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A ‘false solution’? How crypto mining became the oil industry’s new hope | Cryptocurrencies
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A ‘false solution’? How crypto mining became the oil industry’s new hope | Cryptocurrencies

Two men stand in a dirt field next to a shipping container-like structure that is their bitcoin mining data center.


ICully Cavness and Chase Lochmiller, former prep school friends from Denver, traveled to Wyoming in January 2019 to bring some tech culture to the American heartland. Trembling in -20F (-29C) temperatures, they wired up a prototype of their brainchild: a machine that harnesses the “waste gas” from oil rigs to power mining for cryptocurrency.

Bitcoin, the most well-known decentralized cryptocurrency, has a notoriously large carbon footprint.Bitcoin mining alone consumesAbout half the electricity consumed in a year by the UK is generated by them. 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, that’s typically vented or burnt off in flares.

“We flipped the switch and saw all the bitcoin mining servers light up green, and you could see the flare physically shrink a little bit,” said Lochmiller, a self-described “city kid” who had never before set foot in an oilfield.

“It was kind of a Frankenstein moment, like ‘Oh my god, it’s alive!’”

Their creation is part the niche wave of tech startups who are now looking at the oil and natural gas industry to fuel 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 “solving” one another: the wasting of gas flaring that contributes to the climate crisis, and the need for cheaper energy as crypto increases in popularity.

Two men stand in a dirt field next to a shipping container-like structure that is their bitcoin mining data center.
Chase Lochmiller, Cully Cavness, and founders of Crusoe Energie, display their modular data centers.Photograph by Crusoe Energy

Climate experts, however, warn it’s a “false solution” so long as oil and gas production is allowed to continue. The world’s 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 “waste gas” doesn’t confront the dire need to curb fossil fuel consumption. Researchers warn that oil companies might feel incentivized even more to drill.

“At the end of the day, they’re still burning natural gas,” said Arvind Ravikumar, a methane researcher at the University of Texas at Austin, who deemed flare mitigation and companies proposing similar technologies a “scam”.

Lochmiller and Cavness, however, say their work helps the industry produce oil in as clean a way as possible, buying time, or “extending the runway” for the energy transition.

Their company attracted high-profile investors such as Bain and Winklevoss Capital. They raised $125 million for their second round in April. They plan on launching 100 bitcoin mining data centres by early 2022, an increase from the 65 currently in place.

Crusoe has trademarked its solution as “digital flare mitigation”. They set up fleets of data centers, which hum in shipping containers-like structures near remote oil rigs. Oil producers are then paid for the waste gas they otherwise wouldn’t use because it’s cheaper to burn than to pay to transport to market. Crusoe may then use the byproduct to run energy-intensive computing on-site.

Lochmiller and Cavness say their work helps the industry produce oil in as clean a way as possible.
Lochmiller and Cavness claim their work helps oil producers produce oil in the most clean way possible.

The data centers burn through enormous amounts of energy because there’s no centralized “bank” that holds cryptocurrency. New coins are created by solving complicated equations that require high computing power to authenticate. The currency is then traced on a distributed ledger known as the blockchain. This ledger is also resource-intensive to maintain.

The new technology comes amid a “great mining migration” that’s currently underway in the United States after China Ban on crypto miningSeptember. And with renewed global focus on cutting the highly-potent greenhouse gas, methane, which is the primary “waste gas” in flaring, the model is particularly in vogue.

Elected officials and oil-friendly regulators Industry groupsAnd financial services giantsThey have been paying attention. 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 Crusoe’s are “most appealing”. Ted Cruz, a Texas senator, is A fan is also welcome..

In the meantime, North Dakota legislators on both sides of this aisle passed a LawOil producers are now eligible for a tax credit this year if they use flare mitigation onsite. Crusoe, which is based in Williston, North Dakota – the heart of the Bakken shale – worked closely with legislators to pass the bill.

Paasha Mahdavi, a political scientist professor at the University of California Santa Barbara, co-authored the book. 2020 paperNew technologies that prevent methane from flaring at the source seem to reduce methane emissions.

