have scaled back in the downturn and with the business picking up substantially in the last year and a half, we can’t ramp up fast enough. We can’t get supplier materials fast enough, we can’t hire people fast enough. So you producers want equipment, you want it now, and inventories are low, our factories are full and backlogs are a pretty good size.

HEFFLEY: It’s always been an industry where decisions are made somewhat quickly. You guys need equipment almost immediately, but what you run into from a distributor aspect, is that manufacturers have told us there are still enough hot spots around that demand for equipment can suck up what’s available in their inventory. For example: Even though we’re not in a large frac sand market, we’re competing with dealers that are, for a lower amount of equipment that’s available. It makes it tough to be able to supply our customers.

HIGMAN: When things got bad, we obviously ramped down and now have ramped back up. You hire somebody now, and they pass the drug test, show up to work on time and work hard. I think it’s been good for every company out there, as crazy as it sounds, but I think it’s made us look at who we are and become more efficient. I see us doing a lot more custom projects than what we were doing before.

MATSON: On the aggregates production side, our business is down year over year about 13 percent. We didn’t forecast it that way. We forecasted pretty much a flat year. So it’s a little bit of a surprise. On the asphalt construction side, we’ve had a lot of good business in resurfacing work, which has thrown our aggregate plants out of balance. But we continue to see an erosion on margin on bid work. There are a lot of good deals out there. The states, the counties and private sectors are getting some good deals right now. There are a lot of hungry contractors. So the workload may be up, but the profitability on that work is definitely down. It’s a continuing struggle for us. We have to consolidate crews. We’re covering multiple plants with one crew. We have to change our whole way of doing business in this economy.

PHILP: As an equipment provider, we’re seeing the same scenarios. The aggregate market is struggling because of lack of construction. But other marketplaces, such as heavy mining, the oil and gas industry, the power industry, they’re all performing very well. Therefore, we are struggling somewhat to deliver equipment on time just because of the demands. And the demands are not just driven out of North America. But as much as the aggregate’s market is in a downturn, we’re very much interested as a supplier of equipment to ensure that we maintain our involvement in the aggregate’s marketplace – maintain relationships, maintain deliveries and the like to the aggregate groups.

CLARKE: As a manufacturer, we’ve found steady growth this year, and we forecast a flat year for next year. We find our markets in the aggregate industry are certainly down this year. Our growth is with the contractor market and the recycling market – and with the oil and gas. And supplying equipment has certainly been a problem for us, too. The European market for us is strong, but other markets around the world have dropped, and we’ve been able to send that equipment over into the U.S. market.

HINRICHSEN: As a manufacturer, the aggregate business has been important to us, and it has dropped dramatically. We have been fortunate as a global manufacturer to be able to offset that through other demands. We’re adding a tremendous amount of capacity globally, including in the United States – expecting an upturn. We want to make sure we’re ready for when the aggregate business comes back. From the mobile equipment side, there hasn’t been any significant fleet replacement across the industry for three or four years. Your fleets are getting old, and you’re going to need equipment. So, we’re forecasting an upturn in business on the aggregates side, not in terms of your production, but in your demand for mobile equipment.

BARLOW: We’ve all gone through this and it’s not been a pleasant experience. But, will it make us better, will it make producers better, will it make equipment suppliers better, will it make distributors better when we come out of this?

MATSON: Clearly, yes. You have to get very internally focused when you’re in this situation, and you start looking at how you spend every penny. It’s clearly going to make us a leaner and meaner organization.

HEFFLEY: It’s time to fire things up and start becoming creative again. Producers have been forced to ask, “What can we do differently? How can we be more efficient, whether it’s energy efficiency, personnel, crushing technology – whatever it might be. That, in turn, drives us to respond in a creative way also.

CONSTANTINO: Perhaps no topic strikes as much passion among producers as the Mine Safety and Health Administration (MSHA). Has the agency changed for better or worse under Joe Main?

HAMMETT: We are now covered by a different regional MSHA office. The positive is that we’ve seen a major change in our inspections – they’re way more consistent, the inspectors have been friendly and reasonable, which is all a positive.

