24 ms·

Wyoming natural gas flared for cryptocurrency mining exempt from taxation

67 points by thinkmassive 5y ago

georgyo 5y ago
I was ready to be angry. However using gas that would have been burned or vented anyway doesn't seem so bad. Of course this makes it so there is no incentive to close these vents completely.
- toss1 5y ago
  Yup, they could add that it is taxable at higher rates after enough cryptocurrency was earned to pay for the permanent cap
- rch 5y ago
  Unless it's now more profitable to burn everything on site, skipping the infrastructure cost of capture and delivery, while also producing more hydrocarbons for longer than they normally would have.
  - quantified 5y ago
    Skipping any incentive to let it vent away. Probably an incentive to declare more gas as “flare off” Incentives to just burn baby burn for bitcoin power are growing. Already was there for power plants, more money to be made in bitcoin than powering hospitals and tv sets.
- dyndos 5y ago
  >Of course this makes it so there is no incentive to close these vents completely. Are you sure that follows from HB 189? To avoid tax the gas just needs to be certified that it would have been vented. I don't see anything that would encourage keeping small leaks. >Natural gas that is consumed on the site and would have otherwise been vented or flared under the authority of the Wyoming oil and gas conservation commission has no value and is exempt from taxation as long as the natural gas is certified by the Wyoming oil and gas conservation commission as to have originated from a qualifying well.
- PragmaticPulp 5y ago
  The article says they're also using wells that would be shut-in. They're basically buying up wells that are too low pressure to continue using for mainstream production, and then instead of closing them off they're extracting all of the remaining gas and burning it. Seems like a terrible idea to give them a tax break for burning more natural gas that would otherwise be left in the ground. I'd be okay if it was just the flare-off from refineries, but that's not all they're doing.
  - rattlesnakedave 5y ago
    > Seems like a terrible idea to give them a tax break for burning more natural gas that would otherwise be left in the ground. Good thing that’s not what they’re doing.
    - aluminum96 5y ago
      The linked references in the article say this is what they're doing.
      - rattlesnakedave 5y ago
        No. They are giving them a tax break for using gas that would have been flared or vented.
- dagnabbit 5y ago
  The article states that they’re using gas that would not have been extracted, burned, or vented. It’s just a tax break for some “entrepreneurs” who are making climate change worse. Bitcoin remains an environmental disaster, defended exclusively by horrible people.
rsj_hn 5y ago
I’m confused as to the economics of this. Can someone explain to me why it’s cost effective to make use of this gas for crypto mining but not for other purposes? If you move crypto, you’d buy energy at the market price, no? Why pay more than the market price?
- kindle-dev 5y ago
  It's in the article: "Natural gas that is consumed on the site and would have otherwise been vented or flared under the authority of the Wyoming oil and gas conservation commission has no value and is exempt from taxation as long as the natural gas is certified by the Wyoming oil and gas conservation commission as to have originated from a qualifying well,” the new law reads."
- freefal 5y ago
  These are crude wells for which natural gas is just a byproduct. While crude can be stored in tanks near the wells and trucked intermittently to pipelines, the natural gas requires pipelines to the wellhead which may not be economic. Generally there isn’t a productive use of small quantities of natural gas in the middle of nowhere so it’s flared. The Bitcoin mining provides a “productive” use.
- betwixthewires 5y ago
  So the issue is the overhead infrastructure needed to do anything useful with the gas. The gas burns, so it is useful, and if they could've done anything profitable with it they wouldn't be burning it. It's not viable, so it is wasted. Well if you can use it on site to do something, like mine bitcoin, it can then be turned into something useful that doesn't require a ton of transport and storage infrastructure, so the state is trying to incentivize that so that they don't just keep burning it.
  - rsj_hn 5y ago
    Ahh, thanks, So the issue is that crypto can consume on-site. Thank you.
- skybrian 5y ago
latchkey 5y ago
Burning natural gas in a generator produces fewer toxic emissions than flaring it. The reason to use it on site for crypto mining is that transporting power over distances is expensive and difficult.
- PragmaticPulp 5y ago
  They're also using wells that would otherwise be shut-in. This isn't just excess gas that would be flared off anyway. > The reason to use it on site for crypto mining is that transporting power over distances is expensive and difficult Transporting electricity over distances is not expensive nor difficult in 2021. Regardless, it doesn't make sense to give someone a tax break for turning electricity into heat instead of putting it into the grid.
  - latchkey 5y ago
    To explain (not appeal to authority), my comment comes from direct experience in existing HV transmission costs, specifically from a hydrodam in upstate NY to a location only about 5 miles away and you'd be surprised at how much that is. I can only imagine that constructing new infrastructure to produce and transmit the power over even longer distances from remote oil fields to a grid, is even worse. It sounds like you have experience in this area though... can you tell me how it isn't expensive or difficult to build transmission lines / towers into remote locations?
  - ineedasername 5y ago
    for turning electricity into heat Isn't it kind of like turning gas into heat, into electricity, back into heat?
Jordanpomeroy 5y ago
