Fracking For Bitcoin?
Bitcoin miners and fracking companies are working together. Yet another example of Bitcoin entering into people’s everyday lives.
Oil and gas wells in hydraulically fractured (“fracked”) shale formations produce some waste gas as a byproduct, mostly composed of methane. Since selling this gas is usually unprofitable, it’s typically disposed of by burning it off. Those little flares, from thousands of wells around the world, add up. Gas flaring is responsible for at least 1% of global carbon emissions, and collectively wastes hundreds of millions of dollars worth of natural resources every year. In the US, that has made flaring a target for regulators in gas-producing states like Texas, New Mexico, and North Dakota, which are considering new restrictions on the practice. BlackRock, the asset manager that has stepped up pressure on companies to disclose their climate risks, has called for the “near elimination” of flaring globally by 2025.
Anticipating a crackdown, some gas companies are starting to look for their own solutions. One cost-effective way to reduce flaring emissions is to turn the waste gas into electricity with a generator, and use it to power something, like lights or pumps, on the well site. But Gerasymovych realized that crypto miners and gas drillers could both benefit by converting waste gas into cheap power. What better way to reduce emissions than supplying a data center, ravenous for cheap 24/7 electricity, that can be built into a transportable shipping container?
There was just one problem: Perhaps because of Bitcoin’s tumultuous price swings, gas companies weren’t interested. “People laughed at us,” Gerasymovych said. Then three things changed. First, the pandemic struck, and the price of natural gas cratered; an industry that was already on shaky financial footing found itself facing an existential crisis as drilling ground to a halt and scores of shale companies went bankrupt. Second, thanks in part to a Feb. 2021 endorsement by Elon Musk, the price of Bitcoin soared.
Third, Gerasymovych decided to tweak his business model to sweeten the deal for gas companies. Rather than buy their cheap flare gas to run his own mines, his company, EZ Blockchain, charges a few hundred thousand dollars to install and perform regular maintenance on a Bitcoin mining data center, and lets the gas company reap the Bitcoins itself. In other words, the gas company becomes the miner, and uses its own gas for free.
“The market conditions have changed,” Gerasymovych said. “Now, every oil and gas company we reached out to in 2018 is calling us back because they see Bitcoin is making a lot of money.”