As Oil Giants Turn to Bitcoin Mining, Some Spin Burning Fossil Fuels for Cryptocurrency as a Climate Solution

Lambert here: One hand washes the other, I suppose….

By Sharon Kelly, an attorney and freelance writer based in Philadelphia. She has reported for The New York Times, The Guardian, The Nation, National Wildlife, Earth Island Journal, and a variety of other publications. Prior to beginning freelance writing, she worked as a law clerk for the ACLU of Delaware. Originally published at DeSmogBlog.

Flaring — or the burning of stranded natural gas directly at an oil well — is one of the drilling industry’s most notorious problems, often condemned as a pointlessly polluting waste of billions of dollars and trillions of cubic feet of natural gas.

In early March, oil giant ExxonMobil signed up to meet the World Bank’s “zero routine flaring by 2030” goal (a plan that — when you look just a bit closer — doesn’t entirely eliminate flaring but instead reduces “absolute flaring and methane emissions” by 60 to 70 percent.)

How does ExxonMobil plan to reach that goal? In part, it turns out, by burning stranded natural gas directly at its oil wells — not in towering flares, but down in mobile cryptocurrency mines.

Roughly speaking, crypto miners compete with each other to solve complex puzzles. Those puzzles, designed to require enormous computing power, can be used to help make a given coin more secure. Successful miners are rewarded for their efforts with newly generated coins. 

Using the energy-intensive process of crypto mining to fight pollution is the latest in a wave of claimed climate “solutions” whose environmental benefits seem to only appear if you squint at them from very specific angles — like “low carbon” oil, measured not by the oil’s actual carbon content but by how much more carbon was spent to obtain it.

Critics point out that replacing flaring with mining crypto could become a way for fossil fuel producers to spin money directly from energy, polluting the climate without heating people’s homes or transporting people from place to place in the process. “In terms of productive value, I would say there is none,” Jacob Silverman, a staff writer at the New Republic, said in a recent interview. “The main value of cryptocurrency is as a tool for speculation. People are trying to get rich.”

That, of course, includes oil drillers. “This is the best gift the oil and gas industry could’ve gotten,” Adam Ortolf, a crypto mining executive, told CNBC. “They were leaving a lot of hydrocarbons on the table, but now, they’re no longer limited by geography to sell energy.” 

Using crypto mining to sponge up unused natural gas could carry environmental benefits, for example, if you compare that option against flaring that gas and using other supplies of natural gas to mine that same crypto. But, in reality, there are a lot of other moving pieces at play, including calls for cryptocurrency to start lowering its energy demand.

Bitcoin, in fact, has grown so energy intensive that tech industry insiders have begun openly discussing the ways that it’s causing a “climate crisis.”

“A single ledger in bitcoin consumes enough energy to power your house for almost a day,” Intel CEO Pat Gelsinger told Bloomberg in mid-February. “That’s a climate crisis.”

“If we produce a technology that consumes that much energy,” he added, “wow, that’s not okay.”

Meanwhile, oil giants like Exxon have begun increasingly eying cryptocurrency mining — which could directly connect the world’s biggest producers of fossil fuels to an industry with an ever-expanding appetite for energy.

A pilot project in North Dakota’s Bakken shale has already allowed ExxonMobil to steer up to 18 million cubic feet of gas a month into bitcoin mining ventures in 2021, Bloomberg reported last week, adding that the oil giant is considering expanding cryptocurrency mining pilots into Alaska, Germany, the Qua Iboe Terminal in Nigeria, the Vaca Muerta shale in Argentina, and Guyana — a small South American country that ExxonMobil pushed into the ranks of the top ten gas-flaring countries in 2020.

And Exxon is hardly alone. ConocoPhillips has also launched a Bakken shale pilot program. The two are founding members of the OOC Oil & Gas Blockchain Consortium, whose members also include Chevron, Equinor, Hess, Pioneer, and others. Russia also recently announced that it would accept bitcoin as payment for fossil fuels and crypto mining companies have described talks with officials from Saudi Arabia and other major oil producers.

The crypto mining company working with Exxon says it’s “on a mission to eliminate the routine flaring of natural gas by providing oil and gas companies with a fast, low cost and simple solution to stranded gas.”

