Our Houston-based colleague, David Hutchison, spends a large chunk of his time standing on piles of sand. He wishes those piles of sand could be on the beaches of the Caribbean, but most often they are in the prairies of Wisconsin, Texas, and Western Oklahoma.

Everyone is fully aware that oil companies are turning their backs on pristine Northern White in favor of cheaper, dirtier sand found right near where the wells are being drilled – so-called “in-basin” sand. The oil company can save half or more on the cost of proppant if they dig it up in the cow pasture next to the well rather than put it on a unit train and rail it down from Taylor, Wisconsin. Maybe the well produces slightly less oil, but if you can save $1M on the initial well cost, many oil companies are willing to make that trade.

We’ve always had in-basin sand, but now in-basin is as common as, well, sand.

From the proppant work that David does, we’ve derived the following chart, which shows our current estimate of in-basin sand use each quarter since early 2014:

Most of this in-basin sand is found in Texas, but Oklahoma sand is ramping up now. You can find sand in Arkansas, Nebraska… here, and there, almost everywhere. Mines close to drilling activity attracted big chunks of investor capital at the end of 2017 and early 2018, which means the capacity came online in the second half of 2018 and is still coming on line.

Q4 2019 is going to end with a whimper… perhaps 50 billion pounds of sand will be pumped somewhere in North America. Thanks to in-basin mine investment, more than half of that sand will come from mines within 100 miles of the well.

Tough news for Warren Buffett. He owns a LOT of trains.