McLAUGHLIN: There are inconsistencies between the states. As a manufacturer, we really struggle with how do we build equipment for Wyoming, for Mississippi. We’re spending hours and hours of engineering time to design that tail guard. Then the equipment goes out, and it’s not good enough in one place, but it’s good enough somewhere else.

MATSON: Rulemaking has clearly increased under the current administration, with plans to further regulate mining without any clear justification behind the rulemaking. This leads to a lot of inconsistencies and interpretation. And the movement continues toward strong enforcement and less towards helping the operators in compliance and to make their operation safer.

METZGAR: There are still sects in part of the world where the leader handles venomous snakes. Depending on how the snake is handled, the snake is perfectly content. But, occasionally the snake bites. That’s what you’re dealing with: 2,000 out-of-control inspectors. If they’re handled the way they want to be handled, they’re nice and nothing happens. But if the district office or the subdistrict office says, “Your quota goes from eight citations to 10,” the snake is going to bite. I’m at a loss to figure out how we regain control and how we influence this.

MATSON: Ten or 15 years ago, there was more of a partnership when an inspector came on your site. You weren’t automatically guilty. You as an operator felt like you had some say in the inspection, and it was more of a give-and-take and they were there to help. It’s not that way anymore.

McLAUGHLIN: To me that’s a step backwards.

CLARKE: We’re building a brick wall higher between MSHA, the manufacturer and producer, and rather than trying to figure out what MSHA is doing, I believe we should be trying to make more of an effort to work with MSHA to see what we can do to lower that wall and improve those relationships. Health and safety is important to all of us.

PARKS: We’ve seen some changes, and I think perhaps Secretary Main has delivered on his commitment to change some of the attitudes of some of the overzealous inspectors, and perhaps even root out some that were abusing their authority.

MATSON: I have to agree. We have seen some improvement on writing good paper instead of bad paper.

CONSTANTINO: What do you mean by that?

MATSON: Citations that make sense versus those that don’t. Legitimate citations.

HIGMAN: Common-sense stuff.

MATSON: Versus others that are just off the wall.

CONSTANTINO: We’re in the middle of yet another extension of the highway bill, with little sign from Congress that a large, multi-year, highway-funding bill is imminent. The Senate is proposing a short-term, two-year bill at about current levels while the House is proposing a long-term, six-year bill with about one-third fewer dollars per year. What are your thoughts?

MOORE: The states rely tremendously on this federal highway bill. It’s hard for states to plan when we keep having short-term extensions of the current bill. It makes it hard for producers to have any type of plan. I’m a proponent of a six-year bill. If it’s not the full amount of money, that’s fine. It’s just a lot easier to plan capital investments when it’s a long-term solution, which I think benefits manufacturers, as well.

HIGMAN: Why not invest in the U.S. and our infrastructure? Everybody in this room knows it’s falling apart. It’s in a state of disrepair, and we’ll have another accident like the bridge collapse in Minnesota. I truly believe that.

PARKS: I’m disappointed we don’t have a long-term bill at this point. Now we’re going into the presidential election campaign and going to have to debate it. I think at this point a six-year bill is critical and, unfortunately, uncertainty about the future continues to be a drag on the economy. Having a long-term horizon will lead to more long-term investment in this country and in our industry.

HINRICHSEN: I don’t think you can accept a six-year bill with a 34 percent reduction, besides the fact that it impacts all our businesses, it’s not good for the country.

MATSON: That’s right.

SIMON: It comes down to the bottom line. Everybody wants more, but you have to come up with a way to pay for it. To this point, Republicans have resisted any increase to the user fee. They may be more amenable to raising the user fee if it’s tied to things they like, and one of those is expansion of domestic oil and gas production. It is going to create more jobs and, at the same time, improve our domestic security and improve the economy. My suggestion is that as new areas are open for leasing and expansion, a portion of that royalty revenue be shared with states that will benefit from it, because state budgets are in trouble. Also, a portion of it should go to the highway trust fund.

CONSTANTINO: Frac sand is one of the hot topics in the aggregates industry. Oil and gas companies claim the practice of fracking is safe, while homeowners on the front lines are up in arms. In the meantime, some producers are cashing in on the demand for frac sand. Is this affecting your business, and how do you think this controversy is going to play out?