Do you like gas flaring? Because this is how you get gas flaring?
- jdhn 5y ago
  This isn't going to start a boom in flaring. If anything, it'll start a boom in using natgas that otherwise would be flared to mine cryptos.
  - jcrben 5y ago
    That's an empirical statement without supporting evidence. For natural gas wells without infrastructure, this is a great alternative. It almost certainly makes some uneconomical wells economic. And if bitcoin goes to 200k, you can bet this practice will be booming.
cascom 5y ago
To be clear the gas isn’t flared if it’s powering a generator…
- maxerickson 5y ago
  It is for tax purposes in Wyoming!
PragmaticPulp 5y ago
This is weird. The law appears to be a targeted benefit for 3 Wyoming entrepreneurs who are starting a company to mine cryptocurrency using natural gas that might otherwise go unnused -- or even unburned at all. (Photos of their setup: https://oilcity.news/startup/2021/03/05/modern-miners-new-casper-business-mines-bitcoin-at-unused-gas-wells/ https://oilcity.news/startup/2021/03/05/modern-miners-new-ca... ) Note that it's not just gas that might be flared off - They're also trying to set up crypto mining on wells that would be otherwise shut-in. In other words, wells that are scheduled for shutdown are no longer going to be shut down, because these 3 guys are going to keep them open to burn off every last bit of gas they can extract. And for some reason they're getting a tax break to do it? This doesn't really make sense, IMO. I don't really mind if they're going to use the minimal heat from natural gas flares to do something, but if they're going to interfere with the process of shutting down wells then they're not exactly doing the environment any favors. Why do we need to give them a tax break for keeping wells open longer than they otherwise would be? Why not have them pay taxes like everyone else on those wells? Doesn't make sense. Feels like a major handout to these few people in exchange for burning more natural gas. Not cool.
- cascom 5y ago
  This is not a new concept, and this company is not the first mover, for example: https://www.crusoeenergy.com/ https://www.crusoeenergy.com/
  - PragmaticPulp 5y ago
    > This is not a new concept, The state giving them arbitrary tax breaks appears to be a new concept, unless I'm mistaken.
    - cascom 5y ago
      I don’t know what the economics look like, but I think the goal is to eliminate deadweight loss from the tax, such that if that tax were imposed only 20% of wells would be economic, vs say 60%. Furthermore i would presume there is tax revenue and jobs associated with these operations that don’t exist were the gas just flared.
Bud 5y ago
This is what we get for giving 2 Senators to states with less than the population of a single medium-sized city.
- Maursault 5y ago
  This problem, and the general problem of a national party in minority being continuously over-represented in the Senate and the Electoral Collage, is so easily fixed by the California Democratic Party giving incentive for 2 million California Democrats to move and establish residency in Wyoming, South Dakota and North Dakota, turning these into overwhelmingly Blue states. Heck, they could spare another 2M to move into Idaho and Montana doing the same there without jeopardizing California's Democratic politics.
  - salawat 5y ago
    That... Right there. That's Empire building/colonialism right there. There is no ambiguity, no justification, and no misunderstanding it. That is a group of people organizing to displace and disenfranchise the native residents of another place for policy and political gains. This is how you divide a country. This is how you provoke civil unrest. This is how you shove a wedge in interstate relations. If you honestly endorse that type of activity; you are so far from a countryman of mine that I cannot even articulate where you "jumped the shark" politically and culturally speaking, and it is my sincerest hope no one ever takes you seriously. The architecture of States in the U.S. was always based on sovereignty, suborned to a federalized layer on top for the resolution of interstate conflict. What you suggest would be nothing less than something capable of disrupting the freedom of movement in the United States as each state is pushed to defend itself from deliberate encroachment and political subversion by out of State elements. On the one hand, maybe we'd finally break up the National political parties and get a more factionally driven federal level. More likely, there's be a crisis of Unity the likes of which hasn't been seen since the Civil War. Washington was right. The only thing that could unmake the United States... Is the United States.
    - Maursault 5y ago
URSpider94 5y ago
The thing that people are missing here is that these aren’t natural gas wells, they are oil wells. Natural gas is a byproduct of oil production (crude oil can have a lot of natural gas dissolved in it, which bubbles out when it’s pumped out of the ground). It’s usually not economical to capture this gas and make use of it, so it’s usually just flared, or worse - vented. To the degree that this makes use of this waste gas, it’s better than nothing. However, if it encourages continuing to tap gas off of shut-in oil wells, then it’s potentially less good.
verytrivial 5y ago
I hate every detail of this.
aluminum96 5y ago
Ban or heavily tax all proof-of-work cryptocurrency mining in the US. Bitcoin is causing major environmental impacts (both with emissions and e-waste), and better solutions exist, such as proof-of-stake. Society should not have to pay for the environmental externalities of bitcoin speculators.
- Gosper 5y ago
  > and better solutions exist, such as proof-of-stake A far weaker security guarantee – when network security is the entire point – is certainly not better. Bitcoin is irrelevant to your otherwise valid point that environmental externalities should indeed be accounted for in power generation.

