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This article was originally published by Montana Free Press.
SIDNEY On a sunny oil rig not far from the North Dakota border, the iconic infrastructure of the Bakken Oilfield towers over pink gravel, pump trucks hauling energy-rich hydrocarbons thousands of feet below the eastern prairie of Montana.
A multi-story flare and storage containers can be found along the perimeter of the platforms, along with a sign announcing the site owner, Houston-based Kraken Oil & Gas. On the other side of the pad, however, a line of metal buildings put together by a Colorado startup represents a decidedly non-traditional arrangement for the oil industry. Buzzing generators hook up electricity to a handful of squat boxes that look like a cross between shipping containers and hot dog stalls. Under the awnings, roaring fans project hot air streams scorching over their sides.
Inside, behind a tangle of power cords and network cables, a full wall of each container is filled with high-tech IT equipment, powerful servers soaring to put the produced natural gas as a by-product. from oil production buffers to use on a whole different kind of mining: digital cryptocurrency mining.
Instead of burning it down, we’re trying to bring something to the site so that we can use it and create something beneficial, said Bruce Larsen, a native of Sidney, president of Krakens.
Kraken dug here for oil released by hydraulic fracturing, or hydraulic fracturing, the technology that, along with horizontal drilling, spurred the Bakken oil boom in North Dakota and that part of eastern Montana in the late 1970s. 2000s and early 2010s. Even though the boom has cooled off from its peak over the past decade, production has continued on platforms like this, where liquid oil extracted from the earth is evacuated to refineries which convert it into gasoline or plastic. On sites without a pipeline connection, producers instead transport the liquid oil in tanks.
Bakken’s oil, however, usually surfaces with a companion that is not necessarily welcome: natural gas that is both more difficult to transport from distant well pads and less profitable to sell. In part because a component of this gas, methane, is a potent greenhouse gas about 25 times more effective at trapping the heat of global warming in the atmosphere than carbon dioxide companies like Kraken regularly burn them. unwanted waste gases in well flares, converting as much of the methane as they can to relatively harmless CO2.
The wastefulness inherent in flaring, along with its climatic implications, has caught the attention of government regulators and environmentalists. North Dakota, for example, set flaring reduction targets as early as 2014 to encourage the oil industry to invest in the infrastructure it needs to capture the by-product gas and make it into something. useful.
More recently, as Bitcoin and other cryptocurrencies have emerged as major investment options, the cheap energy that goes up in smoke on well blocks has also caught the attention of tech-savvy entrepreneurs.
Unlike traditional currencies like the US dollar, which are regulated by central banks, Bitcoin and its peers are run by digital exchanges that use decentralized databases and cryptography to track ownership. New units of Bitcoin are created by digital mining, essentially performing computer gymnastics to unlock new bitcoins. Bitcoin mining, however, has become an increasingly difficult business as the popularity of digital currencies has grown, requiring special hardware and huge amounts of electricity to power it. This energy consumption has, in turn, seen the cryptocurrency industry criticized for its own impact on the climate.
A Bitcoin mine operated at a former mill near Missoula, for example, drew criticism after county officials said it used as much electricity as a third of county households. Additionally, researchers at the University of Cambridge estimate that Bitcoin currently consumes nearly 94 terawatt hours of electricity per year globally, more than the combined consumption of the 108 million people who live in the Philippines.
The server containers at the Kraken well site are owned by Denver-based Crusoe Energy Systems, a venture capital-backed startup founded in 2018 that touts itself as a partner for oil companies seeking a economical way to reduce their flaring. In eastern Montana, Crusoe buys otherwise stranded gas from Kraken, directs it to the generators on site, and uses the resulting power to smash Bitcoin without the ether.
Cully Cavness, co-founder and chairman of Crusoes, said in an interview that the company also makes its server farms available to people who need other compute-intensive work, such as training artificial intelligence models or rendering of computer animations. He said the company donated computing power to Folding at Home, an organization that helps research COVID-19 and other biochemical topics by simulating the atomic interactions at play in protein molecules.
Bitcoin mining, however, is Cruso’s main effort at the moment. The company, Cavness said, has a dedicated network engineering team that determines how to connect each well server farm to the rest of the world, using satellite internet, microwave transmissions, or in some cases, bespoke fiber optic lines that can also provide broadband service to nearby rural customers.
The company isn’t the only effort underway to leverage natural gas from wells for Bitcoin mining in the United States, but Caveness said Crusoe is the biggest startup in space. He said the company currently operates around 40 data centers, mostly on the Bakken in Montana and North Dakota, but also operates in Colorado and Wyoming and plans to expand to other oil-producing regions. .
Were pushing him pretty quickly today. We were looking to reach around 100 in a few months, he said.
Caveness said he sees the company’s model as an effective response to environmental concerns about the energy consumption of cryptocurrencies, both because flares do not necessarily burn all of the methane in gas from the cryptocurrencies. wells and because producing mining energy from gas offsets energy consumption that would otherwise have to come from elsewhere.
Compared to continued flaring, this is deeply carbon negative, he said. I think more and more, the environmental aspect of this is going to be part of our value proposition.
Larsen sees it as a win-win situation for producers like Kraken. Most of the company’s revenue, 90%, still comes from the sale of oil, he said, but he appreciates having a way to reduce flaring waste.
Alternatively, he said Kraken could either build a gas pipeline or spend money on equipment to liquefy the gas on site, so it’s easier to truck around although sites like the well pad near Sidney generally does not produce enough gas to make this investment.
As an industry, we were trying to do our best to minimize the amount of gas we burn, Larsen said. I never want to flare gas, just sometimes we get stuck with infrastructure constraints, so we have to.
Since the site near Sidney produces slightly more gas, 1.5 million cubic feet per day, than the 1.2 million cubic feet per day that Crusoe’s four generators have on site can turn into electricity. , the well platform still has a burning torch. Larsen said he hopes Crusoe can figure out how to use the rest of the stranded gas as the cryptocurrency firm composes its business model in the years to come.
Basically for us, Bitcoin is the newer and more polished solution. And it’s probably the most effective, he said.
This story is published by Montana Free Press as part of The Long Streets Project, which explores Montana’s economy with in-depth reporting. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication about issues, trends and values of importance to Montanais. Discuss Long Streets’ work on MTFPs with senior reporter Eric Dietrich [email protected].
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