This is an opinion editorial by Robert Warren, Partner at DistributedHash and Business Development at Upstream Data Inc.
This is the story of a father and son team who embark on their journey in search of affordable energy but find themselves sitting on one of the largest waste energy sources in the industry. The natural gas industry has found itself to be an ideal partner in bitcoin mining, and Adam Ortolf of Stranded Energy Investments has the mine to prove it.
In a truly entrepreneurial story, Adam Ortolph of Colorado (AKA.) @denverbitcoin) went from managing a print shop on Front Range to erecting a stranded natural gas bitcoin mine, and is now helping to grow Upstream Data Inc. into the industry provider it is today.
In 2017 Ortolf was managing a UPS store on the Colorado Front Range. On a particularly busy afternoon a patient client noticed his work ethic and offered him a position at their oil and gas accounting company. Knowing nothing about oil and gas, Ortolf was skeptical of the proposal, but after some thought decided to join the small team that helped facilitate production accounting and management of oil wells. Of.
It was there that Ortolf developed a feeling for the oil sector from the hundreds of pages of production documentation for which he would comb through to produce the report. His mentor, Rick, took the time to sit him down and whiteboard everything from planning production to the oilfield, “He taught me how to drill a well, everything from drilling to casing to perforation… I understood the economics.” Started… oil and gas. Until now I didn’t even understand bitcoin deeply.”
“I learned oil and gas accounting and reporting just by doing it,” Ortolf says. “Gas can have millions of different little variables. Maybe you’re burning some gas, selling some of the gas, and maybe some of the gas going to a generator here that turns on a light and your You power the internet. How do you calculate it every month?” By noticing the numbers, Ortolf developed an intuition for well site operation. “I started to notice when the numbers would be wrong,” he says.
It was in this number that Ortolf began to see that the patchwork of monitoring and legal requirements surrounding natural gas led to the amount of gas produced and often disposed of at sites.
“I learned what humans actually do at the Vail site because I was reporting all the important information… Not real. That’s what you pay tax on and what you get paid for, but it’s not being accounted for if gas lines are popping, leaking, venting. If you need to report on that So you have to guess, and if you’re being fined, you underestimate,” Ortolf said.
With that caveat in mind, it is often reported that about one billion cubic feet of natural gas is released or flared daily, most coming from Texas. However, because Texas is more permissive for venting and flaring, these estimated numbers are considered artificially high compared to other oil-producing states. When venting or flaring is heavily regulated or fined in a state, producers are encouraged to reduce what is happening at the well site.
Some rough estimates say twice as much gas has been released or flared up than has been reported. This is enough energy to double the current bitcoin hash rate (about 200 exhash wasted power at the current difficulty).
Opportunities in Waste Natural Gas
With eyes wide open to the massive amounts of natural gas wasted or lost every day, Ortolf found himself connecting two different universes – bitcoin and oil and gas.
“There was an article about the mining death spiral. That term attracted me at the time. Understanding mining now, it is just FUD (fear, uncertainty and doubt). It is a market function. But to be a nave person I thought bitcoin was just another internet money scam.”
Understanding the energy, Ortolf wanted to understand how this magic internet money scam actually worked. He thought, “I bet the people pulling the strings are the miners. I’m sure I can understand how they are doing it. So I went to find out about mining, how these people are duping everyone.”
After researching the bitcoin protocol and how mining in the system works, Ortolf came to an unexpected conclusion, “Holy sh*t, you can’t rig this game, no one can cheat this game – you’re a gamer.” Can’t cheat kWh.”
It was there that with the often trapped, wasted or unaccounted energy he merged with bitcoin mining every day, “I understood energy, I understood oil and gas. I understood at this point natural gas.” Powers a significant percentage of the world, and much of it is wasted … the way to generate it [bitcoin] The power has to be generated, and it’s really a low barrier.”
If the miners on the bitcoin network use this massive amount of lost natural gas, you will have a cost-effective and environmentally positive way of funding the operation.
“We can isolate it and reduce it,” Ortolf explained. [waste gas] In an economical way, in a way that is really profitable and reduces air emissions. Suddenly you don’t need a foundation to donate to save the planet, it’s a self-sustaining way of reducing waste.”
They did research to see who made this connection. After weeks of hunting with little progress, he set up a Google alert for “flare gas mining” and found out about the results. One day the recommended answer from Google sent back the name “upstream data”.
Ortolf navigated the website, “After all, I was reading things I was only thinking… As much as it’s a no-brainer today, it didn’t feel like anything at the time. At the time I thought I was a no-brainer.” I’m like a cook, like maybe I’m dreaming here.”
upstream data connection
Ortolf immediately scheduled a call with his business partner (his father) and upstream data. A few hours after that first phone call with CEO Steve Barbour discussing oilfields and bitcoin mining, Stranded Energy Investments decided to invest in an off-grid bitcoin mining operation now called Hash Combo via upstream data. Is.
What Ortolf said he loved about Upstream Data was the customer-oriented nature of the business. Instead of the many get-rich-quick companies that emerged and disappeared in this space over the years, “this guy was 50 years old trying to make a gas company,” Ortolf says, “this company is going to be one of the best.” is the oil and gas companies of the century, that [Steve] It takes the vision and leadership skills to pull this off.”
The upstream build included a 50kW generator to power the older generation Antminer S9s. Ortolf and his father initially invested in the building, generator and ASIC, and used Upstream Data’s engine maintenance services to keep the facility running at a Canadian well. Altogether they were generating about 400 Terahash on an engine that consumed ~15 Mcf of natural gas per day. It went up to around $40/day at a $0.10 hash price.
But even with operations running on cheap gas, they were hit by the halving of hashrate and increased mining difficulty. It was rainy season in China, and miners were feasting on the glut of hydroelectricity produced. Ortolf explained how he and his father asked themselves, “How is it possible that we have the cheapest power in the world and we’re squeezing? And then, boom – the rainy season ends in China, a The ton hash rate goes off, then bitcoin starts coming back up… it happened fast, bitcoin was at forty five thousand and it was like we were buying it for eleven.”
From those experiences Ortolf continued his advocacy, consulting with oil and gas companies and energy producers to discuss the use of trapped or wasted energy for productive purposes. Because of his experiences with Upstream Data Inc. he continued to send customers to build them, “it was the only place I knew to send people,” Ortolf says.
In a final twist of fate, as his oil and gas mentor, Rick, witnessed Ortolf’s efforts at the print shop, Steve Barbour could see the passion Ortolf brought to his consultancy. Steve called Ortolf and offered him a position on the Upstream Data team in business development. So today as you access upstream data to set up your first operation, you may have the opportunity to chat with Ortolf about his experiences setting up the first mine in the oil field.
This is a guest post by Rob Warren. The opinions expressed are solely their own and do not necessarily reflect the views of BTC Inc. bitcoin magazine,