Why fossil fuel companies see green in Bitcoin mining projects

Of all the corporate climate hype circulating this spring, ExxonMobil’s secret project to reduce its pollution by mining Bitcoin has to be considered one of the strangest.

Exxon launched a pilot project in 2021 to mine Bitcoin at Bakken oil fields in North Dakota, CNBC reported in March. The largest oil and gas company in the United States is also considering doing the same in Alaska and parts of Nigeria, Argentina, Guyana and Germany. Bloomberg reported. And it is not alone. Other oil companies, including ConocoPhillips in North Dakota, see energy-hungry cryptocurrency as a way to offload some of their climate footprint and perhaps make some money in the process. The United States has become the largest hub for Bitcoin mining globally, so this could be a growing trend.

The story of how fossil fuel companies have turned to the dirtiest cryptocurrency around to green their books starts with a persistent gas problem. Whenever a company drills for oil, it often pushes methane gas out of the ground as well. Methane is an even more potent greenhouse gas than carbon dioxide. If a company lets methane escape into the atmosphere, which they are often embarrassingly guilty of, methane would trap heat 80 times more than CO2 over the next 20 years. Yikes.

Oil companies will often pump some of that gas back into the ground, not out of the goodness of their hearts, but to keep up the pressure that pushes oil out of wells.

But there isn’t always enough room to put the excess gas back into the ground. The alternative? Set it on fire. Burning methane, called “flaring” in industrial parlance, releases CO2. When it comes to the climate, this is a harm reduction approach. Not releasing gas in the first place would be best, but releasing CO2 is slightly better than letting more potent methane rise into the atmosphere.

The downside to this, aside from worsening a climate crisis that is killing people and making entire communities unlivable, is that burning methane is a bit like rolling up a wad of money and smoking it. See, methane’s marketing nickname is “natural gas.” More than $ 1 billion worth of natural gas goes up in smoke every year in the United States due to flaring.

All that gas could be used as electricity, but that would require building infrastructure. And it looks like fossil fuel companies may be willing to bear those losses rather than spend (surprisingly affordable) money and time building pipelines to put that gas on the market. A more interesting option is to put that gas into operation on site near the oil well, so there is no need to build a new pipeline to use the gas.

This is where Bitcoin comes under chat. The Bitcoin network uses the same amount of electricity in a year as the country of Malaysia. Miners solve increasingly complex puzzles to mint new Bitcoins, which require special hardware and a lot of electricity. Fortunately for Exxon and similar companies, Bitcoin mining rigs can be installed virtually anywhere there is a cheap and abundant source of energy, such as, for example, an oil field where Exxon has so much extra gas that it is burning it, willingly or unwillingly.

Here’s where we finally get to Exxon’s potential climate argument for Bitcoin mining. Exxon is working with a company called Crusoe, according to CNBC, whose sole purpose is to help fossil fuel companies manage their exhaust by using it for cryptomining or other computer projects. It is “on a mission to align the future of computing with the future of climate,” he says on his website.

Crusoe munched on his own numbers and came to the conclusion that cryptomining reduces CO2 emissions by a whopping 63 percent compared to flaring. Crusoe says it’s because his system is much more effective at burning all the methane. Rockets, it is estimated, burn only 93 percent of the methane they are supposed to burn. The rest escapes into the atmosphere. Crusoe’s cryptomining system, on the other hand, uses 99.89% of the methane.

Crusoe did not respond to interview requests from The border. Sarah Nordin, Exxon’s media relations consultant, declined to “comment on rumors and speculation about the project” in an email sent to us.

Exxon’s decision to use the flue gas for Bitcoin rather than find another more practical use “is probably one of the worst-case scenarios for an infrastructure project,” says Paasha Mahdavi, assistant professor of political science at the University of California, a Santa Barbara.

It might be different if Exxon were bringing its exhaust gases to the grid where it could serve a probably more important purpose like heating and lighting homes. So that excess gas would displace pollution that would otherwise have come from intentional drilling of gas elsewhere. But that’s not quite the case when Exxon mines Bitcoin with flue gases.

“Better do something useful with [the gas]rather than just igniting it for the benefit of no one, “says Jon Goldstein, a senior director of the Environmental Defense Fund.” But at the same time, it seems [cryptomining is] it’s not really a use that will do much good for society at large. It will benefit cryptocurrency investors. ”

Other experts are more skeptical that this is actually an answer to the exhaust gas problem. “This is basically a way to monetize flaring. It’s not a way to stop shining, ”says Mahdavi.

Mahdavi also warns that Exxon could potentially make itself Look as if it were reducing pollution on paper when in reality he is just shifting those emissions from his own books directly to someone else’s. Whenever Exxon throws exhaust, that’s part of the company’s carbon footprint. But if another company burns gas from Exxon’s oil fields to mine Bitcoin, who is assigned the associated greenhouse gas emissions: Bitcoin miners or Exxon? The answers are still unclear, says Mahdavi.

There’s one final problem with Exxon’s cryptomining, and it’s a big one. Unsurprisingly, allowing fossil fuel companies to profit from exhaust gases gives them a good reason to continue drilling, Mahdavi and environmental economist Raphael Calel write in a 2020 paper.

“There is now potentially an incentive to increase your drilling because you are getting a higher return,” says Calel. “All you get is an incentive for overproduction so that you get that extra benefit downstream.”

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