Bud's Offshore Energy (BOE)

We learned that Federal mineral lease operators are diverting natural gas from those leases to power electric generators for cryptomining operations without paying gas royalties. (Note: Per the report, these operations were onshore. No evidence of offshore cryptomining was provided.)

Inspector General, US Dept. of the Interior

The Inspector General recommended that the Dept. of the Interior issue guidance to affected bureaus regarding cryptomining operations, including guidance addressing potential land use concerns, safety risks, environmental impacts, and royalty collection requirements.

In responding to the recommendation, DOI commented that “BSEE and BOEM recognize that the remote location of offshore facilities could potentially be used to facilitate clandestine, nefarious activity – including cryptomining.”

While that potential certainly exists, the probability of evading royalty payments by using produced gas to cryptomine at OCS facilities is extremely low:

• To evade royalty payments, the crytomining would have to take place upstream from any sales or allocation meter.
• Space on OCS facilities is extremely limited, and cryptomining units are not compact.
• Costs associated with transporting and installing the units would be significant.
• A surge in lease-use gas or a significant reduction in sales gas would be noticed by ONRR accounting systems.
• Avoiding royalty payments would be a criminal penalty with enormous implications for the responsible companies.
• OCS facilities are visited at least annually by knowledgeable BSEE inspectors, who would identify and question any such equipment additions.
• In the unlikely event that an OCS cryptomining activity went unnoticed, it’s highly likely that an offshore worker would contact the OIG or BSEE.

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