One eats up more electricity than entire countries, and the other pours unwanted natural gas into the atmosphere with abandon. Put the two together and what do you get?
A solution to both problems, say bitcoin and energy companies.
Oil producers have long used flaring to burn off natural gas, a byproduct of crude production, in far-flung fields that aren’t served by pipelines to take it away. The practice is widely criticized for its release of emissions that are dangerous and contribute to climate change.
Cryptocurrency miners, who are paid in digital currency such as bitcoin, require huge amounts of cheap energy to power the fleets of powerful computers searching for answers to extremely complex computational math problems. A Cambridge University study found that the world’s crypto mining consumes 125 terawatt hours of electricity per year, more than the entire country of Ukraine.
But the digital mining companies can haul generators and computing equipment to the distant sources of power, helping to create joint ventures whose numbers are soaring as bitcoin prices soar and flaring comes under stricter regulations.
“It’s a no-brainer,” said Matt Lohstroh, co-founder of Beaumont-based Giga Energy, which uses natural gas to mine bitcoin instead of burning it off.
Lohstroh said his list of oilfield clients in Texas is growing so quickly that his company had to start manufacturing its own generators to meet demand. “We can’t get them fast enough,” he said.
Oil companies also are trying to get ahead of proposed emissions regulations aimed at slowing the release of methane, which is 84 times more capable than carbon dioxide at warming the atmosphere. The Biden administration, for example, hopes to charge royalties for vented or flared natural gas.
Global flaring represents 688 terawatt-hours of potential electricity per year — enough to power the world’s current bitcoin mining operations more than five times over, according to a recent study by scientists at Cambridge University.
Bitcoin mining companies typically bring their generators and computers to the drill site, pay the oil company for the gas like a pipeline company would, then use it to feed gas generators for mining.
With a single Bitcoin selling for about $40,000, oil majors are jumping in. Houston-based ConocoPhillips has a Bitcoin pilot project in the Bakken shale field in northern Plains states, where excess gas is routed to a Bitcoin processor owned and managed by a third party.
Crusoe Energy’s President Cully Cavness, who previously worked as a geologist in the oil and gas industry, pioneered the idea of using stranded gas for bitcoin mining when the company launched in 2018. Now it has mobile data centers at dozens of drill sites in Montana, North Dakota, Wyoming and Colorado and is expanding into Texas this year.
“Texas is the state that has the single largest volume of flaring natural gas,” he said, estimating that oil and gas producers in the Permian Basin flare hundreds of millions cubic feet of gas per day. “It’s been a challenge for the industry for a long time.”
To be sure, the rapid rise of bitcoin companies in the industry is creating challenges, Sourcenergy CEO Josh Adler said. The soaring price of natural gas could lead to new pipelines, he said, leaving less gas stranded at wells. “I think the wide open green field for them is narrowing,” Adler said.
Still, flared gas isn’t the only form of wasted energy that bitcoin miners are tapping in Texas. There aren’t enough transmission lines carrying electricity out of West Texas, where large wind and solar farms often generate more power than can be moved over existing lines, said Ryan Nuckolls, managing partner of Austin-based power generator American Power Partners.
“There’s just so much stranded energy in the west zone that renewables companies have to find a place for,” he said. “Generators are losing money because they can’t get power to their consumers because of congestion.”
The Cambridge University study estimated the the American power grid loses 206 terawatt-hours annually in transmission losses — more than enough to power the world’s bitcoin mining operations. To take advantage of the surplus power, Las Vegas-based Marathon Digital said in December it would install more than 100,000 bitcoin mining computers around Texas, mostly near wind and solar farms in West Texas.
amanda.drane@chron.com
