Energy News Beat

Bunker buying is “broken”, according to James Peacock, the founder of XMAR, whose company, founded last year in Cyprus, has set out to give shipping a retail model for bunkers similar to how Amazon transformed online shopping.

“Bunker buying is behind the rest of the industry, negotiations on WhatsApp, no clear price comparisons, and little data to back up decisions,” Peacock argues in conversation with Splash Extra.

“Bunker buying is still stuck in the past. Send out an enquiry, get a few offers, negotiate, and fix a $300,000 order in 15 minutes, often on WhatsApp,” Peacock says. “Every deal is done in isolation, with little thought given to how fuel procurement fits into the bigger picture of voyage optimisation.”

Then there’s how performance is measured across transactions, voyages and individual roles. Operators and bunker officers’ performance is rarely based on numbers even though they could be.

“Ask them how they assess a good bunker deal, and the answer is usually vague. It’s about relationships and keeping things easy, even if that means paying over the odds,” Peacock says.

Until shipping companies take a more strategic approach and use data to drive procurement decisions, they will continue to miss opportunities to reduce costs and improve efficiency, he argues.

Bunkering has always been a grey area, Peacock concedes.

“Pricing is vague, quality is inconsistent, and there’s more room for fraud than in almost any other part of the shipping industry. Short deliveries, off-spec fuel and hidden fees have been happening for decades because there’s no transparency or accountability,” he points out.

That’s starting to change. Singapore’s move to mandate electronic bunker delivery notes from April 2025 is a step in the right direction. Likewise, the EU ETS is also forcing shipowners to be more honest about fuel consumption, making it harder to manipulate figures.

The problem, according to Peacock, is a lot of people in shipping don’t actually want transparency.

“Procurement teams like doing things their own way. Operators prefer quick deals with trusted suppliers. Many still see transparency as a risk rather than an advantage. And as long as performance is judged by gut feel instead of hard numbers, the old ways will persist,” Peacock says.

Regulation will force some level of transparency, but the real change has to come from buyers, their companies, their owners demanding better, he insists.

“Those who push for clear pricing, fair contracts, and supplier accountability will get better deals and fewer headaches. Those who don’t will keep playing the same expensive guessing game,” says Peacock.

XMAR gives buyers full transparency over pricing, contract terms, and credit options. The platform provides reporting tools that let buyers compare their fuel costs against bunker price indices, track supplier performance, and see the difference between the highest and lowest offers on every order.

“It turns bunker purchasing from a gut-feel process into a numbers game,” Peacock claims, adding: “XMAR puts shipping companies in control, giving them the tools to get better prices, reduce fraud risks, and make smarter, more profitable fuel decisions.”

The post The Amazon of bunkers? appeared first on Energy News Beat.

 

Energy News Beat

No deep dive into any industry or sector should start with a downer. However, there are no two ways about it – the LNG shipping sector has been in freefall of late and nothing earth-shattering has happened in the first two months of this year to convince people that it will improve drastically. But, there might be some normalisation, if not recovery, on the horizon if certain factors align properly.

First, the situation is bleak. According to Clarksons’ weekly report from February 21, LNG carrier spot rates are still close to record lows which were seen at the beginning of the month. The average spot rate assessment for a 174,000 cu m unit increased to $9,250 per day which is down 83% from the 2024 average. This means that you can hire a 174,000 unit for 10 days and still pay less than one night for the most expensive hotel room in Las Vegas.

So, now that the numbers painted a grim image it is important to understand why are these things happening and how is any of this going to get better. And, most importantly, when.

The growth of the LNG fleet far outpaced the growth in LNG trade in 2024 which took a toll on charter rates. This was not even fully offset by the need for longer journeys as the Suez Canal was almost unusable due to the permanent threat of Houthi attacks. In 2024, 62 new LNG vessels were delivered to operators while another 68 orders were placed during the year.

At the beginning of this year, several new vessels hit the water and capacity overhang increased, resulting in rates dropping to historic lows. These drops also mean that many vessels are sailing at rates below the operating expense of LNG vessels estimated at around $15,000 per day.

UK consultancy Drewry reported that 96 more LNG carriers are scheduled to be delivered next year, aggravating the oversupply situation, which is also a cause for concern.

They also believe that most shippers will continue to avoid the Suez Canal and go around the Cape of Good Hope which will partially improve the situation. However, if the truce in Gaza lasts and Houthis refrain from attacking vessels and keep the Red Sea calm, a return to the Suez could put even more pressure on already weak rates.

Another issue could be a possible escalation in the Iran-Israel conflict and the closing of the Strait of Hormuz. Regional exports, which account for 21% of the global LNG supply, could be blocked.

But it is not all bad. Even though this year will be a tough one by all accounts, experts do agree it will be at least stable. The UP World LNG Shipping Index (UPI), which comprises 19 companies and partnerships worldwide and represents around two-thirds of the world’s LNG carrier fleet, said in a recent report that the future of LNG shipping is, in a word, optimistic.

“LNG is now a crucial global commodity, and its importance is still rising. The third wave of development is now running, but the construction of new liquefied capacities is a bit late. On the other hand, the shipbuilders are on time, so the vessels are oversupplied now,” the report stated.

They predict that a near rise of capacity in Qatar and other countries will add about 200m tonnes per annum and that shipping companies will be prepared for this rise. UPI also emphasised that that was not the case in the second wave of development. However, experts are pointing out that this would have more results from 2026-2028 than any immediate impact.

