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23 year-old Texans made $4 million mining bitcoin off flared natural gas


Brent Whitehead and Matt Lohstroh at the Texas A&M versus Alabama football game.

Matt Lohstroh

HOUSTON — When Brent Whitehead and Matt Lohstroh were sophomores at Texas A&M University, they decided to get into the business of mining bitcoinThe oil fields of East Texas. The year was 2019, and at the time, the idea of oil and gas companies joining forces with bitcoin miners was considered both avant-garde — and a major taboo.

Whitehead is an engineer from a family that has a history of oil and gas production. Lohstroh is a finance major who was obsessed with bitcoin. They ignored these skeptics and sunk the money they earned through their high school landscaping jobs into Giga Energy Solutions. This company mints bitcoins from stranded gas.

Oil and gas companies struggled for years with how to deal with an oil spillage. Gas delivery is more difficult than oil. It can be transported by truck to distant destinations, but it’s possible for the oil to be shipped out via pipeline. A drilling crew will often dump the gas into a pipeline and then take the money the buyer is willing to give them. Drillers will burn or flare the gas if it is 20 miles from any pipeline. You will often see flames from the oil fields.

Drillers also burn cash, despite the negative environmental consequences of using flare gas. These two Aggie alumni, aged 23 and 23, saw it as a problem that had an easy solution.

Giga sets up a shipment container containing thousands bitcoin miners at an oil well. Then, the natural gas is diverted into generators which turn the gas into electricity. The method reduces carbon dioxide equivalent emissions by 63% when compared to continuing flaring. according to research from Denver-based Crusoe Energy Systems.

“Growing up, all I ever saw was flares. Just being in the oil & gas industry. Whitehead said that he knew the wastefulness of it, speaking to CNBC while attending the North American Prospect Expo summit held in Houston. The summit was a key event for industry. “It’s new to reduce emissions, but also to monetize the gas.

Whitehead said that more than 20 companies have been signed, with four being publicly traded. Giga claims they are also talking to sovereign wealth funds. They also claim they are rapidly expanding. Six additional employees have joined Giga’s already 11-person team this month.

Whitehead, Lohstroh, and Whitehead belong to a growing group of people betting on bitcoin mining’s potential to revolutionize the energy market.

Lee Bratcher of Texas Blockchain Council stated, “They’re making their clients money through stranded bitcoin mining while solving the environment challenge with flared gasoline at the same time.”

These Giga executives also believe in the potential of bitcoin to provide a new level of financial freedom.

Lohstroh stated that “Nobody controls it” and that you do not need to request permission to use them. This is what really attracted me towards bitcoin.

Whitehead has a similar opinion. CNBC reports that Whitehead’s views on individualism, self sovereignty and privacy are some of the reasons he fell into the bitcoin rabbit hole.

“I didn’t focus on the price as much as I did the adoption. Whitehead said, “I believed this was something amazing for humanity.”

Giga’s Beaumont store, Texas

Matt Lohstroh

Bitcoin meets oil and gas 

Bitcoin mining can be viewed as both a security layer and a method to create new bitcoin.

The bitcoin mining machine runs an application on the computer that attempts to solve a problem before others. The solution to the puzzle creates a block. This process both creates and updates new bitcoins. It also keeps track of transactions. 

The coolest thing about bitcoin, which is often overlooked by many naysayers, is its portability. You can take it to any source of energy. Steve Barbour is the founder of Upstream Data in Canada, which manufactures and distributes portable mining solutions that are suitable for use at oil and gas plants.

You can get involved in the oil-and-gas business. This often involves sites located far away from large population centres.

If a well doesn’t exist near a pipe, then it is unlikely that the amount of gas being extracted will be large enough to warrant building another line. If a driller is unable to find an immediate way to dispose of the natural gas stored, they can usually dispose it off-site.

One method is to vent it, which releases methane directly into the air – a poor choice for the environment, as its greenhouse effects are shown to be much stronger than carbon dioxide. It is possible to light the gas by torching it. 

Flares can only be 75-90 percent efficient according to Adam Ortolf who is responsible for business development in America at Upstream Data. He stated that some methane has been vented even without being burned with a flare.

On-site Bitcoin mining is especially effective in this situation.

Ortolf says that when the methane runs into an engine, generator or other device, it burns 100% and no methane escapes to the atmosphere. 

Giga’s Beaumont store, Texas

Matt Lohstroh

He stated that “but nobody will run it through the generator unless they make money” because generators can be expensive to buy and maintain. So unless production is economically viable, the producers won’t be able to internally burn the gas.

Bitcoin allows oil and gas companies to make their methane more economically viable than combusting it externally with flares. This makes stranded gas obsolete.

However, Ortolf took years to persuade people that parking an ASIC-equipped trailer on an oil field was a wise and financial sound decision.

