For regulators, sand mine riches are tough to refuse

  • Article by: TONY KENNEDY , Star Tribune
  • Updated: October 28, 2012 - 5:13 PM

As the sand rush intensifies, county regulators are being hired away by the industry, creating backlogs of work and fears of conflicts of interest.

WHITEHALL, WIS. -- For Kevin Lien, the offer was almost too good to refuse. If he left his job as Trempealeau County's director of land management, the sand company would double his salary. And give him profit-sharing. And top it off with a shiny new pickup truck.

Lien, who has served this western Wisconsin county for 20 years, was tempted but ultimately decided to stay put.

Others receiving seductive offers did not.

As sand mining intensifies across Wisconsin and Minnesota, mineral companies are pouring into the region and many of them are enticing county regulators with job offers, hoping they will join an industry that they now oversee.

In the quest for lucrative mining permits that can be tough to get, the newly formed or out-of-state companies covet the local regulators' knowledge of the region's geography, personal connections in small towns, and intricate understanding of county ordinances covering health, traffic and the environment.

"This mining industry has lots of money to lure us away," Lien said. "No wonder we're losing people."

If the hiring wave continues, it could disrupt the ability of Minnesota counties to assess an array of high-stakes projects in a mining boom that is bound to have lasting economic and environmental consequences. In Wisconsin, where the land rush is well underway, counties are already struggling to keep up. Just this month, Buffalo County extended a moratorium on sand-mining applications, in part because its zoning staff was gutted by departures.

The job offers also raise serious ethical questions, said Steve Rannenberg, president of the Wisconsin County Code Administrators (WCCA).

Rannenberg said it's unprecedented for any "commercial industrial entity" to target county zoning employees for hire. He said the offers raise conflict-of-interest questions because land-use staffers have a hand in picking winners and losers in a burgeoning business that can be highly profitable.

In one case, a county sand specialist who worked for months on a mining application quit and went to work for the sand company as soon as the application was approved.

"Should the public be concerned? I would be inclined to say yes," Rannenberg said.

But Mike Fitzgerald, president of Superior Sand Systems Inc., said companies are buying experience, not influence. He said the public backlash against a company that hires county staff can outweigh the advantage of gaining instant local expertise.

"It actually handicaps us," Fitzgerald said. "People immediately lurch to the assumption that we did that in some way to gain influence in an underhanded way."

Oil boom, sand boom

The sand stampede that now stretches from central Wisconsin to southeastern Minnesota is being stoked by a national boom in oil and gas production that, federal officials said last week, could make the United States the world's leading oil producer. From North Dakota to Texas, energy companies are using a technique known as hydraulic fracturing -- or "fracking" -- to tap underground shale formations rich in petroleum and natural gas.

Western Wisconsin and southern Minnesota have vast deposits of high-grade sand that is vital to the fracking process, leading some to predict that the region could have a $1 billion mining industry before long.

So far, the highest-ranking local official to change jobs is Paul Van Eijl, the former zoning administrator in Buffalo County, which is just across the Mississippi River from Wabasha and Winona.

Van Eijl resigned as president of the WCCA this year and from his county job in early April to become a "land acquisitions manager'' for Fitzgerald's Superior Sand Systems.

County records show that Superior Sand and its affiliated landowners won the first conditional-use permit for a frac sand mine ever issued by the Buffalo County Board of Adjustment. The process caused a public outcry because the board voted for the permit during a suddenly announced field trip to the mine site in July 2011.

Fitzgerald, whose company is based in Calgary, traveled to Buffalo County for the pivotal board meeting, which began in the courthouse in Alma.

Van Eijl said he "got along" with the company and talked to its representatives "once or twice'' while the permit was under consideration. But he said his assistant handled the application and nothing about his move was inappropriate. Fitzgerald said it was Van Eijl who initiated the employment talks. Van Eijl said he left his county job because the position was slated for consolidation for budget reasons.

"I have a family and mortgages," he said. "I got nervous in January and decided to leave."

Short-staffed

A review of Van Eijl's county e-mails reflects the growing buzz that sand mining has created -- and the way it can leave counties short-handed.