SIMON: In a story Darren (Constantino) wrote, I took issue with his use of a study that was conducted by Duke University regarding the Marcellus Shale area of Pennsylvania. They had sampled water wells for the presence of methane, which is natural gas, basically. This study is absolutely useless because it contains no baseline data whatsoever. They don’t have a before-and-after – before-drilling and after-drilling picture. The U.S. Geological Survey sampled about 9,000 water wells in North Dakota, and found methane in about 25 percent of them. Methane is all over the state and is found in areas where there is no active drilling whatsoever. Environmentalists and others who have an issue with oil and gas production will use something like this and distort the findings in order to support regulations or prohibitions on hydraulic fracturing. The practice has been employed for decades. It’s been around for quite some time and it’s effectively regulated at the state level.

BARLOW: I’m going to take a devil’s advocate approach. The history of oil and gas self-regulation has had its significant ups and downs. No doubt about it. So now you have these gas pipes blowing up all over the place. You have these oil pipelines that are leaking or have cracked, and there are several of them out there. Look at what happened in the Gulf. Did that have to happen? And they haven’t changed anything. They’re still using that same piece of equipment that didn’t work this last time. So I look at this industry and say we’ve got to look at the people that are affected by it, as well – the human aspect of it. The quarry business and mining business have gotten a lot better, but I think oil and gas have been given a free ride longer than other industries have.

Session 2

Participants
Scott Alexander, Avenrock Materials
Andy Bartram, FLSmidth
Jeff Carlisle, Douglas Manufacturing
John Garrison, Terex Minerals Processing Systems
David Gross, Orica USA Inc.
Michael Heenan, Ogletree Deakins
Jeff Heinemann, Sandvik Mining and Construction
Mark Krause, Lafarge North America
Ron Kuehl, Polydeck Screen Corp.
Alan Maio, CRH China
Alan Odgers, JW Jones Co.
Sam Palombo, W.S. Tyler
Alan Parks, Memphis Stone & Gravel Co.
Christopher Peri, Cemex
Mike Pratt, Prairie Materials
Blaine Pressley, Volvo Construction Equipment
George Reddin, FMI Corp.
Brian Richesson, Pit & Quarry
Damian Rodriguez, REMco

RICHESSON: As always, we’ll begin with a discussion about the economy, which hasn’t changed much since we met in Nashville last fall [2010]. We’d like to hear from you about how the economy is affecting your business and other businesses in your market area. What effect is this having on you and your customers? And is equipment financing still a concern?

ODGERS: In the domestic market, we find that new equipment sales are in the fair to good range, somewhat consistent. The niche market of Latin America, the focus is extremely strong in construction activity. Our total volume is up substantially this year, about 70 percent. That’s not just a good economy. That’s some of the niche markets of Latin America. And key niche areas of silver and gold mines, for example, are strong this year.

RODRIGUEZ: I view the U.S. market as flat. Nothing significant is happening. You got some replacement business. There is the old equipment that, sooner or later, has to get replaced. So that happens. But the situation in export is very, very strong right now. And it makes the difference to a U.S. manufacturer what your export standing is and whether they recognize you as a reliable supplier. So it pays dividends to make an effort to become known, go to those markets, the same as you would go to customers here in the U.S. You have to treat those customers with the same respect and courtesy that you would with a customer in the U.S. For the foreseeable future, that’s going to remain the situation for most American producers of processed equipment because we have a very mature market.

HEINEMANN: I would echo Alan and Damian’s comments as it pertains to U.S. and Canada. We definitely see that there’s growth in the mining segment, in the business with gold, and it is going to continue for the foreseeable future. So there is a fair amount of business obviously going to Latin America, to Asia, certainly South Africa and Australia, no question about it, that’s going to continue to be doing very well for the foreseeable future. What we see, as it pertains to the construction business, there is a fair amount of activity going on that is supporting those mining businesses, whether it be infrastructure, certainly Marcellus shale is a big thing. So there is a fair amount of activity that we were able to grab ahold of in the construction arena that actually supports mechanisms in the mining business. As it pertains just to general construction, we are seeing some replacement business. We are seeing aftermarket services pick up a little bit with parts and services. For next year, if you want to get into the economy, I don’t see it getting any better.