67 points by thinkmassive 5y ago

I was ready to be angry. However using gas that would have been burned or vented anyway doesn't seem so bad. Of course this makes it so there is no incentive to close these vents completely.

toss1 5y ago
Yup, they could add that it is taxable at higher rates after enough cryptocurrency was earned to pay for the permanent cap
rch 5y ago
Unless it's now more profitable to burn everything on site, skipping the infrastructure cost of capture and delivery, while also producing more hydrocarbons for longer than they normally would have.
- quantified 5y ago
  Skipping any incentive to let it vent away. Probably an incentive to declare more gas as “flare off” Incentives to just burn baby burn for bitcoin power are growing. Already was there for power plants, more money to be made in bitcoin than powering hospitals and tv sets.
dyndos 5y ago
>Of course this makes it so there is no incentive to close these vents completely. Are you sure that follows from HB 189? To avoid tax the gas just needs to be certified that it would have been vented. I don't see anything that would encourage keeping small leaks. >Natural gas that is consumed on the site and would have otherwise been vented or flared under the authority of the Wyoming oil and gas conservation commission has no value and is exempt from taxation as long as the natural gas is certified by the Wyoming oil and gas conservation commission as to have originated from a qualifying well.
PragmaticPulp 5y ago
The article says they're also using wells that would be shut-in. They're basically buying up wells that are too low pressure to continue using for mainstream production, and then instead of closing them off they're extracting all of the remaining gas and burning it. Seems like a terrible idea to give them a tax break for burning more natural gas that would otherwise be left in the ground. I'd be okay if it was just the flare-off from refineries, but that's not all they're doing.
- rattlesnakedave 5y ago
  > Seems like a terrible idea to give them a tax break for burning more natural gas that would otherwise be left in the ground. Good thing that’s not what they’re doing.
  - aluminum96 5y ago
    The linked references in the article say this is what they're doing.
    - rattlesnakedave 5y ago
      No. They are giving them a tax break for using gas that would have been flared or vented.
dagnabbit 5y ago
The article states that they’re using gas that would not have been extracted, burned, or vented. It’s just a tax break for some “entrepreneurs” who are making climate change worse. Bitcoin remains an environmental disaster, defended exclusively by horrible people.

