In US oil fields that stretch along the Rocky Mountains and the Great Plains, trailers have been hitched to trucks to collect natural gas and convert it to electricity on site.
The trailers – with pipes, generators and computers – are known as “mining equipment”. But their owners aren’t there to drill for oil. They are using stray natural gas, undesirable by oil companies, to hunt for another treasure: cryptocurrencies like bitcoin.
Cryptocurrencies are virtual coins that are exchanged without intermediaries such as central banks to buy goods and services. Extracting the currency from cyberspace, however, requires large amounts of often expensive electricity. Supercomputers have to constantly compete against other “miners” to solve complex math problems and unlock digital vaults that hold the currency.
These supercomputers are housed in mobile trailers and run up to 71 degrees Celsius. In the cold of western North Dakota, people stay warm just sitting near them, say miners from the cryptocurrency.
The miners are increasingly sending these rigs to oil fields because it is one of the cheapest ways to get the energy they need. Oil and natural gas come from the same wells, but in these locations drillers look for crude oil and have no pipelines to bring the gas to market. That usually forces them to burn it down in a process called flaring, which creates carbon dioxide emissions, or to vent it directly into the atmosphere as methane.
“The sweet spot for us is stranded, low-volume gas that doesn’t justify a pipeline,” said Steve Degenfelder, land manager at Wyoming-based producer Kirkwood Oil and Gas LLC, which has an alliance with Bitcoin miners.
Oil companies are under pressure from investors and government officials to reduce emissions that lead to global warming. Sometimes they pass the gas on to cryptocurrency miners for free. other times they sell it.
“Oil and gas companies don’t like flaring their gas – it’s money that burns away,” said Degenfelder, who works with miners affiliated with EZ Blockchain, a Chicago-based energy and technology company, to help flare some its 600 reduce oil wells in the Rocky Mountains.
Some environmentalists and investors say cryptocurrencies are not a long-term solution to unwanted natural gas emissions, both because the currency’s future is very uncertain and because Bitcoin and other cryptocurrency companies are producing their own emissions.
The global CO2 emissions from the Bitcoin industry have risen to 60 million tons, which is the equivalent of the exhaust of around 9 million cars. According to a March report by analysts at Bank of America, it is 20 million tons more than two years ago.
Bitcoin, the most famous cryptocurrency, fell from record highs after billionaire Elon Musk tweeted that his electric car company Tesla Inc would no longer use virtual coins as currency, citing concerns about the “rapidly increasing use of fossil fuels.” for bitcoin mining and transactions. ”The currency depreciated for two weeks before recovering on Thursday.
Andrew Logan, senior director of oil and gas at Ceres, the Boston-based group of clean energy investors, said there were better ways to use stranded gas, including to power hospitals and schools. However, that would require the construction of pipelines to get the product out of the oil field, he said.
“I think we need much more durable and long-term solutions that can really bring this gas to market and use it for the highest purpose,” he said.
Proponents say the new oil-cryptocurrency alliances in North America are moving virtual coin mining out of Asia, where more than 60% of these operations take place, largely based on coal-powered electricity. Burning coal produces around twice as much CO2 as natural gas.
“It helps lower emissions at the (oil) producer level, but also globally, by reducing mining in parts of the world where coal is likely the source of electricity,” said Mark Le Dain, vice president of strategy at Validere Technologies Inc oil and gas software company tracking energy molecules and their uses.
However, environmentalists and some investors are finding that the harmful emissions are not going away – they are being carried over from one industry to another.
“It’s not that you’re eliminating the emissions, it’s that you’re turning them into this other thing, bitcoin,” Logan said.
Bitcoin’s appeal remains for miners despite the challenges of the cryptocurrency markets. Even after the recent drop in prices, a single bitcoin was worth more than $ 40,000 on Thursday – almost 90 times its value five years ago, according to Refinitiv Eikon.
Some cryptocurrency mining companies state that the mobility of their natural gas powered operations is vital so that they can flexibly source natural gas from different locations as soon as it becomes available.
“The idea of hooking up these (computers) and then moving them to another location really caught my imagination,” said Haley Thomson, former electricity trader and president of new cryptocurrency mining company, Imperium Digital.
A variety of business models were born. In some cases, cryptocurrency miners pay the oil companies all or part of their natural gas with the coins they mine. In Kirkwood’s case, EZ Blockchain uses stranded natural gas to make Bitcoin and passes it all on to Kirkwood. EZ Blockchain makes money providing equipment and mining services for a fee.
Industry experts and scientists studying energy use say there are fewer than 10 major bitcoin mining companies in North America running on stranded natural gas. Many cryptocurrency miners operate smaller operations in the US and Canada – some of them operate with a single well.
But some big oil companies have signed up.
In North Dakota, one of the leading oil-producing countries, the Norwegian Equinor ASA and the Canadian Enerplus Corp.
Denver-based Crusoe Energy Systems Inc is one of the continent’s largest bitcoin mining companies using otherwise stranded gas. Cully Cavness, co-founder and former oil and gas engineer, expects to double his current workforce from 55 this year.
Crusoe has around 40 mobile containers in oil shale basins. It plans to increase that number to 100 after raising $ 128 million in funding last month from investors such as Chicago-based Valor Equity Partners LP and Lowercarbon Capital.
Crusoe’s partners include Kraken Oil & Gas Partners LLC, which produces approximately 10,000 bpd of oil. This makes the company the largest oil producer in Montana.
“We’re going to need a lot more people,” said Cavness.
Meanwhile, government regulations and incentives are imminent that oil and cryptocurrency companies could benefit from.
The US Senate passed a measure in April to reverse former President Donald Trump’s weakening of methane emissions regulations. That could fuel the use of bitcoin mining to reduce flaring, academic experts said. Legislators in Texas and New Mexico are also trying to cut emissions.
North Dakota and Wyoming passed laws this year giving oil producers tax breaks that supply gas to cryptocurrency and other data miners that would otherwise have been issued.
“I think it will be a big part of what we see in North Dakota in the future,” said Senator Dale Patten, who drafted the North Dakota bill.