In Pennsylvania, Big Dog Energy LLC has installed 30 gas-powered generators on one of its gas well rigs in the town of Beccaria, using the electricity it produces in an ingenious, lucrative and potentially environmentally harmful endeavor — mining the cryptocurrency known as bitcoin.
After the Pennsylvania Department of Environmental Protection discovered the mining operation on a site visit in January, it sent the company a notice of infringement claiming that the company had installed and operated generators without permission. According to the letter to owner Matthew Anderson, these operations violate sections of the state’s environmental law, which prohibits the creation or modification of an air pollution source without a permit.
Big Dog Energy has also started mining bitcoin at a site in Woodward Township, and has submitted notifications of intent to develop gas wells in Covington and Gulich as well, according to a report by Michaela Hess, a local journalist. It remains to be seen if the wells in Covington and Gulich will also be used for bitcoin mining.
Bitcoin is a cryptocurrency in which each transaction is recorded in a distributed digital ledger, with each block of transactions added to a long chain of transactions, or blockchain. In exchange for block verification, which involves a race to solve complex cryptographic puzzles, so-called miners are rewarded with cryptocurrency.
The value of cryptocurrencies to society is in sharp dispute. Proponents say it gives owners privacy, freedom from government and bank control, and the opportunity to reap huge profits as the value of private currency rises. Opponents claim that cryptocurrencies are used to hide wealth and illegal activities, which are in essence giant Ponzi schemes, in which good price increases are worthless only as long as new customers buy them. The recent volatility in the cryptocurrency markets has fueled this controversy.
Beyond the conceptual questions about cryptocurrency, the process of creating a new bitcoin — figurative mining, although it consists entirely of computer transactions — is quite energy-intensive, which raises questions about its environmental impact. The more computer power a miner can devote to mining, the more bitcoins he can mint. The cheaper the cost of electricity, the higher the profits. And if electricity is generated by fossil fuels, those profits come with increased emissions of carbon dioxide and other greenhouse gases, leading to climate change.
Over the past few years, bitcoin miners have found new ways to get cheap electricity – including buying their own power plants. Other miners have begun buying gas that would otherwise have been burned in oil wells in places like Texas and North Dakota to run generators on site, using electricity to mine bitcoin on server farms erected in shipping containers. At least in those cases, the gas would have been burned no matter what, so there are no additional greenhouse gas emissions.
The same cannot be said of Big Dog Energy’s operations, or other off-grid mining operations in stranded gas wells. These are wells that have been opened and ruptured but are not connected to pipelines, so well owners have no way of bringing the gas to market. Anyone who sets up a bitcoin mining operation at one of these stuck sites is burning fossil fuels that would otherwise remain in the ground, had it not been for bitcoins.
Miners who own gas wells can make more than twice the money using gas to mine bitcoin than they can sell in the wholesale market, said Rob Altenburg, director of the Energy Center at Citizens for Pennsylvania’s Future, a statewide environmental advocacy group. . Altenberg is concerned about what this means for Pennsylvania’s air pollution and greenhouse gas emissions, especially if more gas companies follow in the Big Dog’s footsteps. Since these processes are relatively mobile, it is difficult to monitor and regulate them.
“They take the generators on the trailers and plug them into the gas well, and they run the generators and mine bitcoins,” Altenberg said. The problem with them is that they are on wheels, and they have not applied for a permit. They showed up one day with trailers and plugged them in with electricity.”
Altenburg notes that Big Dog Energy has other wells in the state where it could have started mining without anyone noticing. “I think it’s a fair question, has anyone gone and looked at those other wells?” Altenburg said. Has anyone looked at other companies?
The Pennsylvania Department of Environmental Protection did not respond to emailed questions about Big Dog Energy’s bitcoin mining operations. Owner Matt Anderson told the local newspaper that the breach notice “likely does not apply to my operations.”
“It looks like they’re at least trying to claim they don’t even need a permit,” Altenberg said. “It seems that they are either claiming to be part of their current permit for gas wells – which I don’t believe and the people I spoke to at DEP don’t believe it. But, you know, the courts haven’t looked at this yet, it’s completely new. Or they claim they are exempt. In a way due to the nature of these sources, whether they are very small or mobile.”