Malaysia’s top shipping line, MISC, revealed a similar prediction in its latest financial report where it said that LNG rates are expected to remain soft in 2025 driven by the continued influx of new vessels and delays in additional supply from new LNG liquefaction projects. However, it expects LNG rates to recover post-2026, driven by the gradual increase in LNG supply as the delayed projects become operational.

There is also a political side to this. US president Donald Trump lifted a moratorium on new US licenses to export LNG, making good on his campaign promise. Former president Joe Biden banned LNG export licensing in January 2024, but a federal judge lifted the freeze in July last year.

There was a catch though. The Energy Department was not required to approve permits and no permit was granted until mid-February when Trump’s administration awarded a conditional export authorisation for the 9.5m tonnes per annum Commonwealth LNG project in Louisiana.

This also enables other multi-billion-dollar export projects like Venture Global’s Calcasieu Pass LNG project and Energy Transfer’s Lake Charles LNG to apply for export permits and continue development. Trump’s re-election will probably see final investment decisions for US projects accelerate towards the second half of 2025 and peak in 2026.

If we add to this Trump’s desire to increase oil and gas drilling, LNG might be one of the sectors to profit from the current US administration.

Steam LNG carriers are also a considerable problem and need scrapping to restore the supply-demand balance. Most of them are on old long-term contracts and as soon the charters of the steamships are finished, they will become uncompetitive. Scrapping of these vessels has already begun on a very small scale but Drewry believes that between 30 and 40 carriers must be scrapped to balance the fleet and stabilise rates.

LNG is now a crucial global commodity, and its importance is still rising, according to UPI. This year may be challenging for spot rates but if no significant geopolitical changes occur, they expect to see improvements by the end of 2025.

Drewry on the other hand expects a boost in Asian LNG demand next year that will further improve US-Asia trade, with the Cape of Good Hope still being the preferred route. These two factors, the consultancy believes, will act as a “silver lining” for LNG shipping, but will probably be insufficient to absorb the newly built vessels.

The post Has the LNG sector passed rock bottom? appeared first on Energy News Beat.

 

Energy News Beat

Cautious is the watchword to sum up the sale and purchase scene in February. With the US contemplating taxing Chinese-built tonnage, there is a clear sentiment to pick out Japanese-built ships all of a sudden.

“As the Trump 2.0 reality show unfolds, as it does daily, often with singular market-moving tweets, we might as well suspend trying to make credible forecasts of future supply-demand balance across shipping sectors. Underwhelming spot earnings render shipping sentiment downbeat while we seek greater clarity on today’s geopolitical, trade and social threats,” noted a recent report from broker Hartland Shipping.

In tankers, prices are up for vintage VLCCs as brokers predict higher rates for ships trading outside the dark fleet.

Prices for vintage VLCCs went down in January. Now, VLCC pricing is firming again for reputable sales candidates, and a whopping $10m spread can be spotted in the latest sales filling up broking reports.

Greek owner Eastmed has reportedly sold the rusty 20-year-old, 309,000 dwt

Great Lady for $41m, a 335 m long mammoth built at Samsung in South Korea.

At the beginning of the year, Viet My Petrol Transportation sold an almost identical Hyundai Heavy-built ship. The 20-year-old 308,800 dwt, Rolin, went for just $31m. It’s worth noting that the Vietnamese ship has its special survey and drydocking due.

Meanwhile, reports are emerging that the non-scrubbered 2004-built

Princess Alexia VLCC has secured a robust $38m from Chinese buyers, underling what brokers describe as a premium that buyers are willing to pay for tonnage of reputable propriety for lucrative compliant trading.

Secondhand tanker pricing has eased over recent months, with Clarksons’ secondhand tanker price index now down 3% since the start of the year and 17% since its recent peak in early September last year.

Earlier this month, Greek owner Enesel sold a pair of scrubber-fitted, Shanghai Waigaoqiao-built vessels, named

Kavafis and

Elytis. The vessels, built in 2023 and 2024, fetched $142m en bloc, sold to unspecified compatriot owners according to Clarksons, price levels that are comparable to those recorded in late 2022.

Finally, turning to containers, Braemar noted in its latest weekly report: “The secondhand market remains active, with demand continuing to outpace supply.”

CMA CGM has been one of the most busy buyers of secondhand boxships this month. The French liner moved to take four 2010-built, 3,700 teu container vessels – CMA CGM Africa One, CMA CGM Africa Two, CMA CGM Africa Three, and CMA CGM Africa Four – that it has had on a long-term charter from Greece’s Chartworld in a deal worth $160m.

CMA CGM also purchased four 2016-2017-built ice-class wide beam container vessels from Delphis, the container shipping arm of Antwerp-based Compagnie Maritime Belge (CMB). Broker Braemar puts an en bloc price of $120m for the quartet which are the 1,924 teu sister vessels Delphis Bothnia, Delphis Finland, Delphis Gdansk, and Delphis Riga.

CMA CGM has also bought the 2,202 teu

Cape Monterey for $35m from Greek tonnage provider Cape Shipping.

The post Cautious ship sales mood appeared first on Energy News Beat.

 

Energy News Beat

This would be like a reverse Operation Twist.

By Wolf Richter for WOLF STREET.

Dallas Fed president Lorie Logan – a leading voice on the nuts and bolts of the Fed’s balance sheet due to her prior job as head of the New York Fed’s System Open Market Account (SOMA) which handles the Fed’s securities portfolio – gave another interesting and long speech on the nuts-and-bolts of central bank balance sheets. Most of the speech was dedicated to the nuts and bolts of balance sheet liabilities, primarily reserves. But at the end, she discussed assets – and how the Fed might change the composition of its assets after QT ends.