KRAUSE: First off, if we’re banking on our government to bail us out of our business right now, that is not a comfortable position for everybody to be in. The discourse that goes on in Washington and the negativity and the polarization of the parties – it doesn’t matter which side you’re on – to me, it doesn’t sound like much of anything is going to get done long term. So then, as you try and forecast the business going forward, it’s hard to say we’ve got a stable base to build on. Now, on the positive side, you get the nice, big job that’s nearest to your client, okay, so you secure that. But then what does that mean from an equipment standpoint? That means you’ve got to rent. And I would say trying to rent equipment is tough. There is not a lot out there.

RICHESSON: Chris, from a producer’s perspective, can you talk about what you’re seeing in California?

PERI: Absolutely. It’s something that we get a lot of recap work and everything like that from a lower level. We know for a fact it’s going to come back, most likely in two, two-and-a-half years. So a lot of it is asphalt/repave work. So if you look at asphalt/repave, same thing, we have unemployment in California that is in the teens right now, with Nevada in the high, high teens. It is very difficult. So we don’t have any outside help near California right now. It is going to be very difficult moving forward.

BARTRAM: From the traditional business in the highway market and the residential market, it is now swinging toward making asphalt chips and wind turbines, supporting the products required for wind turbines and for gas wells. We are also seeing replacement of machines to make those chips, because a lot of producers weren’t set up to make chips for the blacktop and the roads that had to be resurfaced. Other than the rebuild or the replacement of machines, we’re not seeing a lot of turnkey projects either.

ALEXANDER: A lot of projects are out there, but they’re just not ready to go forward yet because there is no confidence in the general economy. And there are financing concerns. It makes you a little optimistic in thinking in another year or two, or maybe with a change in administration, these projects are going to come out of the ground and things are going to pick back up. We just put a new plant in in Tennessee in the past six months, and we went out and bought a completely new plant and mobile equipment. And it was kind of surprising at the time, in making the orders we thought that there’s just not been a lot of activity out there so all this equipment should be readily available. And we were surprised that the manufacturers had cut back, and things we thought would be on the shelf were not. And there was a lag in time when we could get it – it’s kind of ironic in what is happening in the economy overall.

MAIO: The states need to get their budgets under control, instead of using the federal dollars to fill the gaps in their own state budgets. Until they get their house in order, those dollars aren’t going to go out and get put out to work.

KUEHL: What’s interesting to me, we’re sitting in the room. We’ve got Mark [Krause] who just got back from Brazil, and Alan [Maio] is over in China. It makes us stronger because people are diversifying. They have to in order to survive. So there is a lot of diversification happening for us. We are focusing on some of the other markets. Diversification is what is most important for everyone sitting in the room.

GARRISON: For us, forecasting is a very difficult thing. We are breaking into the other markets as well and still trying to stay focused on the U.S. core markets. But it’s definitely the multi-layer thing. Everyone’s ramped down, whether you’re a manufacturer, producer, distributor. Everybody is ramped down, controlling costs, trying to manage cash, whatever cash they have. And everyone has learned how to do things with less people and still get the job done. But when things start to pick back up, all this pent-up demand, both for equipment, for the road building, for bridges, all these things, it is going to come to a head. And it is going to take us far longer to ramp back up to that than we’re going to want it to take, and particularly for our vendors.

REDDIN: One piece of good news may be P3 activity. It moves slowly, but it is coming. We see it dropping down from the major projects into medium-sized projects. The next 12 months are going to be very enlightening, and we’re fairly optimistic that is going to be a big factor.

RICHESSON: Perhaps no topic strikes as much passion among producers as the Mine Safety & Health Administration (MSHA). Has the agency changed for better or worse under Joe Main?

HEENAN: MSHA has become more aggressive than ever, pushing the envelope more than ever. They are doing things they haven’t done before. They are interpreting things the way they haven’t done before. It’s just a general upward creep in the regulatory environment.

