FREDERICA FREYBERG:

AS WE’VE MENTIONED, ONE OF THE GROWING REGULATORY AREAS FOR THE DNR IS THE STATE’S FRAC SAND INDUSTRY. WISCONSIN IS THE BIGGEST PRODUCER IN THE NATION OF THE FINE SAND USED IN THE HYDRAULIC FRACTURING PROCESS FOR OIL. A RECENT REPORT CALLED WISCONSIN THE SAUDI ARABIA OF SAND, WITH ITS MORE THAN 60 ACTIVE MINES. TALK ABOUT YOUR GROWTH INDUSTRY, JUST FIVE YEARS AGO, THERE WERE JUST FIVE MINES. BUT THE PRICE OF OIL TOOK A STEEP SLIDE, SO WHAT DOES THAT SPELL FOR THE FRAC SAND BUSINESS? WE TURN TO THE PRESIDENT OF THE WISCONSIN INDUSTRIAL SAND ASSOCIATION, RICH BUDINGER. AND RICH, THANKS VERY MUCH FOR BEING HERE.

RICH BUDINGER:

THANKS FOR HAVING ME.

FREDERICA FREYBERG:

SO WHAT ABOUT THAT QUESTION. WHAT DOES THE DROP IN THE PRICE OF CRUDE MEAN FOR THE FRAC SAND INDUSTRY HERE?

RICH BUDINGER:

IT’S PRESENTED AS A LITTLE BIT OF A CHALLENGE FOR US IN OUR INDUSTRY. BUT IT’S NOT UNLIKE THE CHALLENGES THAT WE’VE SEEN IN THE PAST. CHALLENGES WITHIN OUR INDUSTRY, WITH OIL PRICES FLUCTUATING, WE’VE SEEN IT SEVERAL TIMES. SO RESPONSIBLE MINING COMPANIES, RESPONSIBLE COMPANIES THAT HAVE BEEN IN THE BUSINESS FOR A WHILE, THIS IS NOTHING NEW AND WE KNOW HOW TO — WE KNOW HOW TO IT HANDLE THE FLUCTUATION IN THE ECONOMY.

FREDERICA FREYBERG:

BECAUSE MINING ITSELF IS KIND OF ONE OF THOSE CYCLICAL INDUSTRIES?

RICH BUDINGER:

ABSOLUTELY. SO THE SAND, THE FRAC SAND THAT YOU REFER TO, THE INDUSTRIAL SAND, IT’S AN INDUSTRIAL MINERAL. SO ITS USES RANGE FROM NOT ONLY THE FRAC SAND THAT HAS BEEN RESPONSIBLE FOR THE TREMENDOUS GROWTH IN THIS STATE, BUT IT’S ALSO BEING USED FOR FOUNDRY SAND AND GLASS MAKING AS WELL.

FREDERICA FREYBERG:

SO YOU’RE A LITTLE BIT DIVERSIFIED IN THAT WAY?

RICH BUDINGER:

YES. AND ONE OF THE REASONS WHY INDUSTRIAL SAND HAS BEEN A PART OF WISCONSIN’S HISTORY HAS PRIMARILY BEEN FROM THE GLASS AND THE FOUNDRY AND THE CONSTRUCTION USES DATING BACK TO THE LATE 1800s, EARLY 1900s.

FREDERICA FREYBERG:

BUT DESCRIBE WHAT HAS KIND OF HAPPENED TO THE DEMAND FOR FRAC SAND.

RICH BUDINGER:

BACK IN 2007, 2008, WE STARTED TO SEE SOME GROWTH, AND THEN AFTER THE LAST RECESSION, 2010, WE SAW TREMENDOUS GROWTH IN THE INDUSTRY. AND THE USES OF HYDROFRACKING SAND WITHIN THE OIL AND GAS INDUSTRY AND THE TECHNOLOGY APPLIED HAS BEEN RESPONSIBLE FOR THE GROWTH IN DEMAND.

FREDERICA FREYBERG:

I ALSO UNDERSTOOD THAT ACTUALLY THERE’S A NEW PROCESS IN THAT HYDRAULIC FRACTURING FOR OIL, WHERE THEY USE MUCH MORE OF THIS FRAC SAND. IS THAT REASON ENOUGH TO KIND OF OFFSET THE PRICE OF CRUDE?

RICH BUDINGER:

WELL, AS THE ECONOMY CYCLES, ONE OF THE THINGS THAT COMES BACK TO OUR INDUSTRY IS THE NEED TO REDUCE OUR COSTS. TAKE ADVANTAGE OF INNOVATION, AS WELL AS TRYING TO LOWER OUR COSTS THROUGH A DIFFERENT MEANS OF EFFICIENCY. SO AS THE ECONOMY, AS THE BARREL STARTED TO DECLINE, IT PUT PRESSURE BACK ON NOT ONLY THE OIL AND GAS INDUSTRY BUT ALL THE SUPPLIERS AND INDUSTRIAL SAND IS ONE OF THE SUPPLIERS — SUPPLYING INDUSTRIES TOWARDS THAT OIL AND GAS FIELDS. SO WHAT HAPPENS IS WE LOOK FOR BETTER WAYS TO DO OUR BUSINESS AND IT’S ALL PART OF THE CONTINUOUS IMPROVEMENT PROCESS. SO WE’RE TRYING ALL KINDS OF DIFFERENT TECHNOLOGIES AS AN INDUSTRY AS A WHOLE.