At a time when energy markets are already in upheaval due to the war in Ukraine, the drive to use gas directly at the wellhead pits cryptocurrency miners against other potential users of flare gas, like buyers who’d be able to purchase that gas if drillers connected those oil wells to gas gathering lines and processing plants. The oil and gas industry’s backers have used fear of supply shortages to push for more fossil fuel production in the United States — a strategy that, of course, assumes that fuel could be delivered to buyers.

The justifications offered for gas flaring are often economic, with companies commonly arguing that it’s too expensive and financially burdensome to connect oil wells to gas pipelines or to process gas in remote oilfields. “Flaring is also used to burn gases that would otherwise present a safety problem,” the environmental group Earthworks notes, adding that flaring and venting unburned gas both “pollute our air, contribute to climate change, deprive states and individuals of revenue and waste the recovered resource.”

But regulators seem to have previously managed to drive down flaring in some areas without relying heavily on crypto.

Back in 2013, the state of North Dakota found itself embroiled in a fossil fuel scandal so glaring it was literally visible from outer space. Amid the sudden fracking frenzy in the Bakken shale, drillers seeking oil were burning off the natural gas that also came from shale wells at astounding rates, igniting flares that left North Dakota’s remote fields more brightly lit than major cities on the East Coast in nighttime satellite images.

By January 2014, drillers were burning off 36 percent of the gas produced in the state right at the wellhead, Energy Information Administration (EIA) data showed. In the years since, regulators have steadily driven that percentage down, with the EIA more recently reporting that 7.5 percent of North Dakota’s gas production was flared in the first three quarters of 2021.

That’s in part because the oil industry expanded its capacity to process gas from oil wells and to pipe it away to be burned by consumers. The state’s gas processing capacity more than tripled from 2013 to 2020, the Journal of Petroleum Technology reports.

Flaring remains an issue in the Bakken — it is, after all, the place where Exxon’s pilot program launched last year. But the prior reductions do illustrate that gas that’s stranded today won’t necessarily be stranded tomorrow.

Meanwhile, crypto carries its own controversies — not just its enormous appetite for energy, which is notoriously larger than many countries’ — but also concerns about some currency’s stability and even risks that crypto might pose to broader financial systems.

The cryptocurrency world is awash in open pump-and-dump schemes, or coordinated efforts to temporarily drive up prices just before selling off, for example, and some observers have warned about cryptocurrency’s reliance on so-called “stablecoins,” designed to back crypto coins with other assets and encourage confidence in their worth.

Stablecoins “are not yet subject to consistent regulatory safeguards — meaning they pose an elevated risk to consumers and might even threaten the stability of the financial system,” Nellie Liang, the Treasury Department’s undersecretary for domestic finance wrote in a March 6 op-ed in the Washington Post.

Nonetheless, claims that using natural gas to mine crypto can help the environment have drawn powerful backers. “I think cryptocurrency is a net plus for the environment, and in fact, a big net plus for the environment,” Sen. Ted Cruz (R-TX) told Motherboard at the Texas Blockchain Summit in October 2021. “I think being able to take stranded natural gas and put it to productive use is a big positive for the environment.” 

The market value of all cryptocurrencies hit $2.3 trillion, the New York Times reported in December, adding that the price of one Bitcoin rose from $7,000 at the start of 2020 to roughly $50,000 near the end of 2021. Cryptocurrencies have also grown increasingly mainstream, with one 2021 Pew survey finding that 1 in 3 Americans aged 18 to 29 say they’ve used crypto and a handful of companies advertising cryptocurrencies during the Super Bowl this year.

For a way to store abstract wealth, Bitcoin’s real-world energy demand to date has been stunning. The University of Cambridge’s Cambridge Bitcoin Electricity Consumption Index estimates that, all told, Bitcoin has already consumed about 310 terawatt-hours of electricity, with the coin’s cumulative demand for power rising on an exponential curve over the past decade or so. (To put that in context, the entire United States used about 3,800 terawatt-hours in 2020, according to Statista). The crypto industry’s own estimates are lower, with one company, CoinShares, publishing estimates of about 89 terawatt-hours and concluding that Bitcoin caused a little less than one percent of the world’s carbon emissions in 2021.

Of course, Bitcoin and other cryptocurrencies don’t always rely on fossil fuels. Estimates for how much of Bitcoin’s power comes from renewable energy at a given time can vary widely and reflect rapid changes, from as low as 25 percent to as high as 73 percent.

Bitcoin mining is designed to grow more complex over time. While the first Bitcoins were mined on a home computer, over time, competitive miners have shifted from using PC graphics cards to buying up entire power plants and filling warehouses and airplane hangars with processors.

