Clean dry sand is difficult to keep in place when placing the bottom plate, it depends on site conditions as well. Wind can easliy displace sand, and make it difficult for erector. I have worked with Tank vendors who like to use a fiberboard (1" to 1-1/2" thick) in place of sand.
Oiled sand will work, perhaps environmental reasons, but it is just a light spray, and it's contained by the slab and grout, shouldn't be leaking into ground water or causing any other major issues.