Over the past few months multiple individuals have written to this newspaper opposing the Southern Red Sands, LLC, frac sand mining proposal. This editorial is in response to two editorials in particular. It’s not meant to disparage anyone, but is intended to cast light on key issues, and provide a rebuttal in full support of Southern Red Sands (SRS) and the frac sand mining proposal. 

The first editorial, dated June 6, 2019, is entitled “Is it worth it?” by Dr. Jan Gillespie. She asked “What benefit does this mine really bring to our community? Where do the profits go?’ The jobs generated by this facility could be extremely expensive to our community in terms of water, public safety and infrastructure costs. Are they worth it?” The second, dated May 16, 2019, is entitled “Sand hills – mining, water and more” by John Hiscock, J.D. He raised several questions and assertions of negative “impacts” that were “foreseen and possible.” In this short space, we can’t address every issue raised, but will hit the important and pertinent ones. 

 

Issue 1: SITLA Lands. SRS holds mineral leases on two SITLA sections north of Kanab – Section 2 and 16. Indeed, SITLA Section 16 is the current focus of the SRS proposal. However, Hiscock incorrectly states that the acronym “SITLA” stands for the State Institutional Trust Lands Administration. In truth, the acronym actually stands for the School and Institutional Trust Lands Administration. To understand why this minor distinction is important, it’s beneficial to take a “10,000 ft. view” of some basic American mining law and history.

When the American West was settled, most western states were surveyed using the Public Land Survey System. The public domain was surveyed and divided into Townships and Sections – each section being one mile square, and each township containing 36 sections. 

After 1802, states were given grants of land at statehood “to use as a source of income to defray the costs of establishing and funding public schools and institutions.” These grants generally involved specific lands – E.g., Utah received four sections of every township, namely Sections 2, 16, 32 and 36.” These lands were to be managed as a trust created by Utah’s Enabling Act and the Utah Constitution, creating “a permanent school fund.”

Utah has a management framework for the school trust lands, overseen by the State of Utah School and Institutional Trust Lands Administration - SITLA. Under this framework, SITLA “is charged with a fiduciary duty to manage the lands for the benefit of the intended beneficiary (i.e., schools).” The Utah Supreme Court has held the State of Utah, as trustee, has an obligation to “manage the lands and revenues generated…in the most prudent and profitable manner possible.”

With this background in mind, it’s possible to see why it’s important to recognize that SITLA stands for the state School and Institutional Trust Lands Administration, and how this applies to the SRS frac sand mine.

Frac sand is classified as a mineral in Utah. Anyone seeking to mine frac sand on SITLA land must obtain a mineral lease from the State. Under the mineral lease, the Lessee must typically pay an annual rent plus an ongoing royalty payment to the State as Lessor. SRS holds a mineral lease on SITLA Section 16. Under the terms of that mineral lease (public record), SRS is obligated to pay SITLA an annual rental payment of $20 per acre, plus a one-time $50,000 bonus. Additionally, SRS must pay an ongoing, “step-scale royalty” for every ton of sand mined. Assuming the first-year production from Section 16 is only 2.1 million tons of sand, it would bring in over $2.1 million in payments from SRS to SITLA in the first year alone based on the step-scale royalty rate! (Calculations available upon request).

This answers Gillespie’s question – “What benefit does this mine really bring to our community? Where do the profits go?” As shown, the money will directly benefit Utah’s public schools. Gillespie likens the relationship between Kanab City and SRS as one of a private company being subsidized, and she believes SRS should have to “pay their own way.” Does selling water to a company who is putting over $2.1 million annually into our public school system sound like a subsidized company, or one who IS paying their own way?

 

Issue 2: The Water. Hiscock misstates that SRS will need an estimated “18,000 gallons of water per minute.” Hiscock further asserts that SRS “speculate[s] that they can recover/recycle 95 percent of said water…a highly optimistic, questionable and unproven proposition.” Both statements from Hiscock are blatantly incorrect. 

The truth is, “the proposed SRS plant requires 18,000 gallons of water to operate – it DOES NOT require an inflow of 18,000 gallons of water every minute.” This is due to the fact that much of the water is indeed recycled, and reused. Hiscock’s statement characterizing SRS’s ability to recycle 95 percent of the water as “a highly optimistic, questionable and unproven proposition,” is not only false, but misleading. For example, CDE Global has sand washing plants worldwide. Their plants “recycle up to 95% of the process water back to the frac sand plant.” Black Mountain Sand, an O&G company operating in the Permian Basin, “recycles and reuses up to 98% of the water used…helping meet the high-quality frac sand needs of customers with as minimal stress on the local water system as possible.” Hiscock’s claims notwithstanding, 95% water recycling is an industry standard.

