On a sun-baked oil pad not too far from the North Dakota border, the iconic infrastructure of the Bakken oil field towers over pink gravel, pumpjacks pulling energy-packed hydrocarbons from thousands of feet deep beneath the eastern Montana prairie.

A flare stack and multi-story storage containers stand along the pad’s perimeter, along with a sign announcing the site’s owner, Houston-based Kraken Oil & Gas. On the far side of the pad, though, a line of metal buildings set up by a Colorado startup represents a decidedly nontraditional arrangement for the oil industry. Humming generators wire electricity to a handful of squat boxes that look like a cross between shipping containers and hot dog stands. From beneath awnings, whirring fans blast streams of scorching hot air out their sides.

Inside, behind a tangle of power cords and networking cables, a full wall of each container is packed with high-tech computing equipment, powerful servers chugging away to put natural gas produced as a byproduct of the pad’s oil production to use on an entirely different type of extraction: mining digital cryptocurrency.

“Instead of burning it, we try to bring something to the site so we can use it and create something beneficial,” said Sidney native Bruce Larsen, Kraken’s president.

Kraken has dug in here for the oil released by hydraulic fracturing, or fracking, the technology that, along with horizontal drilling, spurred the Bakken oil boom in North Dakota and this stretch of eastern Montana in the late 2000s and early 2010s. Even as the boom has cooled from its peak over the last decade, production has continued on pads like this one, where the liquid oil pulled from the earth is piped away, headed toward refineries that convert it to gasoline or plastic. On sites without a pipeline connection, producers truck liquid oil away in tanks instead.

Bakken oil, though, commonly comes to the surface with a not-necessarily-welcome companion: natural gas that is both harder to transport from remote well pads and less profitable to sell. In part because one component of that gas, methane, is a potent greenhouse gas — an estimated 25 times as effective at trapping planet-warming heat in the atmosphere as carbon dioxide — companies like Kraken routinely burn off unwanted waste gas in well pad flares, converting as much of the methane as they can to the comparatively benign CO2.

The inherent wastefulness of flaring, as well as its climate implications, have attracted the attention of government regulators and environmentalists. North Dakota, for example, has had flaring reduction targets as far back as 2014 in an effort to encourage the oil industry to invest in the infrastructure it needs to capture byproduct gas and do something useful with it.

More recently, as Bitcoin and other cryptocurrencies have emerged as major investment options, the cheap energy going up in smoke on well pads has also caught the attention of tech-savvy entrepreneurs.

Unlike traditional currencies like the American dollar, which are regulated by central banks, Bitcoin and its peers are managed by digital exchanges that use decentralized databases and cryptography to keep track of ownership. New units of Bitcoin are created by digital mining, essentially performing computational gymnastics to unlock new bitcoins. Bitcoin mining, however, has become an increasingly difficult endeavor as the digital currency’s popularity has grown, requiring special-purpose hardware and tremendous amounts of electricity to power it. That power consumption has, in turn, seen the cryptocurrency industry criticized for its own impact on the climate.

A Bitcoin mine operating out of an old mill building near Missoula, for example, attracted criticism after county officials said it was using as much power as a third of the households in the county. Additionally, researchers at the University of Cambridge estimate that Bitcoin currently consumes nearly 94 terawatt-hours of power a year globally, more than the combined consumption of the 108 million people who live in the Philippines.

The server containers on the Kraken well site are owned by Denver-based Crusoe Energy Systems, a venture-capital backed startup founded in 2018 that markets itself as a partner for oil companies looking for an economical way to cut back on their flaring. In eastern Montana, Crusoe buys otherwise stranded gas from Kraken, pipes it into the onsite-generators, and uses the resulting power to crack Bitcoin free from the ether.

Cully Cavness, Crusoe’s co-founder and president, said in an interview that the company also makes its server farms available to people who need other computationally intensive work performed, such as training artificial intelligence models or rendering computer animations. He said the company has donated computing power to Folding at Home, an organization that helps research on COVID-19 and other biochemistry topics by simulating the atomic interactions at play in protein molecules.

Bitcoin mining, however, is Crusoe’s main effort at the moment. The company, Cavness said, has a dedicated network engineering team that works out how to connect each well-pad server farm to the rest of the world, using satellite internet, microwave transmissions or, in some cases, custom-built fiber optic lines that can also bring broadband service to nearby rural customers.

The company isn’t the only ongoing effort to leverage well pad natural gas for Bitcoin mining in the U.S., but Caveness said Crusoe is the largest startup in the space. He said the company currently has about 40 data centers in operation, mostly on the Bakken in Montana and North Dakota, but is also operating in Colorado and Wyoming and plans to expand into other oil-producing areas.

“We’re growing it pretty quickly today. We’re looking to be at about 100 within months,” he said.

Caveness said he considers the company’s model an effective answer to the environmental concerns around cryptocurrency’s energy consumption, both because flares don’t necessarily burn all the methane present in well pad gas and because generating mining power off the gas offsets power usage that would otherwise have to come from somewhere else.

“Relative to continuing to flare, this is deeply carbon negative,” he said. “I think more and more, the environmental side of this is going to be one of the parts of our value proposition.”

Larsen sees it as a win-win for producers like Kraken. Most of the company’s revenue, 90%, still comes from selling oil, he said, but he appreciates having a way to cut back on flaring waste.

Alternatively, he said Kraken could either build a gas pipeline or spend money on equipment to liquify the gas on-site so it’s easier to transport by truck — though sites like the well pad near Sidney don’t generally produce enough gas to make that investment pencil out.

“As an industry, we’re trying to do our best to minimize the amount of gas we flare,” Larsen said. “I don’t want to ever flare gas, just we get stuck with infrastructure constraints sometimes so we have to.”

Given that the site near Sidney is producing slightly more gas, 1.5 million cubic feet a day, than the 1.2 million cubic feet a day the four generators Crusoe has on site can turn into power, the well pad still does have a flare burning. Larsen said he’s hopeful Crusoe can work out how to use the rest of the stranded gas as the cryptocurrency company dials in its business model in the coming years.

“Essentially for us, Bitcoin is the most novel and neat solution. And it’s probably the most efficient,” he said.