She had previously discussed this in more general terms, so we already could see the direction the Fed might be going with its balance sheet composition in the future after QT ends. But today, she discussed more of the nuts and bolts.

T-bills to take a greater share of Treasury holdings, to replace longer-term Treasury notes and bonds, to bring the Fed’s mix of Treasuries roughly in line with the mix of outstanding Treasuries. This would start after QT ends.

The minutes of the January FOMC meeting show the Fed discussed this and that “many” participants favored this move.

The Fed currently holds only $195 billion in T-bills, or 4.6% of its total Treasury holdings of $4.27 trillion. But of the total marketable Treasury securities outstanding, 22.5% are T-bills.

“At present, the Fed’s portfolio is significantly overweight longer-term securities and underweight Treasury bills,” Logan said in her speech today.

So after QT ends in the future and the Fed begins replacing all maturing Treasuries, “it would make sense in the medium term to overweight purchases of shorter-dated securities so as to more promptly return the Fed’s holdings to a neutral allocation.”

A “neutral allocation” would mean bringing T-bills up to a share of about 22.5% of its total Treasury holdings (assuming that ratio of T-bills to total Treasuries outstanding remains at 22.5% over the years), from 4.6% today, and reducing notes and bonds to a share of 77.5%, from 95.4% today.

To get this neutral allocation “more promptly,” the Fed would heavily favor T-bills over notes and bonds until it gets to the neutral allocation.

This would be a reverse Operation Twist. The classic Operation Twist was last used by the Fed in 2011, when it replaced T-bills with longer-term notes and bonds specifically to push down long-term yields as part of its interest-rate repression policy.

The move laid out by Logan today would be the opposite, shedding longer-term notes and bonds, and replacing them with T-bills. In theory, this would add some mild upward pressure on longer-term yields.

MBS are off the list entirely. Currently, MBS are the second largest asset on the Fed’s balance sheet, with a balance of $2.2 trillion [here is my discussion of the Fed’s QT through January].

Logan reiterated that in the future after QT ends, the Fed intends to hold “primarily Treasury securities” as assets, which the Fed has been saying for a year. Today, she explained explicitly what that meant: MBS are off the list of assets that the Fed intends to keep. And a “modest” share of loans and repos are on the list and would replace some Treasury securities.

This is the future list of assets as she spelled it out today:

• “Primarily Treasury securities,” so the big bulk of its assets
• Loans to the banking system, such as the classic Discount Window (the Fed is working on improving the system that Powell had called “clunky”). Currently $3 billion.
• Repos, in three ways:
  • Through the Standing Repo Facility (SRF), which Fed had revived in July 2021, after having shut it down in 2009 as QE had made it useless. Currently $0 balance.
  • Foreign and International Monetary Authorities Repo Facility, with which the Fed lends to other central banks. Currently $0 balance.
  • Fed’s Open Market Trading Desk’s repo operations, which it used in September 2019 when the repo market blew out and there was no SRF; and then again in March-June 2020.

Getting rid of MBS entirely might slightly widen the spread between mortgage rates and the 10-year Treasury yield, and would therefore lead to slightly higher mortgage rates than otherwise, the opposite effect of buying MBS whose purpose was to repress mortgage rates.

Repos and Discount Window loans might take a larger share of assets, to replace Treasuries.

Repos, especially overnight repos, provide an easy way to add liquidity and then drain it as overnight repos mature the next day, and if the Fed doesn’t replace them with new repos, they vanish off the balance sheet, and the liquidity vanishes with them; they don’t stick to the balance sheet like Treasury securities. Before the Financial Crisis, repos used to be the dominant asset on the Fed’s balance sheet.

In theory, increasing the share of repos and loans to replace longer-term securities might add some mild upward pressure on longer-term yields.

Here is what Logan said about it – note her idea about daily loan auctions:

“In the long term, in my view, it could be interesting to consider whether allocating a modest share of the Fed’s long-run balance sheet to loans or repos could improve the efficiency and effectiveness of policy implementation.

“For example, auctioning a fixed quantity of discount window loans each day could encourage banks’ operational readiness and demonstrate that borrowing is a normal activity for healthy firms.

“Such a facility might also smooth the redistribution of reserves around the banking system. The U.S. has about 9,000 banks and credit unions. Unexpected payment shocks can leave some of them short of reserves at the same time as others have a surplus. Frictions in interbank lending may slow the movement of reserves to whichever banks need them most. But if the Fed held a daily lending auction, the depository institutions most in need of reserves on any given day would likely place the highest bids, automatically redistributing liquidity away from firms with less need.”

Logan emphasized that shifting a larger share of the Fed’s asset to the Discount Window via loan auctions is not even being considered by the FOMC right now, “and even beginning to consider such a tool would require substantial conversation, analysis and learning from the experience of other central banks.”

Source: Wolfstreet.com

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The post Future of the Fed’s Balance Sheet: Fed’s Logan on How Assets Might Shift from Longer-Term Securities to Short-Term T-Bills, Repos, and Loans after QT Ends. MBS Entirely Off the List appeared first on Energy News Beat.

 

Energy News Beat

Global demand for liquefied natural gas (LNG) is forecast to rise by around 60 percent by 2040, largely driven by economic growth in Asia, emissions reductions in heavy industry and transport as well as the impact of artificial intelligence, according to Shell’s LNG Outlook 2025.   

Industry forecasts now expect LNG demand to reach 630-718 million tonnes a year by 2040, a higher forecast than last year.