FREDERICA FREYBERG:

WHAT KINDS OF LAYOFFS HAVE THERE BEEN AT INDIVIDUAL MINES?

RICH BUDINGER:

WELL, AS THE ECONOMY DROPS, THE BARREL OF OIL DROPS. IF THE BUSINESS IS TIED DIRECTLY INTO SUPPLYING FRAC SAND, THAT COULD IMPACT IN A COUPLE DIFFERENT WAYS. LAYOFFS AND BUSINESS CHANGES, BUSINESS MODELS, IT DEPENDS ON WHERE THAT BUSINESS IS AND WHAT THEIR COSTS ARE, COST STRUCTURE. THERE HAVE BEEN SOME SLOWDOWNS, BUT I THINK PRIMARILY THE BIGGEST CHANGE THAT WE’VE SEEN IS A SLOWDOWN IN THE GROWTH OF OUR INDUSTRY WITHIN WISCONSIN.

FREDERICA FREYBERG:

BECAUSE I UNDERSTAND THAT THERE ARE ALMOST AS MANY INACTIVE MINES RIGHT NOW AS THERE ARE ACTIVE, AND ARE THOSE EXPECTED TO KIND OF GO BACK INTO SERVICE OR GO INTO SERVICE IF THIS THING COMES UP AGAIN?

RICH BUDINGER:

IT’S HARD TO TELL. AND I’M NOT EXACTLY SURE HOW MANY ARE ACTIVE, HOW MANY ARE INACTIVE. BUT AS THE ECONOMY CHANGES, THOSE MINES MAY INCREASE THEIR PRODUCTION AGAIN OR THE GROWTH MAY COME BACK IN THE EXACT SAME SPOTS THAT IT HAS SLOWED DOWN SINCE THE BARREL DROPPED. SO IT’S HARD TO TELL.

FREDERICA FREYBERG:

NOW, YOURS – I DON’T HAVE TO TELL YOU – CAN BE A CONTROVERSIAL INDUSTRY, SOME ENVIRONMENTISTS DECRYING THE EFFECTS ON THE LANDSCAPE, POTENTIAL AIR QUALITY AND NOISE. DO YOU EXPECT CHANGES TO STATE REGULATIONS AS A RESULT OF THIS REORGANIZATION THAT WE SPOKE OF EARLIER WITH THE DNR OR OTHERWISE?

RICH BUDINGER:

WELL, WISA – WISCONSIN INDUSTRIAL STANDARDS ASSOCIATION – WE’RE A TRADE ASSOCIATION THAT OUR FOCUS IS RESPONSIBLE MINE PRACTICES AND ALSO HAVING A POSITIVE DIALOGUE WITH OUR STAKEHOLDERS. THAT’S THE COMMUNITIES WHERE WE OPERATE, THAT’S THE REGULATORS, THE WISCONSIN DEPARTMENT OF NATURAL RESOURCES, SO WHEN THERE’S ANY PROPOSAL FOR INCREASED REGULATION OR CHANGES TO EXISTING REGULATION, WE WANT TO BE PART OF THAT CONVERSATION.

FREDERICA FREYBERG:

SO WHAT ARE YOU HEARING AS PART OF THAT CONVERSATION AS TO WHAT THESE REGULATIONS MIGHT LOOK LIKE, WHETHER OR NOT THEY MIGHT BE STRICTER OR, IN FACT, RELAXED?

RICH BUDINGER:

WELL, RIGHT NOW THERE’S A LOT OF QUESTIONS ABOUT CLEAN AIR, CLEAN WATER – THE ACTS THAT HAVE BEEN DELEGATED BY THE U.S. EPA TO THE WISCONSIN DEPARTMENT OF NATURAL RESOURCES AND THEIR ABILITY TO MANAGE WITHIN THE REGULATIONS THAT ARE PART OF THAT FRAMEWORK. AND ANY CHANGES THAT MAY OCCUR, SUCH AS MONITORING, ANY KIND OF ADVERSE IMPACTS OFF THE PROPERTY, ARE CONSTANTLY BEING TALKED ABOUT, BUT ONE OF THE THINGS TO MAKE AN IMPORTANT POINT ABOUT IS THAT INDUSTRIAL SAND, THERE IS STRICT REGULATION THROUGH THE CLEAN AIR ACT THAT MANAGES THE AMOUNT OF DUST THAT’S ON SITE, BUT WE AS WISA, AS RESPONSIBLE OPERATORS, WE MAKE SURE THAT WE’RE OPERATING BEYOND COMPLIANCE. AND SO WHEN WE’RE APPLYING BEST MANAGEMENT PRACTICES, WE LIKE TO SHARE THOSE WITH EACH OTHER, WITH THE MEMBERS, AND WE ALSO LIKE TO TALK ABOUT THOSE WITH OTHER MEMBERS OF OUR INDUSTRY. SO AS THE INDUSTRY PROGRESSES AS THE REGULATIONS CONTINUE TO BE DISCUSSED, I WOULD HOPE THAT IF THERE ARE ANY CHANGES, IT’S MORE ON HOW DO WE DO THINGS BETTER, HOW DO WE MANAGE OUR OPERATIONS, TO GO BEYOND THE COMPLIANCE AND GO BEYOND THE REGULATORY FRAMEWORK.

FREDERICA FREYBERG:

WE NEED TO LEAVE IT THERE, RICH BUDINGER, THANKS VERY MUCH.

RICH BUDINGER:

THANK YOU.