As part of its goal to reduce pollution, Exxon is mining bitcoin in North Dakota

According to those familiar with the situation, ExxonMobil, the country's largest oil and gas company, is testing a bitcoin mining facility in North Dakota.

Exxon has been working with Crusoe Energy Systems, a Denver-based business, for over a year, according to persons who asked not to be identified because the project's details are private. Crusoe's invention aids oil corporations in converting squandered energy, such as flare gas, into a usable resource.

Exxon is diverting natural gas that would otherwise be consumed into generators, which turn the gas into energy used to power shipping containers full of thousands of bitcoin miners, similar to ConocoPhillips' mining program in North Dakota's Bakken region. Exxon began testing the project in late January 2021 and expanded it in July.

While Exxon hasn't said much about its work in the space, Eric Obrock, a 10-year Exxon veteran, said on his LinkedIn profile that he "proposed and led the first successful commercial and technical demonstration of using Bitcoin Proof-of-Work mining as a viable alternative to natural gas flaring in the oil patch" from February 2019 to January 2022.

On his LinkedIn profile, Obrock's title is NGL industry outlook advisor, which refers to the natural gas liquids market. Obrock told CNBC via LinkedIn that he's been informed he can't speak to the media about the situation. A request for comment from Exxon was not returned.

Exxon's bitcoin initiative isn't really about making money using bitcoin. Rather, as part of an industry-wide effort to satisfy increasing environmental criteria, the corporation has vowed to reduce emissions. Exxon joined other oil firms in early March in pledging to the World Bank's "Zero Routine Flaring by 2030" project, which was launched in 2015.

When opposed to continuing flaring, the type of crypto mining agreement it's pursuing with Crusoe reduces CO2-equivalent emissions by roughly 63 percent.

Bloomberg originally reported Exxon's bitcoin mining operations in North Dakota, saying the firm is contemplating similar pilots in Alaska, Nigeria's Qua Iboe Terminal, Argentina's Vaca Muerta shale sector, Guyana, and Germany.

Bitcoin mining in the Bakken

The issue that Exxon and Conoco are addressing has been around for a long time: what happens when drillers hit a natural gas formation by accident?

Unlike oil, which may be trucked to a distant location, gas must be delivered by a pipeline. Producers can sell a drilling site straight away if it is close to a pipeline. Drillers, on the other hand, frequently burn off gas if the pipe is full or the gas is 20 miles distant. That's why oil fields usually have flames rising from them.

Drillers are not only endangering the environment, but they are also wasting money.

Bitcoin mining, for example, requires simply an internet connection and can be done from any location. Miners are also motivated to find the cheapest power sources because energy is their key variable expense.

"This is just a terrific approach to bring that demand to the wasted energy and solve two problems at once," said Cully Cavness, president of Crusoe, whose backers include one of Tesla's major investors, Valor Equity Partners. "Reduce bitcoin's energy hunger and the energy industry's stranded energy and flare gas problems."

Crusoe has 150 employees, according to Cavness, and collaborates with Equinor ASA of Norway, Enerplus of Canada, and Devon Energy of Oklahoma City.

Crusoe can run 20 portable engines, according to permits from North Dakota's Division of Air Quality, with 11 presently in service at well sites around the state. At the Jorgenson Deep Creek Site, two of the engines are running at wells operated by XTO Energy, Exxon's oil and gas fracking division. The Bakken is home to the majority of Crusoe's 80 data centers, according to Cavness.

"On flaring volumes, we're really shifting the needle," Cavness added. "We've implemented our technologies, and we're not flaring more than 10 million cubic feet of gas per day that would otherwise be flared."

Crusoe was acknowledged by the World Bank in its most recent Global Gas Flaring Reduction Partnership report as providing a novel solution to flaring.

Getting to the bottom of the methane problem

With the rise of hydraulic fracturing, or fracking, the Bakken formation has become a major source of additional oil production in the United States in recent decades.

Craig Thorstenson has been in North Dakota's Division of Air Quality's permitting program since 1989. North Dakota has long been an oil state, he adds, but the Bakken's boom propelled the state to second place in the country before slipping to third last year.

The change "was quite a shock for us," said Thorstenson, who was born and reared in Bismarck, the state capital. Residential housing was unable to meet demand.

"We were experiencing a population explosion," Thorstenson explained. "People are coming in looking for work. Those that live in Walmart parking lots."

More drilling means more gas was squandered, affecting the whole Williston Basin, which spans parts of Montana, the Dakotas, and Canada. Crusoe put a lot of money into the area for this reason.

"At one point in recent history, the basin was flaring nearly a fifth of the gas that was produced there," Cavness added.

According to Thorstenson, the amount of natural gas squandered is finally heading down. North Dakota's Department of Natural Resources projected in a March report that 93 percent to 94 percent of natural gas is currently captured. In 2014, the commission set a target of 74 percent capture.

Drillers have traditionally used flaring to dispose of extra gas because it is less harmful to the environment than venting, which releases methane directly into the atmosphere and causes greenhouse effects 84 to 86 times stronger than CO2 over a 20-year period.

Even with flaring, wind and other reasons cause some methane to escape. According to Adam Ortolf, who runs business development in the United States for Upstream Data, a company that manufactures and supplies portable mining solutions for oil and gas facilities, on-site bitcoin mining can have a big impact because 100 percent of the methane is combusted and none of it leaks or vents into the air.

"Nobody will run it through a generator unless they can profit from it," Ortolf explained. "Generators are expensive to buy and maintain." "As a result, producers will not internally combust the gas unless it is commercially viable."

Crusoe's technologies are designed to make drilling profitable for drillers. The company transports its equipment onto the oil pad, allowing it to convert natural gas that would otherwise be squandered into energy, which is then used to run computing at the drill site.

"We get up to 99.9% combustion of that methane when we send it through our generator," Cavness added. "Not only are we repurposing otherwise squandered energy, but we're also lowering methane emissions dramatically."

Cavness believes that methane is the low-hanging fruit from the United Nations' recent global climate meeting in Glasgow, Scotland.

"As an energy industry, that's the problem we want to solve," he said.


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