In a January 2012 e-mail, as Van Eijl was still crafting a new ordinance to guide permitting of frac sand facilities, he sought County Board approval to hire an intern.

"Are you seeing a lot of 'prospecting' for frac sand?" a zoning officer from a neighboring county asked.

"Yes. A lot," Van Eijl replied.

When Van Eijl left just two months later, Buffalo County adopted a seven-month moratorium on frac sand applications. Then this month the moratorium was extended by half a year -- to the relief of Van Eijl's replacement, Jacob Sedivy.

"To be dumped into it like I am in Buffalo County has been pretty overwhelming." said Sedivy, who arrived with three years of zoning experience from a county that had no frac sand activity. "We're getting training to help bring us up to speed."

In addition to losing Van Eijl, Buffalo County said goodbye to its part-time zoning technician. Sedivy said the staffer is now moonlighting as a consultant to frac sand companies.

Randy Anderson, highway commissioner for Jackson and Clark counties in west-central Wisconsin, said office workers aren't the only targets. He lost a heavy-equipment operator and a tri-axle truck driver to Badger Mining's frac sand operation near Taylor. Both men had been in their county jobs for more than a decade and were hard to replace. "Some of the bonuses the mines have been paying are pretty fantastic," Anderson said.

The revolving door also leaves some residents doubtful that county officials can still represent their best interests.

Craig Brooks, a Buffalo County resident who worked more than 30 years in county government, said he's distrustful of frac sand regulation in the area because various public officials participate in frac sand votes despite having personal financial interests or family ties to the business.

"I've been bothered with how loose it can be and still be legal," said Brooks, the retired human services director for Winona County.

Minnesota and Wisconsin aren't alone in worrying, according to Peggy Kearns, director of the National Conference of State Legislatures' Center for Ethics in Government. Kearns said the ethical standard is still evolving. But the trend is toward establishing a "line of demarcation," perhaps six months or a year, before public employees can take a job with a company or industry they regulated.

"It feels like a quid pro quo if you are still in office and you are negotiating employment," Kearns said.

Four offers

In Trempealeau County, Lien is crossing his fingers that two newly trained technicians won't flock to the sand industry as their predecessors did.

Lien said he personally has turned away four companies with job overtures. He considered one but dropped out when the company balked at his demand for a multi-year guarantee. That made him wonder if the suitor had an ulterior motive to "pull me out of my county position." Lien's office has overseen more sand permits than any other county in Minnesota or Wisconsin -- but he has a reputation for strict, detailed reviews.

In June 2011, with mining applications piling up at the Trempealeau County Courthouse in Whitehall, Lien's frac sand specialist quit unexpectedly to work full time for Ottawa Sand Co. Almost simultaneously, the company received clearance to operate a large mine and processing center.

Hours before the scheduled vote on Ottawa's permit, Lien said he was told that county mining specialist Kimarie Estenson was unable to attend because she had been injured in an all-terrain vehicle accident. Shortly after the committee voted to approve the project, Estenson resigned, he said, to take a job with Ottawa Sand.

"I think in this case there were conflicts that should have been avoided," Lien said.

Estenson says she was "totally unbiased" on Ottawa's application and made no recommendation to the committee. She said she had grown frustrated in her county job by "internal politics" and "inconsistencies," but declined to elaborate. Estenson still works for the sand company (now Arcadia Sand) and has formed her own consulting agency.

"I have always felt as a county employee I was there to serve the public and ... my job [was] to be unbiased," she said.

Lien said the loss of Estenson contributed to a workload in his office that "became insurmountable ... where you could no longer get ahead."

The county's zoning technician took over some of Estenson's duties, then resigned about a year later to become an industry consultant himself. Now with two new replacements on staff, Lien said his office is catching up.

"It's really hard to get people trained up to a point where they are self-sufficient," Lien said. "So I hope they stick around."

Tony Kennedy • 612-673-4213

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  • Kevin Lien

  • 15%

    Projected annual growth in frac sand demand.

    1,600

    Tons of sand required to drill a single oil or gas well

    $45-$80

    Price per ton for high quality frac sand

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