He said that projects to capture flared or vented gas have led to an increase in gas production in practice. They create a new demand.

“It’s 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,” Mahdavi said.

Cavness, the chief executive of Crusoe Energy who goes by “Electron Cowboy” on Twitter, grew up envisioning himself jumping on the family bandwagon. He would complete an internship at Shell to follow in the footsteps his grandfather and father in the oil and natural gas industry.

Cavness then landed at Middlebury College in Vermont, a prestigious liberal-arts school with a reputation for being the alma mater for founders and the home of the university fossil fuel diverstment movement.

“Climate was the whole conversation,” Cavness said, noting that he felt pressure to downplay his oil and gas roots.

After going down the climate rabbit hole at Middlebury, and spending a year after graduation studying the “morality of energy”, Cavness’ job was troubling his conscience. He’d been losing sleep thinking about the unfathomable amount of gas the industry was wasting. According to the International Energy Agency, 2020 will be the year of the IEA. 142 billion cubic metres of gas was flared – the energy equivalent of providing electricity to 49m homes.

Cavness and Lochmiller reunited in 2018 on an 18-hour hike in the Rocky Mountains. They had a plan. Lochmiller, a recent MIT graduate, was a partner in a cryptocurrency investment company while Cavness was a separate firm that invested oil and gas. They would combine their worlds, big oil and bitcoin.

A portrait of Chase Lochmiller.
Chase Lochmiller is a co-founder at Crusoe energy and says that their company supports new fossil fuel exploration.Photograph by Bloomberg/Getty Images

The industry finds the bitcoin flaring option to be extremely attractive, it is not surprising. Crusoe’s data centers are set up without cost to producers, who earn money on gas they otherwise wouldn’t.

“It’s essentially a free offering to the oil company,” Cavness explained earlier this year at Hart Energy’s Developing Unconventional Gas Virtual conferenceThe Bakken and Rockies regions.

Cavness and Lochmiller say they’re on the cusp of the latest climate research. Critics warn that their company is located in Silicon Valley’s techno-optimistic ecosystem, where the search for innovative solutions can blind even the most climate-literate entrepreneurs.

Climate experts warn Crusoe’s outlook, and it’s proposed “fix”, reflects a selective understanding of the science. Even the most conservative forecasts agree that oil and gas exploration must cease immediately to avoid the worst effects of the climate crisis. This includes unnecessary human deaths. But despite Crusoe’s climate-focused branding, Lochmiller confirmed the company supports ongoing exploration and drilling.

Cavness sees it as a matter of survival for fossil fuels even after his now-infant child is old or dies. If the oil industry will be “required to sustain life on the planet” anyway, Cavness asks, why not drill in the cleanest way possible?

WCrusoe chiefs insist that their digital flaremigration technology is saving them time to find clean energy sources. But some worry that this strategy is more like a bandage for a serious wound. Nine out of ten climate experts who responded to requests for comment, including top methane researchers, political scientists, and climate analysts, said that oil and gas exploration and new drilling – even if equipped with methane mitigation technologies – is not in line with a future in which warming is curbed in accordance with global climate pledges.

Of this group, the one dissenting voice, an academic and co-founder of a greenhouse gas monitoring company, said continued exploration and drilling can “probably” happen in a clean way.

Climate experts are divided on how cryptocurrency operations should be allowed renewable energy. Three out of ten climate experts the Guardian spoke with were intrigued by one element of Crusoe’s model.

Similar to waste gas operations the company has a set data centers that will run on wind farms to tap energy when gigawatts are generated beyond what is needed. Crusoe’s ability to pay for that energy, according to the company, will enable renewable developers to underwrite new fleets.

Not all are optimistic. Heather Price, an atmospheric chemist at North Seattle College, fears that flare mitigation technology is nothing more than a greenwashing tactic to spin fossil fuels in positive light.

“I have no faith that this use of flares for crypto would be a temporary situation,” she said. “The fossil fuel industry and crypto companies should not get a ‘cookie’ for this move.”

  • This story was published in the upcoming issue of Climate Coverage Now, a global network of news outlets that focuses on the climate story and bolsters coverage


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