MAIO: MSHA sees larger companies with deep pockets, who have the ability to pay those fines. They have the money to make these expensive improvements. The level of enforcement to smaller, independents and the larger producers is much different. MSHA goes into these smaller sites and knows if I give these guys 80 citations and it’s $40,000, well, he can’t pay it. I will put him out of business. But he knows if he comes into one of my sites, people are probably going to get fired, things are going to happen, those things are going to get fixed. A lot of those regulations save people’s lives, but it’s the consistency of what enforcement is done and less gray area and areas for interpretations.

HEINEMANN: The problem is there is just no parity. There is absolutely no parity in how they govern.

ALEXANDER: It gets people really heated, and especially me over the years, and you reach a level of a certain safety standard and a culture, which you put in your organization, and you meet that. And it gets frustrating when you get multiple citations for not having the right type of extension cord in your office or having a fan that’s not grounded, but it’s not even plugged in. I am on the board of the National Stone Association. There’s always so much on the highway program, but we really need to do something about MSHA. There is never an easy solution.

REDDIN: In the early days of the investment in safety practices, it was a win-win. It was great for the employees; it would help the companies run their businesses better, save on insurance, et cetera. But the question, and my sense is, that maybe it has swung now to where it is not quite as efficient, and it’s an added cost without corresponding return.

KRAUSE: Our relationship with MSHA has been a lot better in the last couple of years. But actually, our number of citations and warnings and everything, they’re down significantly. I don’t know if I can say why. We’ve kind of embraced MSHA more and kind of invited them in on a much more regular basis. And even though it’s different people from time to time, there is always going to be the inconsistency. From our viewpoint, MSHA has been easier to deal with lately than maybe some other people.

HEENAN: More than half of the accidents last year were of the type where the individual just makes that mistake. He’s got all the protections there; there is no need to do this. And they’re really just trying to do their job, in a way. They make a mistake or they are overambitious or saving time. And that’s the part to get ahold of. What MSHA enforces is mostly stuff that has nothing to do with that. The top 10 violations, recordkeeping is in there, for example. I suppose it’s one of those things that we just have to keep talking about.

RICHESSON: We’re in the middle of yet another extension of the highway bill, with little sign from Congress that a large, multi-year, highway-funding bill is imminent. The Senate is proposing a short-term, two-year bill at about current levels, while the House is proposing a long-term, six-year bill, but with about one-third fewer dollars per year. What are your thoughts?

KRAUSE: I’d be surprised if they can get the two years. If they can’t fund the government beyond November, to next week or whatever it is, do they really think they’re going to do two years or six years? I’m sorry. If they can’t even get a budget for the government beyond November, do I really believe that they will think two or six years down the road? No. They’ll fund next year, and that will be it. That’s my belief, as sad as that is.

RODRIGUEZ: For the last two years, there has been a lot of wishful anticipation for some of this. The federal highway tax on gasoline that was put in in the ’70s – that got thrown into the general fund by the Clinton administration. And then it was kept there by the Bush administration. So as far as construction, which is sparked by federal funding, I just don’t see that. It would be great if it happened, but I wouldn’t delay decisions waiting for that. Washington is broken. It doesn’t work. Washington doesn’t work for us. We’re just regular folks trying to make a living, right? The folks in Washington are motivated by dissension, disagreement and failure to perform. If any of those people were employees, you’d fire them, because they’re not competent. Regardless of whether it is a Democratic or a Republican, I don’t have a great anticipation of something coming out of that bill that would benefit my company or my customers.

HEINEMANN: As it pertains to the highway bill, I am running out of hope. But you can’t fund everybody. And unfortunately, with some of the state of the roads, they are beyond repair. Unfortunately, probably for us, the best thing we can do is lobby differently. Most of the public doesn’t get that. They don’t understand that, once the potholes show up, we are too late. We are not talking about just patching. We’re talking about replacement. So it is a tough nut to crack.

KUEHL: It’s about driving the economy. If we could get that funded, it could help the economy get started again.