Here, the only “questionable and unproven proposition” is Hiscock’s claims that SRS will use “473 million gallons” annually. In truth, “Southern Red Sands is negotiating with Kanab City to provide 600 ac. ft. of water annually.” At 326,000 gallons per ac. ft., this equates to 195.6 million gallons annually, ~ 60% less than Hiscock’s miscalculation. 

Note that because Section 16 is outside Kanab City limits, SRS doesn’t exactly NEED Kanab. According to Kanab City Council Minutes, SRS has involved the City “to benefit the City…Although, they can get access to sufficient water usage without going through the City…the company would prefer to write a check to the City... SRS would take on all the infrastructure cost and wouldn’t be leasing or buying water rights….They will drill a well on site, therefore eliminating water infrastructure from the City to their location.”

SRS essentially has a couple options to obtain the water needed. First, SRS could purchase an existing private water right, then file for a change of use and change of diversion point with the Utah Division of Water Rights. They could then drill a well on site and continue with the project. Second, SRS could purchase water from Kanab City, then drill a well on site and continue with the project. Either way, the project goes forward. The only real choice is whether Kanab wants to benefit or not. Once again, Gillespie likens this water sale, and the speculative increase in taxes, to a subsidy. Does selling water to a company who is putting over $2.1 million annually into the public school system AND looking for ways to benefit the city AND paying for infrastructure sound like a subsidized company?

 

Issue 3: SITLA Land Management vs. Federal Land Management. Hiscock raises various federal issues including:  “impairment of wilderness quality BLM lands,” destruction of BLM “relict vegetation parcels,” loss of recreation, and wildlife issues. The public land managed by the Bureau of Land Management (BLM) is governed by the Federal Land Policy and Management Act (FLPMA). Under FLPMA, the BLM is required to manage the public lands “under principles of multiple use and sustained yield.” Under this land management system, the federal government “takes into account…recreation, range, timber, minerals, watershed, wildlife and fish, and natural scenic, scientific and historical value,” when determining whether to approve certain activities (such as a frac sand mine).

However, remember SITLA Section 16 is the land at issue, which is not governed by the same land management system. This is because SITLA lands are NOT public lands. According to SITLA, “Although trust lands support select public institutions, trust lands are not public lands. Trust lands were allocated specifically to generate revenue to support designated state institutions, including public schools…While approximately 67% of Utah is open for public access and recreation, SITLA manages about 6% of the state’s acreage for its beneficiaries, primarily public schools.” 

Utah was granted Sections 2, 16, 32 and 36 for one very narrow and specific purpose – to maximize revenue in support of public schools. Thus it should come as no surprise that Sections 2 and 16 are being leased for the very purpose for which they were granted to Utah in the first place! 

While the public should be involved in public land management, SITLA lands are not public lands. Because SITLA lands are not public lands, most of the federal issues raised by Hiscock are irrelevant, and not ripe for discussion.

 

Conclusion. Hiscock stated, “We should demand careful analysis by our stewards…in their consideration and actions regarding this undertaking.” By presenting this opposite viewpoint, local citizens may now actually undertake that careful analysis.

Southern Red Sands mine will provide literally millions of dollars to Utah’s public schools. Is it worth it? Just ask our local teachers and struggling rural school districts. The mine will bring good paying jobs, and a much needed economic boost to our area. Is it worth it? Just ask our local breadwinners who commute to St. George, Page, or other states to scrape together a living. On July 9,  the Kanab City Council will vote on this proposal, and may even ask themselves if it’s worth it. There’s only one word needed to answer that question. Is it worth it? Absolutely.

Citations omitted. Available upon request.

Hayden Ballard holds a Juris Doctor degree from Washburn University School of Law, along with Certificates of Concentration in Natural Resources Law, Oil & Gas Law and Business & Transactional Law. He served as President of the Washburn Agricultural Law Society and as an Executive Committee Member in the Washburn Oil, Gas & Energy Law Society. This fall, Ballard will pursue an LL.M. in Agricultural Law at the University of Arkansas. Ballard also holds a B.S. in Political Science from Southern Utah University, 

Ballard currently lives in Kansas, but grew up in Fredonia, and still considers Northern Arizona/Southern Utah home. He is a graduate of Fredonia High School – Class of 2008. 

Kelcey Marsh holds a Juris Doctor degree from Washburn University School of Law, along with Certificates of Concentration in Oil & Gas Law and Business & Transactional Law. He served as President of the Washburn Oil, Gas & Energy Law Society. Marsh also holds a B.S. in Geology from Oklahoma State University.