Ortolf stated, “In 2018, the conversation I had about mining bitcoin using flared gas was laughable.” “It was absurd to think that hydrocarbons could be brought to market in isolation of their counterparts.

Four years later, Upstream’s business is flourishing. Now, it works with 140 bitcoin miners across North America.

Ortolf stated, “This is one of the greatest gifts the oil and natural gas industry has ever received.” They had left a lot hydrocarbons untapped, but they are now able to export energy regardless of where it is located. 

Bitcoin miners still have access to the best: low-cost electricity.

Barbour stated, “The great thing about oil is that it’s a highly distributed, reliable power source. Because of this, a distributed sale point and reliable power draw such as a Bitcoin mine are quite a fit.” It’s a kind of match made in Heaven actually.

It is okay to ignore the haters

Whitehead had been mowing the lawn of his parents in Buna in southeast Texas just a few months before he started college. Lohstroh was his classmate at that time and a good friend. In it, Lohstroh suggested they buy a mobile bitcoin mining container from Upstream Data and hitch it to a gas well themselves.

Whitehead stated, “I just stopped the lawnmower and went straight to my dad. And I was like: ‘I have to find flare gas right away.’

Whitehead was born into a lineage of wildcats, a term that describes those who do high-risk exploratory drilling.

“I call myself a digital wildcatter because now this is this next phase of wildcatting — bitcoin mining going to natural gas wells,” he said.

Whitehead received the text a week later and Lohstroh boarded a flight to Canada. There were many logistical tricks that ensued. Lohstroh had to drive three hours from Calgary to Upstream’s Calgary facility. However, the two weren’t phased.

Brent Whitehead, Matt Lohstroh and the original unit that they constructed in East Texas.

Matt Lohstroh

Steve Barbour is Upstream’s chief engineer and founder. He initially attempted to advise Lohstroh to not make a purchase while the container was being field tested. But Lohstroh insisted on placing an order.

Barbour stated that the Giga founders are “true bitcoiners.” “Both of them are what I, as a Canadian, think of Texans — entrepreneurial and wholesome. They are just amazing men.”

When the classmates were equipped, they contacted a friend who was able to supply flare gas.

They continued to pound the streets looking for business. The Giga cofounders said that about a 1000 pamphlets were handed out at the 2020 NAPE summit to market the idea for monetizing stranded gases.

“A lot people didn’t know about it. Many people laughed at us. Whitehead replied, “It’s one of the most stupid things I have ever heard.” Some people thought it was great, others didn’t believe it would work and then there were those who suggested we should talk to the CEO of the company.

The pandemic followed.

Whitehead stated that Covid “hit and shut down all of the world” in a statement to CNBC. Despite national lockdowns, Giga still operated 35 miner at its launch site. However, business development was virtually stopped.

Lohstroh stated that there was “no traction” in the area. Lohstroh stated that bitcoin was currently in a bearish market. There was zero interest.

Giga deploying a unit in north Texas

Matt Lohstroh

They found smaller companies in east and north Texas that were violating the regulations or unable to get permits, and they were essentially wasting gas. Whitehead says that smaller businesses were more likely to ignore regulatory compliance.

“We were able o come in and tell you that you should not be flaring. It’s illegal to do this, but you can have it here because there is a shut-in. Whitehead said, “We can accept all the gas.”

However, Dec. 2020 was the turning point. Bitcoin’s price surpassed the $20,000 threshold. This was when the larger players in the oil-and gas industry began to notice and public-traded company leaders started to inquire about starting a business.

Giga also has companies come from overseas to observe their operations and get a better understanding of how they work.

We’ve received people from Saudi Arabia to visit our East Texas sites. They’re probably not familiar with a pine tree, so we are bringing them out to barbecue and showing them how bitcoin mining works. Whitehead stated that the children love it.

Giga mine in Texas

Matt Lohstroh

CNBC interviewed Giga about its revenues in 2021. It is expected to generate more than $20m by 2022.

Whitehead claims that their sites have created jobs such as bitcoin pumpsers and field technicians, which has helped the economy to recover. They are often the biggest source of income in the communities they have set up bitcoin mining sites.

Whitehead said, “An entire area was a ghost town. Now, they have found ways to take the stranded energy and make it monetizable. That’s what keeps me excited. It’s also helping the whole community.”

Numerous bitcoin miners believe that oil and natural gas will dominate crypto mining in the next decades. This bodes well to Giga’s business model.

Barbour said, “It is a frenzy there.”

CNBC’s Lohstroh says that the next step is for energy producers to be the Bitcoin miners.

I believe that this is the next big transition. It could be natural gas producers or power producers. All sectors of the sector will feel the effects of bitcoin mining. This is because bitcoin mining has an inherent connection to power. The point and purpose for energy is to generate power. He said that he expects to see many semantics, and the interconnectedness of them.