UK-based LNG giant Shell said global LNG trade grew by only 2 million tonnes in 2024, the lowest annual increase in 10 years, to reach 407 million tonnes due to constrained new supply development.

“More than 170 million tonnes of new LNG supply is set to be available by 2030, helping to meet stronger gas demand, especially in Asia, but start-up timings of new LNG projects are uncertain,” Shell said.

Shell said China is significantly increasing its LNG import capacity and aims to add piped gas connections for 150 million people by 2030 to meet increasing demand.

India is also moving ahead with building natural gas infrastructure and adding gas connections to 30 million people over the next five years, it said.

“Upgraded forecasts show that the world will need more gas for power generation, heating and cooling, industry and transport to meet development and decarbonization goals,” Tom Summers, senior VP for Shell LNG marketing and trading, said.

“LNG will continue to be a fuel of choice because it’s a reliable, flexible, and adaptable way to meet growing global energy demand,” Summers said.

In the marine sector, a growing order book of LNG-powered vessels will see demand from this market rise to more than 16 million tonnes a year by 2030, up 60 percwnt from the previous forecast, Shell said.

“LNG is becoming a cost-effective fuel for shipping and road transport, bringing down emissions today and offering pathways to incorporate lower-carbon sources such as bio-LNG or synthetic LNG,” Shell said.

Europe will continue to need LNG into the 2030s to balance the growing share of intermittent renewables in its power sector and to ensure energy security.

In the longer term, existing natural gas infrastructure could be used to import bio-LNG or synthetic LNG and be repurposed for the import of green hydrogen, Shell said.

“Significant growth in LNG supply will come from Qatar and the USA. The USA is set to extend its lead as the world’s largest LNG exporter, potentially reaching 180 million tonnes a year by 2030 and accounting for a third of global supply,” Shell said.

The early part of 2024 saw spot LNG prices fall to their lowest level since early 2022, but prices recovered by mid-year due to delays in the development of new supply capacity, Shell said.

“Demand for LNG strengthened in Asia during the first half of 2024 as China took advantage of lower prices, importing 79 million tonnes during the year. India bought record volumes to help meet stronger power demand due to hotter weather in early summer. Its imports rose to 27 million tonnes, a 20 percent increase from 2023,” it said.

While LNG continued to play a vital role in European energy security in 2024, imports fell by 23 million tonnes, or 19 percent, due to strong renewable energy generation and a limited recovery in industrial gas demand, according to Shell.

However, cold winter temperatures and spells of low wind power generation towards the end of the year drove strong gas storage withdrawals which, combined with the expiry of Russian pipeline gas flows to Europe through Ukraine on December 31, 2024, drove up prices.

Shell said Europe is expected to increase imports of LNG in 2025 to refill its gas storage.

The post Shell says Asian economic growth to drive 60 percent rise in LNG demand appeared first on Energy News Beat.

 

Energy News Beat

Sempra announced this in its 2024 results report on Tuesday.

The firm said the Port Arthur LNG Phase 2 development project is receiving “strong” commercial interest.

“Sempra Infrastructure continues to hold substantial, active discussions with world-class companies for participation in the Phase 2 project, which is already anchored by a non-binding HOA for LNG offtake and a proposed equity investment with a subsidiary of Saudi Aramco, as well as a fixed-price engineering, procurement, and construction contract with Bechtel,” it said.

The company said it is targeting a final investment decision in 2025, pending the execution of definitive commercial agreements, obtaining permits, and securing financing, among other factors.

Bechtel is already building the first phase of the Port Arthur LNG export terminal with a capacity of some 13 mtpa under an EPC deal worth about $10.5 billion.

The development of the proposed second phase would increase the total liquefaction capacity of the facility to about 26 mtpa.

In November 2024, Justin Bird, CEO of Sempra Infrastructure, said the company expects to secure DOE’s non-FTA export approval for the second phase of its Port Arthur LNG export project in the first half of 2025.

Sempra Infrastructure previously won approval from the US FERC for the proposed Phase 2 project, and it also secured the FTA approval from the DOE.

DOE still needs to approve Sempra Infrastructure’s non-FTA application for the project.

Last month, President Donald Trump lifted a moratorium on non-FTA LNG export permits by the former Biden administration.

Trump issued the executive order, which was widely expected, just hours after officially taking over his second four-year term as the president.

Besides the Porth Arthur project, Sempra also plans to expand its Cameron LNG terminal.

Cameron LNG operates the existing three-train 12 mtpa liquefaction facility and the expansion project includes building the fourth train with a capacity of about 6 mtpa.

Sempra said in the report that Cameron LNG loaded nearly 200 cargoes in 2024.

In addition, Sempra said that Energía Costa Azul LNG Phase 1 “continues to target the start-up of commercial operations in spring of 2026.”

In August 2024, the firm announced that its Energia Costa Azul LNG export project in Mexico had experienced labor and productivity challenges.

Sempra said at the time that mechanical completion and first LNG are expected to occur in 2025, with timing of commercial operations under the sales and purchase agreements targeted for spring 2026.

Sempra Infrastructure and France’s TotalEnergies are adding natural gas liquefaction capabilities to the existing ECA LNG regasification terminal, located north of Ensenada in Baja California.

The partners took FID on the development back in 2020, and ECA LNG Phase 1 includes a single-train liquefaction facility with a nameplate capacity of 3.25 Mtpa of LNG.

Also, TotalEnergies and Mitsui & Co will offtake a combined 2.5 mtpa of LNG from the facility under 20-year deals.