By Hayden Ballard, J.D. and Kelcey Marsh, J.D.

Over the past few months multiple individuals have written to this newspaper opposing the Southern Red Sands, LLC, frac sand mining proposal. This editorial is in response to two editorials in particular. It’s not meant to disparage anyone, but is intended to cast light on key issues, and provide a rebuttal in full support of Southern Red Sands (SRS) and the frac sand mining proposal.

The first editorial, dated June 6, 2019, is entitled “Is it worth it?” by Dr. Jan Gillespie. She asked “What benefit does this mine really bring to our community? Where do the profits go?’ The jobs generated by this facility could be extremely expensive to our community in terms of water, public safety and infrastructure costs. Are they worth it?” The second, dated May 16, 2019, is entitled “Sand hills – mining, water and more” by John Hiscock, J.D. He raised several questions and assertions of negative “impacts” that were “foreseen and possible.” In this short space, we can’t address every issue raised, but will hit the important and pertinent ones.

 

Issue 1: SITLA Lands. SRS holds mineral leases on two SITLA sections north of Kanab – Section 2 and 16. Indeed, SITLA Section 16 is the current focus of the SRS proposal. However, Hiscock incorrectly states that the acronym “SITLA” stands for the State Institutional Trust Lands Administration. In truth, the acronym actually stands for the School and Institutional Trust Lands Administration. To understand why this minor distinction is important, it’s beneficial to take a “10,000 ft. view” of some basic American mining law and history.

When the American West was settled, most western states were surveyed using the Public Land Survey System. The public domain was surveyed and divided into Townships and Sections – each section being one mile square, and each township containing 36 sections.

After 1802, states were given grants of land at statehood “to use as a source of income to defray the costs of establishing and funding public schools and institutions.” These grants generally involved specific lands – E.g., Utah received four sections of every township, namely Sections 2, 16, 32 and 36.” These lands were to be managed as a trust created by Utah’s Enabling Act and the Utah Constitution, creating “a permanent school fund.”

Utah has a management framework for the school trust lands, overseen by the State of Utah School and Institutional Trust Lands Administration - SITLA. Under this framework, SITLA “is charged with a fiduciary duty to manage the lands for the benefit of the intended beneficiary (i.e., schools).” The Utah Supreme Court has held the State of Utah, as trustee, has an obligation to “manage the lands and revenues generated…in the most prudent and profitable manner possible.”

With this background in mind, it’s possible to see why it’s important to recognize that SITLA stands for the state School and Institutional Trust Lands Administration, and how this applies to the SRS frac sand mine.

Frac sand is classified as a mineral in Utah. Anyone seeking to mine frac sand on SITLA land must obtain a mineral lease from the State. Under the mineral lease, the Lessee must typically pay an annual rent plus an ongoing royalty payment to the State as Lessor. SRS holds a mineral lease on SITLA Section 16. Under the terms of that mineral lease (public record), SRS is obligated to pay SITLA an annual rental payment of $20 per acre, plus a one-time $50,000 bonus. Additionally, SRS must pay an ongoing, “step-scale royalty” for every ton of sand mined. Assuming the first-year production from Section 16 is only 2.1 million tons of sand, it would bring in over $2.1 million in payments from SRS to SITLA in the first year alone based on the step-scale royalty rate! (Calculations available upon request).

This answers Gillespie’s question – “What benefit does this mine really bring to our community? Where do the profits go?” As shown, the money will directly benefit Utah’s public schools. Gillespie likens the relationship between Kanab City and SRS as one of a private company being subsidized, and she believes SRS should have to “pay their own way.” Does selling water to a company who is putting over $2.1 million annually into our public school system sound like a subsidized company, or one who IS paying their own way?

 

Issue 2: The Water. Hiscock misstates that SRS will need an estimated “18,000 gallons of water per minute.” Hiscock further asserts that SRS “speculate[s] that they can recover/recycle 95 percent of said water…a highly optimistic, questionable and unproven proposition.” Both statements from Hiscock are blatantly incorrect.

The truth is, “the proposed SRS plant requires 18,000 gallons of water to operate – it DOES NOT require an inflow of 18,000 gallons of water every minute.” This is due to the fact that much of the water is indeed recycled, and reused. Hiscock’s statement characterizing SRS’s ability to recycle 95 percent of the water as “a highly optimistic, questionable and unproven proposition,” is not only false, but misleading. For example, CDE Global has sand washing plants worldwide. Their plants “recycle up to 95% of the process water back to the frac sand plant.” Black Mountain Sand, an O&G company operating in the Permian Basin, “recycles and reuses up to 98% of the water used…helping meet the high-quality frac sand needs of customers with as minimal stress on the local water system as possible.” Hiscock’s claims notwithstanding, 95% water recycling is an industry standard.