But it’s not clear that Bitcoin and other cryptocurrencies need to use that much energy — especially looking forward. Environmental groups launched a “Change the Code” campaign this week aiming to drive down Bitcoin’s energy consumption. They’re calling on Bitcoin to change its software code from a so-called “proof of work” authentication system to a “proof of stake” system that they say could slash Bitcoin’s energy demand instantly.

“We need to clean up our industry,” Chris Larsen, chairman of Ripple, a company that uses blockchain technology, said in support of Change the Code. “And the issue is not, as some have suggested, powering bitcoin with clean energy. We need the limited supply of clean energy for other vital uses. The issue is changing the code to use far less energy. That’s the environmentally responsible way forward.”

One of Bitcoin’s key competitors, Ethereum, is already making that switch, Change the Code, points out. “No matter how you feel about bitcoin,” added Greenpeace USA Chief Program Officer Tefere Gebre, “pushing those with the power to ensure a code change will make our planet and communities safer from the destructive impacts of climate change.”

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

18 comments

  1. PlutoniumKun

    Back in the 1990’s I worked with some old hand oil and gas drilling engineers who had earned their stripes in the boom days in the Arabian peninsula and North Africa. Some were quite proud of one particular achievement – they (i.e. the petrochem services company that did most of the grunt work) had persuaded the authorities and local oil companies in more than one country to stop flaring off gas, specifically ‘wet’ gas and instead set up industries creating base chemicals for export, mostly using butane and pentane which was otherwise too expensive to collect and export. I was a little skeptical of their claims, but had to admit that this was certainly a lot better for local air quality and economies than just flaring it off.

    Its gotta be said though, that even making base chemicals for plastic is a lot better use for humanity than crypto. If there are future historians, they will not be kind to us when they see this sort of idiocy being described as a ‘climate solution’.

  2. Robert Hahl

    The gas will be burned one way or the other (or the other, or the other…). What difference does it make? I’m sure the energy consumed making and using aluminum soda cans is shocking. It is all essentially waste too. What is the difference?

    1. jefemt

      Much of the smelting power of aluminum is created by hydro in the pacific northwest, arguably sustainable green electrons, although a Pac NW salmon might have a quibble about the unaccounted externalities of those ‘green’ electrons…

      I was driving by a refinery in Billings MT last week, and was pondering a way to rig a conveyor belt made of a very high melt-point alloy that would s l l l o w l y bring bodies from the hospitals and nursing homes along and incinerate them over the refinery flares for cremation purposes. My bet is it would sterilize any strain of covid…

      Non-renewable carbon based fuels have a linear life… we can add curves, but the ever elusive full-cycle life cycle loop does not exist in most human contrived ‘systems’. No free lunch. Unobtanium.

      We are demanding a convenient oil and gas fueled modern life… it’s been –get this – seven generations- of humanity riding the O & G overshoot-enabling Express Train to Doom. We should not be surprised that the problem, ultimately, is ourselves, our unexamined lives, our seeming inability to bear down, change. We acquiesce to scoundrel political and monied Davos-folk who are steadfast in their selfish pursuit of MOAR at the expense of the Spaceship we ALL ride on, whether we are impoverished or blindingly wealthy.
      We have the science, the knowledge, to start to employ all citizens of the world in truly healing, thought through processes. It would start by stopping.
      Then re-tooling and pulling in the same direction on the same harness.
      Funny thing — covid brought a stop a couple years ago… and it seemed to me, the bird-song filled clearer skies, the quieter Cities… many folks talking and examining lives, what mattered…that we may have had a moment.

      But TPTB emphasized the narrative that we had to Return to Normal. Normal is our undoing.

  3. Robert Hahl

    p.s. I’m not despairing or suicidal, I want to know why people think it matters how we use energy that is not going to be saved anyway. Moral hazard?

    1. anon y'mouse

      perhaps work out a way to use it that is genuinely productive? or not drill it out of the ground just to be wasted?

      and bitcoin is a waste, no matter how many scam artists are making money.

    2. drumlin woodchuckles

      Good point. The too-far-too-ship-anywhere methane will be either burned or just vented off regardless. The only way to stop that would be a massive extermination program against oil company executives and operatives till the survivors agreed to stop the venting and/or flaring in order to save their own lives. And that solution requires a level of political power which Green Decent People don’t have and will never have soon enough to make any difference.