Sempra initially expected to launch the LNG terminal in 2024.

 

The post Sempra eyes Port Arthur LNG expansion FID in 2025 appeared first on Energy News Beat.

 

Energy News Beat

Everyone is talking about Bitcoin—heck, even your grandma is! From outskirts to main street, Bitcoin has become a hot topic for anyone curious about the future of money and energy.

I had only dabbled in Bitcoin until I met someone who not only understands its intricacies but also the profound connection between Bitcoin and energy. I was fortunate to speak with Eric Rice, President of SORVN Capital—an alternative investment group specializing in Bitcoin. We explored the entire history of Bitcoin and cryptocurrencies, discussed why Bitcoin truly represents digital energy, and delved into their exciting project: Digital Midstream Genesis. This initiative is an off-grid Bitcoin mining operation integrated with a natural gas processing facility, offering private investors some of the lowest-cost mining opportunities available.

It was an awesome discussion, and I learned a great deal. My thanks to Eric and the entire SRVN team for making this episode possible!

If you’re interested in learning more about their project, visit sovrncapital.cashflowportal.com.

Transcript

Michael Tanner [00:00:10] What’s going on everybody? Welcome into episode 9 of the Deal Spotlight. This is a special episode for me for a few reasons. One, we get to talk to former colleague of mine, President of Sovereign Capital, Eric Rice, and we get to do a little bit of twist on the Deal Spotlight. Normally, I come to you, we bring on a guest, and we talk about a deal that has already happened. This time, we’re going to talk about a deal that is actively in the process of happening and is one that you could potentially participate in if you are an accredited investor. I am super, super excited to talk today with President of Sovereign Capital, as I mentioned, Eric Rice, and their project, Digital Midstream Genesis, in partnership with Exotic Ridge. Guys, if you are into energy and you are into Bitcoin, this is going to be the episode for you. Quite frankly, I don’t know much about Bitcoin. I know a lot about energy. I know a lot about oil and gas, but Bitcoin and the overall cryptocurrency space, I know a little bit about, but not much. Eric came on today and did a wonderful, wonderful job of not only giving us a history lesson about where crypto was, where it is now, and the interconnectivity it has with energy, but then also dove deep, deep into their current fund that they are raising for right now, Digital Midstream Genesis, which is an off -grid Bitcoin mining project where you actually receive the distribution in Bitcoin, which I think is fascinating because coming from an operator side, I hear all the time about how Bitcoin is going to be great. Bitcoin mining is going to be great because we’ll just be able to buy all your gas. But then it seems like all of the value never accrues to the person who’s selling the energy. What Digital Midstream Genesis and Sovereign Capital has done in which you will see here in this interview is they’ve basically combined the upstream oil and gas side with, in terms of the natural gas power, layering it over an active Bitcoin mine that allows you, you the investor, to participate across the entire value chain. Eric comes on and does an excellent job, I said, of breaking down the history of crypto, walking us through how that leads to its combination and the power of energy. And then we deep dive into this fund, what makes it different? What makes it unique from all the other off -grid Bitcoin mining offerings that are available? But man, this was an awesome interview. I am fired up. I really appreciate Eric and the entire Sovereign Capital team who make this happen, guys. And I highly recommend going and checking out SovereignCapital .com. We’ll have the link in the description below if you are interested in checking out more about this guy’s awesome episode. I’m going to go ahead and kick it up. Here’s Eric with Sovereign Capital. I want to dive into this, Eric. This is awesome. I, you know, as I kind of say in the intro, you know, this is a little bit of a different flavor than normally what we do on this podcast. Normally what we do is we’re breaking down oil and gas M &A deals. But everyone’s talking first, I remember we’re talking about Bitcoin. We’re sitting here, we were just talking before we went live here, $106 ,000 per Bitcoin. Trump just took office. A lot of that stuff’s going crazy. Crypto was on everybody’s mind. And I’ve been kind of searching in the winds here a little bit to see, like, OK, how do we introduce this stuff and for me learn about this stuff? Because I’m as ignorant about a lot of this cryptocurrency specifically when it comes to Bitcoin as the next. And, you know, us having worked together in a previous life, you know, you have, in my opinion, and again, we don’t give investment advice on this podcast, but you have some of, the best crypto energy combination fund on the planet. So I’m really excited to dive in to what you’re a part of and what you’ve done. So first off, I just appreciate you coming on and chatting about all this.  

 

Eric Rice – President, SOVRN Capital [00:04:00] Well, thank you for having me, Michael. This is quite an honor. Good to see you again, by the way. So, yeah, Passed Venture Together actually taught us a lot about what to do in the Bitcoin mining space to provide a better solution for investors and for shareholders in the operation and for the community at large.  

 

Michael Tanner [00:04:14] Absolutely. And, you know, I come to this and I think a lot of people who, you know, some people that are listening to this, I would say maybe the majority of the people are listening to this, come from the traditional oil and gas operation side. And a lot of us look at at crypto and specifically this idea of mining Bitcoin using oil and gas byproducts as as a little bit of. Oh, there’s some tepidation there because a lot of the times, you know, as you’re sitting in an operator’s role, you’re getting pitched. Hey, let’s mine crypto. But you’re really not mining crypto. You’re just selling your crypto miner, your gas at an insanely cheap value so that they can go take the upside of Bitcoin. So what I want to do first off is kind of just, you know, your you have your own podcast that’s excellent, by the way, we’ll put the link to your podcast in the show notes. You’re you’re a really great historian and explainer of things. So what I want to do to kind of start out is just sit back and let you kind of explain first off the history of Bitcoin and maybe crypto and how we got here. But really, the collision, as you talk about often, is the collision of crypto and energy and the idea that crypto really is digital energy. I think it’s fascinating.  

