25 April 2022 |

Crusoe Energy Pulls in 9 Figures

By Nick Van Osdol

DFM1

Pictured above? One of Crusoe Energy’s Digital Flare Mitigation systems in the wild. I had the pleasure of hearing from Chase Lochmiller, CEO of Crusoe Energy, on the heels of their recent Series C fundraising announcement. 

This raise caused an interesting little debate among the climate tech community. Crusoe pulled in a massive $350M in equity funding from the likes of Lowercarbon Capital and other leading climate tech investors, indicating there’s no shortage of folks who see Crusoe as a valuable business for decarbonization. I’m in that camp. 

What does Crusoe do? At its most simple, they valorize stranded energy assets. Their v1 operations involve taking unwanted natural gas from oil operations and converting them into electricity. Normally oil & gas operators simply ‘flare’ (burn) these gasses off into the atmosphere, producing methane gas emissions. To date, Crusoe has mostly used the electricity they produce to mine bitcoin. Why BTC? Well, it’s an easy way to monetize electricity compared to: 

  • transporting the natural gas somewhere else via pipeline 
  • trying to find a client for the electricity.

For a longer read on the business, you can peruse our past Deep Dive here

Given this initial set-up, there are a number of folks who contend that by helping oil & gas companies valorize these stranded assets, Crusoe will prolong the life of the fossil fuel industry. And they chime in with familiar refrains that crypto mining isn’t a good use for that electricity.

I think they’re missing the forest for the trees. Why? Hopefully the below Q&A with Chase will shine some light on that. As we’ll explore, Crusoe’s efforts and ambitions reach far beyond flare gas on oil sites and bitcoin mining. Enjoy!

For folks who are catching up, can you elaborate on the tech you use to reduce flare gas emissions? 

We work with Waukesha as our primary engine manufacturer for our Digital Flare Mitigation (“DFM”) systems. With them, we use the cleanest rich burn technology in the world, which results in a 99.9% destruction of the methane. We also use the best catalytic converters to strip out things like CO, VOC’s, and particulates that can cause significant air pollution.

When we spoke last year, you all were focused on diversifying energy uses, siting, and the end applications of the electricity you produce. How’s all that progressing? 

Those efforts have been moving along nicely! We launched Crusoe Cloud, and the data center infrastructure that supports our cloud also is used to support colocation customers. We are actively working on a handful of other grid connected carbon free power projects, with the plan to have something operational this year. We are also expanding Digital Flare Mitigation into other basins domestically, with plans to expand internationally as well into markets like Argentina, Abu Dhabi and Oman.

What will the Series C unlock? How many sites are you already up & running at? 

A lot of the things I mention above are unlocked and accelerated by the Series C. The capital will be used to accelerate growth in DFM both domestically and internationally, grow and expand Crusoe Cloud and develop large scale computing projects that unlock value in other grid connected clean power resources. We also have some plans for vertically integrating components of our supply chain, which we’re going to be announcing in the coming months.

There’s a lot of debate about methane’s ‘Global warming potential’. E.g. over a 100 year time  span you’re closer to 30x the GWP of CO2, whereas over a 20-year time scale you’re closer to 80x. What’s your stance on that?

I know this is a debate, but it really shouldn’t be. CH4 oxidizes into H20 and CO2 with a half life of about 9 years. So what that means is that by year 20, over 75% of the CH4 emitted at year 0 has become CO2 and the majority of methane’s warming impact has already happened. Cully has a 6 month old daughter and he made the analogy that it’d be like picking between two different statistics for his daughter’s  average daily diaper usage. You could say that his daughter uses 5 diapers a day over the first 2 years of her life OR you could also say she only uses 0.5 diapers a day for the first 20 years of her life. Which one gives you more meaningful information? Additionally most of the major corporate climate goals are in a time frame of the next 10-30 years, so if we are going to keep warming below 2 degrees, the next 20 years are the most important 20 years.

You & Cully have a much deeper understanding of the O&G energy markets than I do. What’s your vantage point on the energy landscape considering the war in Ukraine? Where do you all net out on natural gas as a ‘bridge’ to a net zero future? 

Global geopolitical conflicts have raised the importance of energy independence and highlighted how much our world is powered by fossil fuels today. So ignoring [fossil fuels] and ignoring their production has a lot of negative consequences. Our goals as a business are to enable the world to produce the oil we need in the least impactful way possible by mitigating associated methane emissions in the production process. We are seeing production and activity picking up quite a bit in response to the conflict and price movement. One big challenge during a rapid shift like this is that building infrastructure like pipelines to support production can often lag significantly, and so in order to produce without flaring, having technologies like Digital Flare Mitigation becomes all the more important. 

On the natural gas as a bridge question, I think it certainly can be a bridge in terms of displacing coal plants as a much cleaner alternative. I also believe that there is a future where natural gas can serve as a carbon free power source with the development of technologies like CCS. Crusoe is actively exploring this market and hopes to help push development in this space forward to become economically viable as a standard practice.