rsj_hn 5y ago

I’m confused as to the economics of this. Can someone explain to me why it’s cost effective to make use of this gas for crypto mining but not for other purposes? If you move crypto, you’d buy energy at the market price, no? Why pay more than the market price?

kindle-dev 5y ago
It's in the article: "Natural gas that is consumed on the site and would have otherwise been vented or flared under the authority of the Wyoming oil and gas conservation commission has no value and is exempt from taxation as long as the natural gas is certified by the Wyoming oil and gas conservation commission as to have originated from a qualifying well,” the new law reads."
freefal 5y ago
These are crude wells for which natural gas is just a byproduct. While crude can be stored in tanks near the wells and trucked intermittently to pipelines, the natural gas requires pipelines to the wellhead which may not be economic. Generally there isn’t a productive use of small quantities of natural gas in the middle of nowhere so it’s flared. The Bitcoin mining provides a “productive” use.
betwixthewires 5y ago
So the issue is the overhead infrastructure needed to do anything useful with the gas. The gas burns, so it is useful, and if they could've done anything profitable with it they wouldn't be burning it. It's not viable, so it is wasted. Well if you can use it on site to do something, like mine bitcoin, it can then be turned into something useful that doesn't require a ton of transport and storage infrastructure, so the state is trying to incentivize that so that they don't just keep burning it.
- rsj_hn 5y ago
  Ahh, thanks, So the issue is that crypto can consume on-site. Thank you.
skybrian 5y ago

latchkey 5y ago

Burning natural gas in a generator produces fewer toxic emissions than flaring it. The reason to use it on site for crypto mining is that transporting power over distances is expensive and difficult.

PragmaticPulp 5y ago
They're also using wells that would otherwise be shut-in. This isn't just excess gas that would be flared off anyway. > The reason to use it on site for crypto mining is that transporting power over distances is expensive and difficult Transporting electricity over distances is not expensive nor difficult in 2021. Regardless, it doesn't make sense to give someone a tax break for turning electricity into heat instead of putting it into the grid.
- latchkey 5y ago
  To explain (not appeal to authority), my comment comes from direct experience in existing HV transmission costs, specifically from a hydrodam in upstate NY to a location only about 5 miles away and you'd be surprised at how much that is. I can only imagine that constructing new infrastructure to produce and transmit the power over even longer distances from remote oil fields to a grid, is even worse. It sounds like you have experience in this area though... can you tell me how it isn't expensive or difficult to build transmission lines / towers into remote locations?
- ineedasername 5y ago
  for turning electricity into heat Isn't it kind of like turning gas into heat, into electricity, back into heat?

Jordanpomeroy 5y ago

Do you like gas flaring? Because this is how you get gas flaring?

jdhn 5y ago
This isn't going to start a boom in flaring. If anything, it'll start a boom in using natgas that otherwise would be flared to mine cryptos.
- jcrben 5y ago
  That's an empirical statement without supporting evidence. For natural gas wells without infrastructure, this is a great alternative. It almost certainly makes some uneconomical wells economic. And if bitcoin goes to 200k, you can bet this practice will be booming.

cascom 5y ago

To be clear the gas isn’t flared if it’s powering a generator…

maxerickson 5y ago
It is for tax purposes in Wyoming!