Here, the only “questionable and unproven proposition” is Hiscock’s claims that SRS will use “473 million gallons” annually. In truth, “Southern Red Sands is negotiating with Kanab City to provide 600 ac. ft. of water annually.” At 326,000 gallons per ac. ft., this equates to 195.6 million gallons annually, ~ 60% less than Hiscock’s miscalculation.

Note that because Section 16 is outside Kanab City limits, SRS doesn’t exactly NEED Kanab. According to Kanab City Council Minutes, SRS has involved the City “to benefit the City…Although, they can get access to sufficient water usage without going through the City…the company would prefer to write a check to the City... SRS would take on all the infrastructure cost and wouldn’t be leasing or buying water rights….They will drill a well on site, therefore eliminating water infrastructure from the City to their location.”

SRS essentially has a couple options to obtain the water needed. First, SRS could purchase an existing private water right, then file for a change of use and change of diversion point with the Utah Division of Water Rights. They could then drill a well on site and continue with the project. Second, SRS could purchase water from Kanab City, then drill a well on site and continue with the project. Either way, the project goes forward. The only real choice is whether Kanab wants to benefit or not. Once again, Gillespie likens this water sale, and the speculative increase in taxes, to a subsidy. Does selling water to a company who is putting over $2.1 million annually into the public school system AND looking for ways to benefit the city AND paying for infrastructure sound like a subsidized company?

 

Issue 3: SITLA Land Management vs. Federal Land Management. Hiscock raises various federal issues including: “impairment of wilderness quality BLM lands,” destruction of BLM “relict vegetation parcels,” loss of recreation, and wildlife issues. The public land managed by the Bureau of Land Management (BLM) is governed by the Federal Land Policy and Management Act (FLPMA). Under FLPMA, the BLM is required to manage the public lands “under principles of multiple use and sustained yield.” Under this land management system, the federal government “takes into account…recreation, range, timber, minerals, watershed, wildlife and fish, and natural scenic, scientific and historical value,” when determining whether to approve certain activities (such as a frac sand mine).

However, remember SITLA Section 16 is the land at issue, which is not governed by the same land management system. This is because SITLA lands are NOT public lands. According to SITLA, “Although trust lands support select public institutions, trust lands are not public lands. Trust lands were allocated specifically to generate revenue to support designated state institutions, including public schools…While approximately 67% of Utah is open for public access and recreation, SITLA manages about 6% of the state’s acreage for its beneficiaries, primarily public schools.”

Utah was granted Sections 2, 16, 32 and 36 for one very narrow and specific purpose – to maximize revenue in support of public schools. Thus it should come as no surprise that Sections 2 and 16 are being leased for the very purpose for which they were granted to Utah in the first place!

While the public should be involved in public land management, SITLA lands are not public lands. Because SITLA lands are not public lands, most of the federal issues raised by Hiscock are irrelevant, and not ripe for discussion.

 

Conclusion. Hiscock stated, “We should demand careful analysis by our stewards…in their consideration and actions regarding this undertaking.” By presenting this opposite viewpoint, local citizens may now actually undertake that careful analysis.

Southern Red Sands mine will provide literally millions of dollars to Utah’s public schools. Is it worth it? Just ask our local teachers and struggling rural school districts. The mine will bring good paying jobs, and a much needed economic boost to our area. Is it worth it? Just ask our local breadwinners who commute to St. George, Page, or other states to scrape together a living. On July 9, the Kanab City Council will vote on this proposal, and may even ask themselves if it’s worth it. There’s only one word needed to answer that question. Is it worth it? Absolutely.

Citations omitted. Available upon request.

Hayden Ballard holds a Juris Doctor degree from Washburn University School of Law, along with Certificates of Concentration in Natural Resources Law, Oil & Gas Law and Business & Transactional Law. He served as President of the Washburn Agricultural Law Society and as an Executive Committee Member in the Washburn Oil, Gas & Energy Law Society. This fall, Ballard will pursue an LL.M. in Agricultural Law at the University of Arkansas. Ballard also holds a B.S. in Political Science from Southern Utah University,

Ballard currently lives in Kansas, but grew up in Fredonia, and still considers Northern Arizona/Southern Utah home. He is a graduate of Fredonia High School – Class of 2008.

Kelcey Marsh holds a Juris Doctor degree from Washburn University School of Law, along with Certificates of Concentration in Oil & Gas Law and Business & Transactional Law. He served as President of the Washburn Oil, Gas & Energy Law Society. Marsh also holds a B.S. in Geology from Oklahoma State University.