 

Eric Rice – President, SOVRN Capital [00:05:23] Well, thank you for that compliments. It’s great to start out talking about history because you really can’t understand Bitcoin, why it exists, why it was being built for so long. And I think most people have no idea that most people think Bitcoin popped up out of nowhere. These projects for cryptography and peer to peer payments and digital promises or cash on the Internet have been in existence in prototypes since the 70s. So this has been around for quite some time. Bitcoin was the first and best product. And I’ll say that confidently. It’s important to understand why it exists, the history of money. And then, of course, the difference between Bitcoin and crypto. And that’s where a lot of people, I think, intentionally by the banks, by the systems, they mix the two together all the time. But you’re starting to see, you know, Trump is really good at saying Bitcoin and crypto because they’re completely different things. Although Bitcoin is a crypto uses cryptography. It is not a cryptocurrency like you hear in the altcoin market. And they call them altcoins for a reason. We call them something different. I won’t say that on your show, but they call non Bitcoin altcoins. So why does it exist? Well, you can look at the history of money. We’ve used everything in money from seashells to stones to gold and silver to paper. And I just kind of start at gold and silver, right? Gold and silver is commonly thought of as basic money. But people don’t know the difference between money and currency. And most people intertwine those two. Money is the base of value. Currency is the medium of exchange. That’s how you exchange value, which is why we had gold backed paper, otherwise known as a gold backed dollar. But the problem with money has always been dilution. So we used commodities for for value because they were scarce. Right. So seashells, certain types of stones. These were very rare, very hard to acquire. So they had value in barter. Then we moved into a universal system with precious metals. We had gold, we had silver. And ultimately, what would happen in that process is that the people who were weighing the so if I had chunks of silver because they weren’t making coins at the time, I had a bag of silver nuggets and I go to a merchant. Ultimately, that merchant would rig his scale to get more silver. And if I if I didn’t have the exact amount of silver for a purchase, I would overpay because I couldn’t shave down the silver. So I didn’t have a standardized unit. So ultimately, people were getting ripped off by the merchants with tilted scales. And then they went to minting. Then governments got involved and they started minting universal coins. One ounce, quarter ounce, tenth of an ounce, all these different variations of gold and silver. Ultimately, over time, they started clipping the edges, which is why you have those little ridges on the quarter, even though the quarter is worth nothing. It has ridges on the edge that represents coin clipping. Coin clipping became a very big deal for governments that were going under governments that were kind of doing the things that we’re doing now, raiding, looting the treasury, creating ridiculous laws, creating mayhem in society. They were running out of cash. So they started clipping the edges of coins, melting them down and making more coins. That was the original version of inflation was coin clipping.  

 

Michael Tanner [00:07:56] I had no idea. That’s insane. I had no idea because I’m looking at a coin right now. I’m like, holy smokes. That’s where that comes from.  

 