      So since the gas will either be flared or just simply vented regardless, burning it to run bitcoin miner-farms
      can be spun as 80 times less globally warming than just simply venting the methane unburned. In fact, I can think of an elegant blackmail-extortion threat which the Oil Bussiness will use. They will say, ” you people can either let us burn the methane in bitcoin mines or we will vent it as unburned methane. That is the choice we will give you and that is the choice we will permit you to make.”

    3. rjs

      there’s a ethical difference between burning natural gas to keep a family warm and burning natural gas to run a ponzi scheme…

    1. rjs

      Why is there so much flaring?

      building infrastructure to capture the gas is expensive. get the oil money & run. & leave the abandoned well for the taxpayers to deal with

  4. Samuel Conner

    Here’s a decade-old item on conversion of waste NG to nitrogen fertilizer:

    http://www.northernplainsnitrogen.com/wp-content/uploads/2014/12/APUC_NDSU_Final_Report_Ammonia_Plant-2.pdf

    skipping to the summary of conclusions, it appears to think that it is economically feasible.

    If the R fertilizer export embargo is long-lasting, perhaps this would be a wiser use of the NG that is currently being flared. But it’s harder than on-site conversion to energy as it would require infrastructure to bring the NG from the many point sources to a central processing facility for conversion to fertilizer.

  5. anon y'mouse

    suffering from too little coffee, i read the title as they spin cryptocurrency as the “final solution”. hmmm, “yes, it is” i responded.

    my brain is too freudian for this planet.

    1. Jeremy Grimm

      They spin burning fossil fuels into cryptocurrency. Does some little guy with a weird name show up to help with this? I think I’ve heard this story before.

  6. solarjay

    What the article keeps the focus on is “this vs that” ie, flaring or bit coin.
    For example, the only reason that flaring is allowed is because Obama.
    It would be possible ( Hahaahahahah) for the feds to ban it.
    Take for example the deep water horizon explosion. That happened because the feds don’t require redundant blow out protection, like oh the rest of the first world.
    This would cause extraction to take into account whether oil/gas fields are cost effective to mine.
    If so, then they would do some sort of pipeline/pumping/storage to take the gas, instead of flaring.
    Pipelines are not too expensive, every single well has an oil pipeline already, so they could have put a gas line along with it.

    For example, take oil/gas wells that produce what’s called “condensate”. That they don’t want in the pipeline and they can’t pour it on the ground so they collect it ( its the large tanks you see next to wells) and then truck it away.
    But pour the methane/CO2 into the air, thats OK.

    By keeping the narrative at flare or bit coin is another example of dumbing us down by not including actual real options, let alone keeping it in the ground.

    1. anon y'mouse

      yeah, beware any dialogue where the options are reduced to a binary. whomever constructs such boundaries is trying to force evil and bad decisions, even within the acceptable middle ground.

    2. Robert Hahl

      Ultimately that was my take too, the point of stories like this is to make some wasteful uses of energy seem outrageously worse than other wasteful uses of energy, normalizing the latter and blocking thoughts about more radical solutions. Shame on you Lambert :)

    3. drumlin woodchuckles

      The Cossacks work for the Czar and the feds work for the oil business. The feds are not going to ban any aspect of the business they work for.

      A social-political civil war waged and won to conquer the FedGov and make the feds into OUR feds could lead to OUR feds banning THEIR flaring and venting. But we would have to win that civil war first and crush our enemies with overwhelming thoroughness in order to make that happen.

  7. jefemt

    I bet the bean counters that work for big oil and gas would argue that pipelines are getting expensive. Surface owners are demanding indemnifications and ‘astronomical’ rents for easements. The landowners, most of whom have no mineral interests, are keen to ‘get theirs’ from the oil plays.

    It’s a complicated business.

    It is also odd, with all the new wind generation being installed in the Dakota’s, that there is not a lot of emphasis of geographically-sensible co-gen to make the green electrons tempered with carbon Nat Gas back-up to be reliable base-load.

    As I stop to buy $5.09/gallon # 2 low sulphur diesel in SE Montana, I notice no evident reduction in demand, use. People go to the pump, most don’t appear miffed, irritated, or pissed.
    We apparently are nowhere near the point of demand destruction and fuel flipping to a price elastic ‘good’.

    And yes, I am a lemming in the fuel line queue….

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