n January of 2019, Chase Lochmiller and Cully Cavness, recently reunited prep school pals from Denver, drove out to the snow-covered plains of Wyoming to bring a piece of tech culture to the American heartland. Trembling in -20F (-29C) temperatures, they wired up a prototype of their brainchild: a machine that harnesses the âwaste gasâ from oil rigs to power mining for cryptocurrency.Cryptocurrencies such as bitcoin, the most-popular decentralized digital currency, have a notoriously large carbon footprint (bitcoin mining alone consumes about half as much electricity in a year as all of the UK). So to leverage a cheap source of energy to run their bitcoin mining operations, Lochmiller and Cavness found themselves partnering with oil companies to repurpose a byproduct, primarily methane, thatâs typically vented or burnt off in flares.
âWe flipped the switch and saw all the bitcoin mining servers light up green, and you could see the flare physically shrink a little bit,â said Lochmiller, a self-described âcity kidâ who had never before set foot in an oilfield.
âIt was kind of a Frankenstein moment, like âOh my god, itâs alive!ââ
Their creation is part of a niche wave of tech startups that are now eyeing the oil and gas industry to help power the cryptocurrency boom. Lochmiller and Cavness, who started a bitcoin mining company called Crusoe Energy, see their fix as a marriage between two problems capable of âsolvingâ one another: the wasting of gas flaring that contributes to the climate crisis, and the need for cheaper energy as crypto increases in popularity.
Climate experts, however, warn itâs a âfalse solutionâ so long as oil and gas production is allowed to continue. The worldâs leading authority on climate science concludes that only a dramatic reduction in greenhouse gas emissions will help avert a climate calamity; merely finding alternate uses for âwaste gasâ doesnât confront the dire need to curb fossil fuel consumption. If anything, researchers warn, oil companies may feel incentivized to drill even more.
âAt the end of the day, theyâre still burning natural gas,â said Arvind Ravikumar, a methane researcher at the University of Texas at Austin, who deemed flare mitigation and companies proposing similar technologies a âscamâ.
Lochmiller and Cavness, however, say their work helps the industry produce oil in as clean a way as possible, buying time, or âextending the runwayâ for the energy transition.
Their company has attracted high-profile investors, including Bain and Winklevoss Capital, raking in $125m for their second round of fundraising in April. They plan to roll out 100 bitcoin mining data centers by early 2022, up from the 65 units already in place.
Crusoe has trademarked its solution as âdigital flare mitigationâ. They install fleets of data centers that hum in shipping container-like structures next to remote oil rigs. Oil producers are then paid for the waste gas they otherwise wouldnât use because itâs cheaper to burn than to pay to transport to market. In return, Crusoe can use the byproduct to power energy-intensive computing operations on-site.
The data centers burn through enormous amounts of energy because thereâs no centralized âbankâ that holds cryptocurrency. Instead, new coins are created by solving complex equations that require heavy computing power to authenticate. The currency is then tracked on a decentralized ledger, known as the blockchain, which is also resource-intensive to maintain.
The new technology comes amid a âgreat mining migrationâ thatâs currently underway in the United States after China banned crypto mining in September. And with renewed global focus on cutting the highly-potent greenhouse gas, methane, which is the primary âwaste gasâ in flaring, the model is particularly in vogue.
Oil-friendly regulators, elected officials, industry groups and financial services giants have been taking note. Commissioner Jim Wright of the Texas Railroad Commission, the state agency charged with regulating oil and gas, told the Guardian that modular mitigation setups like Crusoeâs are âmost appealingâ. Texas senator Ted Cruz is also a fan.
Meanwhile, North Dakota lawmakers on both sides of the aisle passed a law this year making oil producers eligible for a tax credit if they employ onsite flare mitigation. Crusoe, which is based in Williston, North Dakota â the heart of the Bakken shale â worked closely with legislators to pass the bill.
According to Paasha Mahdavi, a political science professor at the University of California, Santa Barbara, who co-authored a 2020 paper on methane mitigation measures, new technologies that stop flaring at the source do seem like they would reduce emissions.
But in practice, he said, projects designed to capture otherwise flared or vented gas have resulted in an overall increase in gas production. After all, they create a new source of demand.
âItâs like if you had a leaky gasoline pipeline and, instead of fixing the problem, you plugged in a Humvee next to the leak and left the engine on in perpetuity with the A/C on full blast,â Mahdavi said.