Another Pennsylvania energy company is selling electricity produced at a gas well platform in Ridgway Township to power a bitcoin mining operation. In a statement provided to local journalist Brian Stockman, the company said: “Pin Oak Energy is evaluating what is called a ‘digital pipeline.’ Essentially, this process converts on-site natural gas production into on-site electricity for use in a variety of applications.”
There are more than 1,000 unconventional (that is, cracked) wells in Pennsylvania that have been drilled but no gas, condensate or oil production is reported until 2021, according to the FracTracker Alliance. It’s not hard to imagine the owners of those stranded assets bringing in generators and bitcoin miners to stream profits, especially if it’s legal.
Pennsylvania isn’t the only place this is happening. In 2020, a bitcoin miner called Link Global installed four 1.25 megawatt gas generators in an idle natural gas well in Alberta, Canada, and began mining bitcoin. The generators worked for about a year (364 days) without permission. Another unauthorized Bitcoin mining operation by the same company lasted for more than 400 days.
In South Dakota, a bitcoin mining company called Highwire Energy has purchased the mining rights to seven natural gas wells that were to be dammed.
Avi Asher-Shapiro, a reporter with Thomson Reuters, interviews a go-to “Hoddle Tarantola” who mines bitcoin at abandoned gas wells in southeastern Kentucky. Tarantula told Asher-Shapiro that only one site was bringing in $20,000 worth of bitcoin per month. The tarantula explained its operations in more detail in last year’s Fun With Bitcoin podcast. Depending on how much gas is available at each site, Tarantola said he will install a 1/2 megawatt or 1 megawatt generator to power the miners.
While electricity generation may be small at individual sites, it can build up quickly depending on how fast the tarantula and other off-grid miners are. “There is no limit to the amount of capital that can be extracted from stranded energy now that bitcoin mining is up and running,” Tarantola told Asher-Schapiro.
In the podcast, the tarantula claimed that mining in suspended gas wells is environmentally friendly. “We’re limiting fugitive emissions, which is a natural gas that can leak, we’re actually putting it in a controlled environment and burning it into carbon dioxide that trees can use and turning it into oxygen we breathe,” he said. “Whereas methane or methane escaping is 30 percent more harmful to the atmosphere and ozone there is absolutely nothing that turns that into something humanity can use in a beneficial way.”
Damaging gas wells properly reduces methane emissions without increasing carbon dioxide emissions, which contribute to global warming and climate change.
Tarantulas are also part of the cottage industry that sprang up to provide people stranded with gas resources with turnkey bitcoin mining solutions. for each his Twitter Biography, is now the director of mining for a Wyoming-based company called Sovereign Mining, which sells pre-fabricated bitcoin mining facilities with an enthusiastic slogan, “Mine Bitcoin Anywhere!” The company says it is “committed to powering the Bitcoin network that is stranded and underused.”
Tarantulas belong (or at least were) to a Kentucky-based gas company called Midstream, which sells turnkey solutions to potential miners as well as bitcoin mining. According to the company’s website, “Instead of selling our gas, we use it to fuel generators which in turn power our crypto-mining machines. Through this strategy, we are able to extract 10 times more value from our natural gas.” It’s a good selling point for what the company calls Big Rig, a 300-kilowatt mining pool designed “for natural gas producers who want to dip their toes into their gas-powered mining.”
Midstream Chief Operating Officer Marshall Holbrooke is also the CEO of Puissant Industries Inc, a “natural gas development and cryptocurrency mining” company that owns 39 wells in eastern Kentucky.
In Kentucky, at least, off-grid mining appears to be perfectly legal. John Mora, director of communications for Kentucky Energy and Environment, wrote in an email. Mora added that he “is still checking the requirement to obtain permits for generators used in this way.”
It is difficult to assess the extent to which bitcoin mining brings stranded gas wells online, because, as Altenberg notes, these operations are relatively small and mobile. They may only appear–as in Alberta, and as in Ridgway, Pennsylvania–because residents complain about the noise. Even when people find out about it, local and state government officials may not be able to tell miners to stop.
“It’s really hard for a state environmental regulator to deny permits,” Altenberg said. “I’ve spent 22 years working at DEP. And I had to tell a lot of people that if the company met the permit criteria, and DEP refused the permit — DEP wouldn’t say, ‘We won’t let you do that, because we think it’s a bad idea.'” ‘ They should say, you know, “Do you meet these criteria or not?” Nor were the standards written in a world where bitcoin mining was just an idea.”