ALEXANDER: That is an absolute necessary item that we have to address before the economy is going to turn back around. Like everything, it’s become so political. And the big question of, no matter where you look, the municipalities, local, state or federal government, there is just no money. And to me, being biased as a producer, biased as I am, the gas tax is the least painful and easier solution. We all know this thing gets brought up every time this comes up. But when we buy a gallon of gas, I don’t know what the price is out there right now, whether it is $3.29, $4.00 or $3.70. But a couple cents isn’t really going to make any difference to me, and I don’t think the general public will recognize that, either. There is a tremendous way, in terms of getting the funds we need to get our infrastructure back to where it should be. We are so far behind. If you look at any of the studies that have been published, just basic, we are not even keeping up with basic maintenance, let alone any type of enhancements. And it’s a huge problem.

KRAUSE: So Scott, from an NSSGA standpoint, is there something new, unique or different that we’re trying to promote this time or market differently?

ALEXANDER: I wish I could say yes. But for any of you that are on any of the links or get any of the emails from NSSGA, it is always the same thing. Call your congressman.

REDDIN: For the last 25 years, same thing.

KRAUSE: And again, I know it is important to call our congressman and all that. But somehow we’ve got to change the conversation, because where we are today I don’t think is going to cut it.

RICHESSON: Frac sand is one of the hot topics in the aggregates industry. Oil and gas companies claim the practice of fracking is safe, while homeowners on the front lines are up in arms. In the meantime, some producers are cashing in on the demand for frac sand. Is this affecting your business, and how do you think the controversy will play out?

RODRIGUEZ: Frac sand has been around for a long, long time. It’s nothing new. It’s something that received a lot of attention here recently from the energy industry. My impression is that most producers today cannot make a frac sand properly. First of all, there is not a uniform spec for frac sand. It can be interpreted locally. It can be something that some guy wants or some company wants. And the problem with making frac sand is that the particles have got to be very, very polished and have to be very, very uniform in strength. Because you put tremendous pressure when you pump it, when you pump it down a hole, and you can’t have the particles fail. So one of the issues then is not every type of aggregate deposit can be used for making frac sand. Only certain materials that qualify to make that specification or withstand the strength that’s required. So there is still a lot to be learned about frac sand.

CARLISLE: I have no doubt that some of the things that you’re reading and hearing about, by and large, have everything to do with people not really understanding it.

RODRIGUEZ: There is no uniformity to the spec. In Canada, they make it in three or four different sizes. They are very narrow, like 40 to 60 mesh, 60 to 80 mesh. And then it has to be permeable so that material can flow through it. But it has to also have durability. So it has to do lots of things. And I don’t think the science is complete yet. I don’t think there has been enough work done there.

KUEHL: There is an engineer somewhere in the process that says this is the recipe that we need for this well. So the different size fraction that we see – because obviously we are interested in this quite heavily – 30, 70 and 140 has been the primary size for frac sand when you’re screening it. But because it’s a recipe, there are no controls. Nobody knows really what they are pumping down the wells. And because nobody knows what they’re pumping down the wells, then you can have the chemicals, you can have the rest of the stuff you get down there. And that’s the groundwater kind of issues that start getting discussed. The controversy will get resolved, if you just follow the money. There is a lot of money in this. So somehow or another, the regulations will get through this, and it will probably end up safer. But how long it takes us to get there, I do not know.

RODRIGUEZ: Yeah. Well, when somebody says that we’re going to use 70 to 140, and it’s the engineer on the project, he has no clue what an aggregate processor or a mining company has to go through to get 70 by 140 with high strength. You mine a hundred tons then you’ll end up with five tons of frac sand. One of the problems is a lack of understanding in the oil and gas industry as to what’s required when you’re making this stuff.

KUEHL: I couldn’t agree more. We have one particular account that’s driven by oil and gas people. They’re not crushing and screening people, they’re oil and gas people. And they really, truly have a hard time understanding what’s going on.

REDDIN: The ancillary benefit of the industry is the pads themselves, where the wells are, consume a good deal of aggregate. And then they are often down in the rural areas where roads need to be developed to get there, even maybe sand and gravel roads. So there is a tremendous amount of aggregate that’s going into this business.