Making Methane Reduction Profitable: The Story of DenverBitcoin

This is an opinion editorial by Robert Warren, partner at Distributed Hash and business development at Upstream Data Inc.

This is the story of a father and son team that began their journey looking for cheap energy but found themselves sitting on one of the largest waste energy sources in the industry. The natural gas industry has found itself a perfect partner in bitcoin mining, and Adam Ortolf of Stranded Energy Investments has the mine to prove it.

In a truly entrepreneurial storyline, Adam Ortolf of Colorado (AKA @DenverBitcoin) went from managing a print shop on the Front Range to standing up a stranded natural gas bitcoin mine, and now helping grow Upstream Data Inc. into the industry provider it is today.

In 2017 Ortolf was managing a UPS store on the Colorado Front Range. One particular busy afternoon a patient customer noticed his work ethic and offered him a position at his oil and gas accounting company. Knowing nothing about oil and gas, Ortolf was skeptical of the offer, but after some consideration decided to join the small team that helped facilitate production accounting and management of oil wells.

It was there that Ortolf developed a feel for the oilfield from the hundreds of pages of production documentation he would comb through to produce reports for. His mentor, Rick, took the time to sit him down and whiteboard everything from planning to producing in the oilfield, “He taught me how to drill a well, everything from drilling to casing to perforation … I started to understand the economics of oil and gas. By this point I hadn’t even deeply understood bitcoin.”

“I learned oil and gas accounting and reporting just by doing it,” Ortolf says. “Gas can have a million different little variables. Maybe you’re flaring some of the gas, selling some of the gas, and maybe some of the gas is headed over here to a generator that powers a light and your internet. How do you account for that every month?” Poring over the numbers, Ortolf developed an intuition for well site operations. “I started to take notice when the numbers would be wrong,” he says.

It was in the numbers that Ortolf began to see how the patchwork of monitoring and legal requirements around natural gas under-reported the amount of gas being produced and often disposed of on sites.

“I learned what human beings actually do at the well site because I was reporting all of the important information … in the United States right now what’s reported, and this is an important distinction, what’s reported isn’t real. That’s what you pay taxes on and what you get paid for, but what isn’t being accounted for are gas lines popping, leaks, venting. If you are required to report on that you have to estimate, and if you’re going to get fined, you estimate low,” Ortolf said.

With that caveat in mind, it is often reported that approximately one billion cubic feet of natural gas is vented or flared daily, the majority coming from Texas. However, because Texas is more permissive of 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 incentivized to underreport what is happening on the well site.