The Golden Sands of Ludington

[XLFD]

A little over one year ago, the Michigan DNR Trust Fund had a press release saying that they recommended setting $5 million aside in order to purchase the 372 acres held by Sargent Minerals LLC located to the east of M-116 on the way out to the Ludington State Park.

The December 6, 2017 news release from MNRTF reads: "Mason County – DNR, Sargent Minerals Co. Land Acquisition - $5,000,000: Acquisition of up to 372 acres from the Sargent Minerals Company. The property is surrounded by Ludington State Park and will increase recreation opportunities and protect natural resources as part of Ludington State Park. The property includes coastal habitats with lakes, wetlands, sand dunes and woodlands. Acquisition of the property will allow for the property to be dedicated, operated and managed as part of Ludington State Park which will provide additional recreation land and consolidate ownership at the park."

On December 18, 2018, the DNR proudly proclaims in another press release that the Trust Fund purchased one hundred acres of pristine sand dunes, wetlands and forests from Sargent Sands for $17 million.  It was the northernmost part of Sargent's holdings, the release noted that 40% of the 'pristine' lands had been mined for sand.  It also noted there was $1.3 million still around as 'seed money' for future acquisitions.  

News organizations with short memories seem to have forgot about the earlier figures being thrown around as fair market for this land which were far smaller than the negotiated $170,000 ($17M/100)per acre (up to $13,441 per acre or $5M/372).  This includes Mlive, TV 7&4, K 102.5, Interlochen PR, WDIV, MCP, and the COLDNews.  All of these parrot the talking points of the DNR spokesman, Ron Olson, rather than question whether this deal was good or bad.  

And it seems very bad, the difference in price over this year is a sizable factor of 12.65 magnitude.  I had sent a FOIA to the DNR this spring, and they denied the release of any sort of appraisal of the property they were seeking, with the DNR claiming that public knowledge of the appraisal could negatively affect the ultimate deal.  Under appeal, I was ultimately able to get an invoice of the land appraiser but nothing else. 

It should be noted that the company, Gallagher Valuation & Forensics PLC, who allegedly appraised the property was a law firm that had no experience in land appraisal, the closest specialty was in business valuation (which is noted to be what they did in this case on the invoice), which is the process of determining the economic value of a business or company.  It appears the DNR was interested not in the value of the property, but the value of the company it looked to buy the property from.  I found this rather strange and still do.

What would make this property 12.65 times more valuable this December than last December?  Nothing in the local property market would make the case for the value to increase by anything over 8%, surely not 1265%.  Defenders of this acquisition may say that $170,000 per acre isn't bad for lakefront property, and they may be right if it comes in small purchases and has a nice lakeside villa resting on it.  But such amounts are rare for land purchases and seemingly non-existent in this area.

I looked at available large lots of land currently for sale on this website for comparable lakeside counties of Oceana, Mason and Manistee, focusing on lots that were either near Lake Michigan or another sizable recreational lake.  Many of the inland places will go for around $2000 per acre, but we find a few lots with location that are somewhat comparable to this parcel, including a couple that are right on the lake, instead of being across the highway to the lake.  

The above is advertised as one-quarter mile (1,400 feet) of sugar-sand beach Manistee coastline with 60 ACRES of Pristine Woodlands- aptly named- TOP OF THE WORLD.  It's cost:  $1,175,000.  If it had 40 extra acres of sand-mined land attached it would still be well under $2 million.

Also in Manistee is a golf course for sale in Onekama.  This 300 acre lot comes with a bonus lot of 80 acres, an 18 hole golf course, with five sizable buildings and sizable Portage Lake to the north, Lake Michigan not too far to the west.  The 380 acres comes at a steep price, $2,665,000, but that's really only about $7000 per acre, or less than 1/24th of what Sargent Sands just got per acre.

So, yea, we expanded Ludington State Park by 100 acres (increasing the size of it by less than 2%), and yea, Sargent Sands got one heck of a good deal for selling the partially pristine land.  But, wow, the MI DNR Trust Fund Board and DNR Director Keith Creagh really showed that they wasted a lot of state resources in a rather minor acquisition which likely won't be very useful until they acquire more of Sargent Mineral's property-- property whose value is surely going to be a lot higher than it really is now.  And, wow, they never hired an actual land appraiser to show they were foolish.

[shinblind]

Frac sand cleaned and dried, they even got a name for it Northern White premium frac sand, currently at the mine source is about $25 a ton.  Roughly one ton in a cubic yard of dry sand.

There are roughly 4,900 cubic yards in an acre  figuring 3 feet deep. 

Times that 4,900 cu/yd by 100 acres. 490,000 cu/yd. 

