On U.S. oil patches stretching along the Rockies and Great Plains, trailers hitched to trucks back up toward well pads to capture natural gas and convert it on the spot into electricity.
The trailers — carrying pipes, generators and computers — are called “mining rigs.” But their owners aren’t there to drill for oil. They are using stray natural gas unwanted by oil companies to power their search for another treasure: cryptocurrencies like bitcoin.
Cryptocurrencies are virtual coins exchanged without middlemen, such as central banks, to purchase goods and services. Extracting the currency from cyberspace, however, requires vast amounts of often-expensive electricity. Supercomputers must run constantly in a race against other “miners” to solve complex math problems in order to unlock digital vaults holding the currency.
Placed in mobile trailers, these supercomputers run as hot as 160 degrees Fahrenheit (71 degrees Celsius), and in the cold of western North Dakota, people stay warm just by sitting near them, cryptocurrency miners say.
The miners are increasingly sending these rigs out to oil fields because it’s one of the cheapest ways to obtain the energy they need. Oil and natural gas come from the same wells, but at these sites, drillers are seeking crude oil and have no pipelines to get the gas to market. That typically forces them to burn it off in a process called flaring — creating carbon dioxide emissions — or to vent it into the atmosphere directly as methane.
“The sweet spot for us is stranded, low volumes of gas that don’t justify a pipeline,” said Steve Degenfelder, land manager at Wyoming-based producer Kirkwood Oil and Gas LLC, which has formed an alliance with bitcoin miners.
Oil companies face pressure from investors and government officials to reduce emissions that lead to global warming. Sometimes they give the gas away for free to cryptocurrency miners; other times they sell it.
“Oil and gas companies don’t like to flare their gas — that’s money that’s burning away,” said Degenfelder, which works with miners connected to EZ Blockchain, a Chicago-based energy and technology company, to cut flaring at some of its 600 oil wells across the Rocky Mountains.
Some environmental advocates and investors say cryptocurrencies are not a long-term solution to unwanted natural gas emissions, both because the currency’s future is highly uncertain and because bitcoin and other cryptocurrency companies produce their own emissions.
The global bitcoin industry’s overall carbon dioxide emissions have risen to 60 million tons, equal to the exhaust from about 9 million cars. That’s up from 20 million tons from two years ago, according to a March report by Bank of America analysts.
Values of bitcoin, the best known cryptocurrency, plunged from record highs after billionaire Elon Musk tweeted that his electric car company Tesla Inc. would no longer take the virtual coins as payment, citing concerns over “rapidly increasing use of fossil fuels for bitcoin mining and transactions.” The currency plunged in value over two weeks before starting to recover Thursday.
Andrew Logan, senior director of oil and gas at Ceres, the Boston-based clean-energy investor group, said there are better ways to use stranded gas, including to power hospitals and schools. However, that would require building pipelines to carry the product out of the oil patch, he said.
“I think we need much more durable and long-term solutions that really bring that gas to market and let it be used for whatever its highest purpose is,” he said.
Proponents say the new oil-cryptocurrency alliances in North America move mining for virtual coins away from Asia, home to more than 60% of such operations, which largely rely on coal-powered electricity. Coal combustion produces roughly twice as much carbon dioxide as natural gas.
“It helps cut emissions at (an oil) producer level, but also globally by…