Eric Rice – President, SOVRN Capital [00:08:03] Yes. Yeah, the ridges on the end make no sense. It just represents coin clipping. So the quarter actually didn’t have those ridges when it was silver, pure silver. And now that it’s, you know, fake metals and it has that. So and coins pre 1962 actually still have silver. So if you have those in a bag somewhere, hold on to them. Those quarters are really worth about 12, 15 bucks because they still have real silver. Now, the coin clipping started. So you had counterfeiting. You had inflation. Every coin that came out wasn’t a full ounce. Those little shavings were melted down. You had new currency. People got upset. Then we went to leveraging gold for paper currency. And that worked out OK until people started looting the treasuries again. And you’re starting to see that you saw in 1971. We went off the gold standard, full fiat. Fiat even has a confused term in the market. People think fiat means fake. It does in Italian like Fugezi. It’s a fiat. It’s fake. But it also means mandate. So fiat currency is by mandate. We are mandated by the lords of the government of the United States to only use paper currency that has no value. It’s not backed by anything. The interesting thing about gold -backed securities or gold -backed currencies is that the auditing system is incredibly difficult. In fact, I’ve talked to guys from KPMG Price Waterhouse who’ve been paid for 20 years to audit gold inventories. It’s almost impossible. You have to assay every ounce to make sure that it’s legitimate and not just tungsten dipped in oil or in gold. And then you have to you have to back them consistently. So you have to assay and audit every single year. And say you’re doing a trade in gold with Russia. You send a boat full of gold to Russia and pirates shoot it down. Now the gold inventory is completely off skewed and the currency loses value because nobody knows. More importantly, commodity -backed currencies find a fatal flaw in every model moving forward is the fact that when gold goes up in value, more gold is mined. Gold inflates at about one to two and a half percent per year. Now, with the findings we’re seeing in gold -backed currencies, you know, we now have a big problem. There’s been four point seven trillion dollars speculatively found throughout the world in the last 12 months, which would actually dilute the entire gold market. The price of gold would plummet 30, 40 percent from new supply. So you have these supply and demand issues. And and that brings us into the digital environment. So Bitcoin by itself was created by a group of people who called themselves cypherpunks. These were the these were the computer nerds in the 70s and 80s that no one paid attention to at the mall. They were the guys sitting there playing with a calculator while everybody else had their, you know, tight rolls on their jeans, buying slushies for their girlfriend. These were the guys trying to figure out the computer world. And the cypherpunk movement was all about separating money from state because we in all of our lives, I don’t care how you how old you are watching this podcast right now. You have never lived in a world where money and state have been separate. Every single dollar spent, every loan taken, everything goes through the centralized United States government, the Federal Reserve. And it’s important to understand that the Federal Reserve is not part of this country. It is a private corporation who has a mandate to do two things, print currency and monetary policy. Those are the only two things the central bank does. Prince currency manages monetary policy. Now they hire people called senators and government congressmen to persuade the public into continually using their centralized system, creating more archives of control, more leeches onto your body, sucking the blood out of you for every transaction and inflating away your income. I don’t think it would need to explain to anybody in oil and gas the power of inflation, considering inflation is blamed on oil and gas consistently for the price of energy. But the only reason the price of energy goes up is because we have fiat printable money. You can print it at will, dilute it out. Everything needs energy. So energy goes up first. And then everyone blames inflation on oil and gas. I was in oil and gas. I get it. It’s the it’s the focal point, but it’s the distraction, the real purpose. The real problem of inflation has always been money printing from central banks who control all but three countries in the world. There’s only three countries in the world that do not have a central bank that runs their money and monetary policy. So the history of Bitcoin is actually pretty interesting. There were about 30 attempts to build a decentralized. And this is a term most people don’t understand. Also, Michael, we live in such a centralized world, such a centralized world where we have to have a hero. We have to have an icon. We have to have an idol. And we have to have a ruling body to tell us what to do. The cypherpunks didn’t want that. They wanted a world where they controlled the money source. And I would advise all of you to read the Cypherpunk Manifesto. I think it’s from 1994. It was really a declaration of war on the central banking system. Now, the coding for cryptography goes back into the 70s and the NSA and some of these other areas who are always at the forefront of technology, OK, because everyone scares everyone out of Bitcoin. The NSA created it. We don’t know who created it. And to be honest with you, it doesn’t matter at this point because it’s decentralized and fully controlled by the people. It’s money for the people. So I always tell people gold and silver is God’s money. The government money is the devil’s money because it’s controlled and centralized. Bitcoin is money for we the people. It’s run by the people for the people. So decentralized. What does that mean? We have to define centralization. So right now we have a ruling authority, the Federal Reserve, completely centralized forces on your monetary policy and your money printing decentralized. So centralized means controlled by few, mandated or used by all. Decentralized means used by all, run by all, a true democracy of value. So in 2008, Satoshi Nakamoto, which no one knows who that is, many people claim to and none of them have ever been right. In my opinion, whoever created Bitcoin is probably long gone, never to be seen again or already dead because it’s the largest weapon against centralized control and monetary policy in the history of the world. It is a revolution. Now, in 2009, Bitcoin launched. When Bitcoin launched, people didn’t understand what it was, myself included. I was I hated Bitcoin, Michael. I couldn’t stand the idea. I thought it was so stupid until about 2020. Finally started looking into it. Twenty twenty one. I went all in because I understood what the system is right now. The way money runs is they print it, they tax it, they leverage it, they lend it and they tax it again. That’s how a centralized system works. It’s truly debt slavery. Bitcoin by itself eliminated the problem of fiat money printing by creating a scarce number, 21 million Bitcoin. The thing most people don’t know is that every Bitcoin is broken down into 100 million different parts called a Satoshi. So you can spend ten dollars on Bitcoin. You can put you can buy a 99 cent item at one of the 93000 online and in -person stores in America that accept Bitcoin. Ninety three thousand ninety three thousand already accept it. And I think that number is only going to triple in the coming years. So the difference between centralized and decentralized is very simple. The banks run the money, right? The central bank controls printing and monetary policy. And then your regional and national and federal banks, they basically are the ones who hold it, allow you to use it and leverage it. Most people don’t know that when I go to the bank and I deposit a hundred dollars, that that bank is going to leverage my hundred dollars for a thousand dollars and they’re going to lend out a thousand dollars to people at five, six, ten percent interest on my money. They make a return. I get nothing. And I’m actually considered to be a debt. I’m I’m I’m a debtor to them.  

 

Michael Tanner [00:14:41] So we got South Park image where they sit and he gets, hey, here’s my money. And then it’s and it’s gone and it’s gone.  

 

