(Reuters) – Some oil and gas drilling companies operating on public lands in the United States are diverting natural gas to operate cryptocurrency mines without paying federal license fees, according to a government surveillance report released on Wednesday.
The Home Office’s inspector general’s office advised the agency, which oversees 420 million acres of state land, to issue guidelines to stem the rise of an industry that could operate unnoticed in its vast territory.
Cryptocurrency “mining” requires massive amounts of electricity to power computers that compete to solve math puzzles to validate transactions.
The process has been criticized by environmentalists and governments concerned about its heavy reliance on climate-warming fossil fuels for power generation.
In its report, IG said that crypto mining units in Colorado are located on or near state land leased for oil and gas development and are diverting gas from those leases.
The mobile units could go long undetected by federal officers responsible for patrolling large areas of public lands, the report said.
“These activities generate revenue for private companies using federally owned gas, sometimes without the lessee paying mineral royalties,” the report said.
The issue was raised by the Colorado Oil and Gas Conservation Commission, which told IG that the crypto operations pose environmental, health and safety risks and could be underinsured in the event of an accident.
In its response to IG, Interior said it would take action to educate staff about the threats outlined in the report and would work with agency officials to discuss how guidance could be produced for the department.
According to the Bureau of Land Management, the royalty rate for state onshore oil and gas leases issued since August last year is 16.67% and 12.5% for older leases. According to federal data, the Department of the Interior generated more than $1.7 billion in revenue from onshore natural gas royalties last year.
(Reporting by Nichola Groom; Editing by Leslie Adler)
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