PragmaticPulp 5y ago

This is weird. The law appears to be a targeted benefit for 3 Wyoming entrepreneurs who are starting a company to mine cryptocurrency using natural gas that might otherwise go unnused -- or even unburned at all. (Photos of their setup: https://oilcity.news/startup/2021/03/05/modern-miners-new-casper-business-mines-bitcoin-at-unused-gas-wells/ https://oilcity.news/startup/2021/03/05/modern-miners-new-ca... ) Note that it's not just gas that might be flared off - They're also trying to set up crypto mining on wells that would be otherwise shut-in. In other words, wells that are scheduled for shutdown are no longer going to be shut down, because these 3 guys are going to keep them open to burn off every last bit of gas they can extract. And for some reason they're getting a tax break to do it? This doesn't really make sense, IMO. I don't really mind if they're going to use the minimal heat from natural gas flares to do something, but if they're going to interfere with the process of shutting down wells then they're not exactly doing the environment any favors. Why do we need to give them a tax break for keeping wells open longer than they otherwise would be? Why not have them pay taxes like everyone else on those wells? Doesn't make sense. Feels like a major handout to these few people in exchange for burning more natural gas. Not cool.

cascom 5y ago
This is not a new concept, and this company is not the first mover, for example: https://www.crusoeenergy.com/ https://www.crusoeenergy.com/
- PragmaticPulp 5y ago
  > This is not a new concept, The state giving them arbitrary tax breaks appears to be a new concept, unless I'm mistaken.
  - cascom 5y ago
    I don’t know what the economics look like, but I think the goal is to eliminate deadweight loss from the tax, such that if that tax were imposed only 20% of wells would be economic, vs say 60%. Furthermore i would presume there is tax revenue and jobs associated with these operations that don’t exist were the gas just flared.

Bud 5y ago

This is what we get for giving 2 Senators to states with less than the population of a single medium-sized city.

Maursault 5y ago
This problem, and the general problem of a national party in minority being continuously over-represented in the Senate and the Electoral Collage, is so easily fixed by the California Democratic Party giving incentive for 2 million California Democrats to move and establish residency in Wyoming, South Dakota and North Dakota, turning these into overwhelmingly Blue states. Heck, they could spare another 2M to move into Idaho and Montana doing the same there without jeopardizing California's Democratic politics.
- salawat 5y ago
  That... Right there. That's Empire building/colonialism right there. There is no ambiguity, no justification, and no misunderstanding it. That is a group of people organizing to displace and disenfranchise the native residents of another place for policy and political gains. This is how you divide a country. This is how you provoke civil unrest. This is how you shove a wedge in interstate relations. If you honestly endorse that type of activity; you are so far from a countryman of mine that I cannot even articulate where you "jumped the shark" politically and culturally speaking, and it is my sincerest hope no one ever takes you seriously. The architecture of States in the U.S. was always based on sovereignty, suborned to a federalized layer on top for the resolution of interstate conflict. What you suggest would be nothing less than something capable of disrupting the freedom of movement in the United States as each state is pushed to defend itself from deliberate encroachment and political subversion by out of State elements. On the one hand, maybe we'd finally break up the National political parties and get a more factionally driven federal level. More likely, there's be a crisis of Unity the likes of which hasn't been seen since the Civil War. Washington was right. The only thing that could unmake the United States... Is the United States.
  - Maursault 5y ago

URSpider94 5y ago

The thing that people are missing here is that these aren’t natural gas wells, they are oil wells. Natural gas is a byproduct of oil production (crude oil can have a lot of natural gas dissolved in it, which bubbles out when it’s pumped out of the ground). It’s usually not economical to capture this gas and make use of it, so it’s usually just flared, or worse - vented. To the degree that this makes use of this waste gas, it’s better than nothing. However, if it encourages continuing to tap gas off of shut-in oil wells, then it’s potentially less good.

verytrivial 5y ago

I hate every detail of this.

aluminum96 5y ago

Ban or heavily tax all proof-of-work cryptocurrency mining in the US. Bitcoin is causing major environmental impacts (both with emissions and e-waste), and better solutions exist, such as proof-of-stake. Society should not have to pay for the environmental externalities of bitcoin speculators.

Gosper 5y ago
> and better solutions exist, such as proof-of-stake A far weaker security guarantee – when network security is the entire point – is certainly not better. Bitcoin is irrelevant to your otherwise valid point that environmental externalities should indeed be accounted for in power generation.