Times 490,000 by $25 per cu/yd = $12,250,000.  So digging down about 4 1/2 feet deep would get you to around $17,000,000 mark. More likely flattening the land would be sufficient.

The actual value if Sargent Sand dug down like they have on the other part of their lease would likely be 2-3 times that amount.

So the State in this case under current market conditions is getting a fair deal.

And since new mining permits were difficult to get before and with the new governor will be almost impossible to obtain it looks to be even a better bargain. I am glad in this case to see the SOM drain this account rather than have the money sent down State for some dubious project by the new administration.

That $5M for 372 acres offered before was both an insult and a joke.

[XLFD]

I'll grant your numbers, I'll even give you a bonus by saying that a cubic yard of dry sand would be closer to 1.3 tons.  But consider that if this was a 100 acre parcel out in Freesoil with topsoil going 9 inches deep, that if you evaluate the gross amount of money that could be made by skimming that 9 inches of quality topsoil off and sold that 120,000 cubic yards for the going rate of $15 per ton, the parcel would be worth minimally $1.8 million just for the topsoil, or $18,000 per acre.  That's a far lot more than the less-than-$2000 you can get for large tracts of older farmland, forests, and wetlands in Kaleva, Branch, and Walkerville.  Then just think how much the next soil layer of clay would get them if it was good quality...

The point is, the MI DNR should justify why they agreed to this price for a small portion of the Sargent Sands land, and why the comparable lakeside properties in this area go for much less than what they paid.  I'm totally content in waiting and letting Sargent do its business in providing sand to frackers, while that market niche is there; Ludington State park has 5300 other quality acres to explore, and I haven't come close to seeing all of them yet.

[shinblind]

Am certain if any other lakeside properties had the mining permits to remove sand, that their value would increase many times over.

With incoming Governor Gretchen I see little in the way of the issuing of new mining permits, therefore 

making the current ones even more valuable.

[XLFD]

Nevertheless, the DEQ receives and grants sand mining permits, since the permitting process began in 1976, 33 requests have led to 12 sand mining sites seeing current action. And while we can argue about a land's actual worth all day, the bigger point of discussion in my book is why did the DNR feel this acquisition at this time is in the state's best interest. Big loss of tax money, big loss of $17 million for a section of land which won't see real park use for a long time, big loss of primo fracking sand mining adding to the state's economy.

Read the DNR's new release again and see how aimless this purchase was.  They have no plans for the land, it seems that their goal is to just keep Sargent from selling their land to developers by offering them more than any sane developer would pay.

[shinblind]

Is it me or does the heading ''The Golden Sands of Ludington" have the same meter as ''Oh Little Town of Bethlehem''. 

[stump]

It's interesting that the numbers of 3 or 4 1/2 feet are brought up . The dredging of the fracking sand goes down way below the level of lake Michigan on that side of the road. They are not just skimming off 3 feet of top soil sand.  The state should continue to dredge and make some money, but walking across piles of old dumped wasteland is priceless or at least worth $17,000,000  

[Willy]

The State is obviously paying for unmined sand  which has become incredibly valuable since the modern fracking process exploded and made Lake Michigan dune sand the Cadillac of dirt. Sargent Mining company turned foundry mold sand production into a gold lined fracking product in a fairly short period of time. Most of the mining process was shut down not to long ago due to a lack of interest in Sargent Sand for foundry's. We either pay Sargent's  extortionist prices or forget purchasing the property. They have us over an oil barrel so to speak. I think this is a raw deal but if the land is to be preserved then we have no choice.

Why is Lake Michigan sand dune sand so agreeable for use in fracking

Frac sand: Close-up view of frac sand (on the right) and a typical sand of similar grain size (on the left). Notice how the frac sand has a more uniform grain size, nicely rounded grain shapes, and a uniform composition. It is also a very tough material that can resist compressive forces of up to several tons per square inch. Grains in this image are about 0.50 millimeter in size. Photo copyright iStockphoto / BanksPhotos.

[shinblind]

Sargent's price not  extortionist, it represents less than the current market value of the of the sand.

It is unfortunate that the State didn't have the foresight to purchase this property when it was less expensive but that is usually how it goes when you are spending other peoples money. 

[stump]

   I wonder if the fracking sand is just in this one remote area. Could it be 100 feet to the west under Lake Michigan waters?

[Willy]

Many places around the globe must mine up to 91 tons of rocks to produce 1 once of gold. At $1200 per ounce of gold that would figure to be around $13 per ton of rock. Compared to the price of a ton of fracking sand it looks like the State could have purchased a gold mine cheaper than Sargent Sand land and a silver mine would have been an even better bargain.