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Annexation lifted key operating restrictions on this Preferred Sands mine in western Wisconsin.

Brian Peterson, Star Tribune

Rules for sand mine companies are melting under pressure

  • Article by: TONY KENNEDY
  • Star Tribune
  • February 4, 2013 - 6:05 AM

PRESTON TOWNSHIP, WIS. - When the biggest frac-sand mine in Trempealeau County opened here in 2011, even the dead were shown consideration.

The county issued an operating permit that banned blasting during funeral services at a nearby cemetery. In deference to other community concerns, it also blocked the company from mining on evenings and weekends, required regular air monitoring, and mandated periodic home inspections to ensure that the industrial operation wouldn't damage property in this scenic community set against a backdrop of hills and coulees.

In less than two years, those stipulations had disappeared after a new company bought the mine and sought to have it annexed to the city of Blair, which sits inside Preston Township. City officials adopted regulations more favorable to the mine and allowed it to operate around the clock, seven days a week.

The maneuver stands as an example of the way mining companies are leveraging jobs and money to exert their will in the small communities of southeastern Minnesota and western Wisconsin, where a sand rush has led to the permitting of more than 100 facilities in the past four years. It also shows how, in the absence of statewide oversight, local units of government are competing for sand mines at the expense of consistent standards.

"They have the means and monetary backing to pretty much come in and do what they want to do," said Rae Delle Nelson, a Preston Township resident who joined neighbors to fight for tight regulations before the mine ever opened.

Michael O'Neill, a former Philadelphia banker and real estate executive who founded the company that now owns the mine, declined to be interviewed for this story. The company, Pennsylvania-based Preferred Sands LLC, said in a statement that it complies diligently with regulations wherever it operates.

Ardell Knutson, the mayor of Blair, said the mine has been a good neighbor to his town and an economic asset. "What were we supposed to do?" he said. "It's kind of hard to say 'no' when it's such a good deal."

But when Blair expanded its boundaries and wrote its own permit for Preferred Sands, Preston Township didn't simply lose the mining restrictions it helped develop; it also lost the facility's future tax payments, which now will go to the city. The township's annual tax revenue from the mine -- more than $72,000 in 2012 -- will shift entirely to Blair after a five-year grace period.

"We spent hours trying to see if we could block it," said Bob Tenneson, the longtime chairman of Preston Township and an early supporter of the mine. "When somebody wants to annex to the city, you can't stop them."

The Preston Township episode has sent a signal to other communities considering a challenge to mine owners' wishes. Trempealeau County officials have already tempered their regulatory approach to ward off potential annexations. They viewed the Blair annexation as a tactic with a clear message to back off on regulations.

"That was definitely what our committee read between the lines," said Kevin Lien, director of Land Management for Trempealeau County. Since then, the county's land use committee has begun amending the county's sand mining ordinance to ease operating-hours restrictions and refine noise limits.

In southeastern Minnesota, another sand company's annexation proposal has caused an uproar in St. Charles. The company controls a large site in the township of St. Charles. Even though the township is hostile to the project, company officials want the neighboring city of St. Charles to annex the land and issue an operating permit.

"There's so much money to be made ... they are just persistent," said Jim Ruhberg, chairman of the township board.

Oil and gas boom

The rule-making struggles occur amid a startling land rush in Minnesota and Wisconsin, which contain vast deposits of some of the world's best frac sand -- a vital ingredient in the drilling technique known as "hydro-fracking'' that has triggered an oil and gas boom across North America in the past three years. Demand for the crush-resistant sand is projected to grow steadily: By 2020, intensified fracking is expected to push America past Saudi Arabia in oil production.

Now, local officials on both sides of the Mississippi River are struggling to keep up with a sand prospecting boom -- balancing the promise of jobs and tax revenues against the worries of residents who fear groundwater degradation, illness from silica dust, truck traffic, loss of property values and a lesser quality of life.

In some cases, the promise of tax dollars generated by the mines is too good for local officials to pass up, particularly with city budgets stretched thin.

In Blair, for example, a Preferred Sands official approached Knutson, the mayor, last June saying the company wanted to get out from under the county's operating-hours restrictions, the mayor said.

"He just showed up one day at my office," said Knutson, a semiretired, 68-year-old building contractor who also drives a school bus. "They wanted to operate 24 hours a day."

Blair, a farming crossroads of 1,370 residents, is known for its annual fall Cheese Fest. It is geographically surrounded by Preston Township, and the two municipalities share a fire department.

Knutson said that his city's $1 million annual operating budget is so tight that the City Council plans years in advance to buy a new pickup truck or police squad car. Repairs to the city park wading pool have been deferred for lack of funds, and the city's tiny staff hasn't received a meaningful raise for as long as the mayor can remember.

When the annexation idea was dropped in his lap, Knutson immediately took it to the council. At first, the council said no. But the mayor said Preferred Sands urged reconsideration. A presentation to city officials emphasized job growth and the company's record of charitable giving. A 24/7 operation would raise employment from 54 to 87 jobs, the company said.

Within 25 days of the initial meeting with the mayor, the city approved the mine annexation. The 500-acre property almost doubled the city's land mass.

Turning point?

Unlimited hours of operation aren't the only favorable terms in the new permit. For example, it makes no mention of air quality monitoring or periodic inspection of neighboring buildings. The permit is good "into perpetuity'' and transferable to new owners. The noise restrictions are also lighter.

In the mayor's eyes, Preferred Sands has been a good partner. Last year, the company rebuilt a ragged municipal building into an insulated garage for ambulance rigs. The labor and materials saved the city $20,000 to $25,000, Knutson estimated.

The mayor said the annexation vote was purely about jobs and tax revenues, and says he's still on speaking terms with his friends in the township.

"It's not a personal thing," he said. "It's a business thing."

The mine's original owner, Winn Bay Sands LP of Saskatchewan, sold the mine along with one in Canada for $200 million in a deal announced in January 2012. Some local officials regard the sale as a key turning point that began to erode the power of residents and neighbors. One provision in the Winn Bay permit, for example, required Winn Bay to meet periodically and share data with a Preston Township citizens' panel.

"I'm frustrated," said Preston Township Supervisor Gary Everson. "Now the township has lost its opinion power."

Tenneson said he now views extended mining hours in the county as inevitable to accommodate businesses that bring money and jobs. Tenneson himself recently entered the frac sand business. Just last month, he received county approval for a new sand mine in Preston Township that his neighbors vehemently opposed.

Tony Kennedy • 612-673-4213

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