Eric Rice – President, SOVRN Capital [00:14:47] And that’s very common. We’re about to go through that. Like, I don’t really I can’t foresee what Trump can do to stop what’s coming in the banking sector. So we already saw Silicon Valley Bank, First Republic. All these all these banks were shut down because they were insolvent, meaning that they had lent out bad money, not gotten a good enough return. And now they don’t have enough money to cover the amount that they owe their their depositors. So we’re entering into this bank bail in model. And that’s really where the law is. We’re not allowed to bail out banks anymore by just giving them cash to make them whole. Now they have the ability to turn their their liabilities into equity, their debt into equity. Technically, your money at a bank is debt. So if they go insolvent, they’re going to give you shares of an insolvent bank instead of your cash. This already happened in Cuba. This has already happened in Cyprus. It will happen here to at least one or two banks before the system is controlled. So where does Bitcoin fit into all of this? Bitcoin created its own island and it started out very small like everything else. Two thousand nine got a little bit of press because it was the first real cash digital gold model that existed where where nerds could pay each other for coding. That was really kind of how it began. Bitcoin was never created to be a peer to peer cashless environment for in -store purchases. It was built to be peer to peer cash transactions online. It was built to be the money of the Internet, the base layer, the monetary policy of the Internet. And it will be in the end because nothing else can compete. Everything else is just faster and cheaper, not more valuable. So 21 million Bitcoin are created, create scarcity. Then you have this process called Bitcoin mining. And this is the big difference between Bitcoin and crypto. Even Satoshi Nakamoto never got a free Bitcoin. He had to mine his Bitcoin. There has never been anyone in the world who’s received a free Bitcoin from the Bitcoin protocols. It’s not a technology. It’s not an app. It’s not a website. It’s an open source, decentralized protocol, immutable ledger. Right. So what do these things mean? What is Bitcoin mining? That’s what we do. So the way I explain Bitcoin mining is very simple. Think of think of Bitcoin like a factory. We all know what a factory images. Right. There’s a factory assembly line. There’s a box. The box gets filled with products. It goes to a quality control guy. He says, yep, there’s a hundred a hundred units of this product in here. All hundred of these units are legitimate and good to go. It goes to a quality assurance team and they say, yes, I assure that the hundred products in that box are good to go. Put them on the assembly line and send them to the trucks and get them out of here. And that’s kind of how an assembly line in a factory works. Bitcoin is no different. It’s digital. It’s a digital version of that. So every 10 minutes, a new block is created, a new box. And instead of putting products in the box, you’re putting transactions in the box while those transactions are filling up in that block. Miners who are basically guys who are using real energy in this world. They’re paying for it. They’re paying for computing units. We use ASICs, S -19s and S -21s as computing units. These computing units make between 200 and 300 million guesses per second. Now, the point of this is to be able to guess the password on the block. So right now you have well over two or three million miners throughout the world that are making competing guesses on a very difficult math problem. I call it a password to keep it simple to guess the password. Once you guess the password, you get that block. Now you are you are the quality control who says, yep, there are all these transactions. There’s no counterfeit Bitcoin. Everything is a OK in here. All the cryptography, the key matches the block. Everything’s good. Then it goes to what’s called a node holder, which is important to understand, because I know the whole I have I’m a node runner. And if Bitcoin were to go down, the electricity of the power goes out. As soon as the power comes out, I personally, Eric Rice, can reboot the entire Bitcoin network. That’s what decentralization is. Centralized means you have a server at Microsoft, right? Like if Microsoft goes down, none of your Microsoft products are going to work. Decentralized is right now. I think node runners, there’s almost 20 ,000 node runners throughout the world. It’s 20 ,000 people who can reboot the system. So the box is filled with transactions. I guess the password making two to 300 million guesses per second. That’s called a hash rate. Super important to understand what hash rate is, is the actual value of the network. Now, when the transactions come in, I verify it. It goes to a node. All the nodes have to agree 100 percent agree that every transaction is legitimate. No counterfeit Bitcoin. Then they sign off on it. We put it on the assembly line, which is called the block chain. It goes on permanently. It goes out the factory door. Can never be modified or changed from that point again. So Bitcoin by itself is an immutable ledger, meaning that it’s an immutable accounting system can never be changed. No one can hack Bitcoin because of the hash rate. So, like I said, when that box, that block comes out and I’m making guesses, there’s millions of computers making hundreds of millions of guesses per second. That’s called computing power. And it’s measured in hash rate. Right now, the Bitcoin network has already touched a Zeta hash. OK, that’s a thousand XO hash of computing power. For those of you who don’t know what that means, think of it this way. Every guess to that password creates a singular line, an electrical code. When you have hundreds of millions, if not billions and almost trillions per second, that creates a force field around the system. Bitcoin is an impenetrable digital fortress. And every token on the system is like buying an apartment or a shop. Real estate within that fortress for buying power. So that XO hash, excuse me, Terra hash, Zeta hash moving from Terra to XO to Zeta hash. Every time that happens to give you an idea of what that means, to have that type of security. Bitcoin was created to be outside of centralized control, meaning I want my money to be unconfiscatable, uncensorable and easy to use. Highly liquid. That’s what a Bitcoin is. The value comes from the Bitcoin network. So the reason people pay $106 ,000 for one Bitcoin is because they want to buy that real estate within within that impenetrable fortress. And how impenetrable is it at a Zeta hash of computing power? These are huge nerdy words. I’m trying to be as non nerdy as possible. No, no, we love it at a Zeta hash of computing power. OK, if you put together Google, Metta, Microsoft and Amazon into one pool, they would equal three percent of that computing power, three percent. In order to get to a Zeta hash of computing power in the system, it requires twenty nine point three gigawatts of energy. If you add up the Navy, the Marine Corps, the Army and the Air Force combined, they use ten point nine gigawatts. Bitcoin has become a decentralized digital fortress for buying power that uses more energy and has more computing power than every government and every military on planet Earth today. And this will only grow throughout time. So as we approach this era of tyranny, where everything, you know, the oil and gas guys know it better than anyone. Over regulation, over taxation, highly burdened on licensing, highly burdened on permits. All these things that get interfere in the way to make and preserve capital are completely avoided through Bitcoin. A scarce, a very scarce amount of it exists. It’s highly protected by energy. And one of the most important things about the overall history of Bitcoin is that it’s not new. This was like the 35th attempt. And you can go back to like the 1920s, where Henry Ford was quoted as saying that one of the goals of his life was to create a currency backed by energy, because that’s the only way anyone will ever be free. Milton Friedman alluded to the idea of Bitcoin. F .A. Hayek, all of the Austrian economics who believe in low government, low regulation, high freedom and high profit would all be Bitcoiners today. Their teachings of Austrian economics is what created the Bitcoin platform today, which needs energy. And now the slam comes with the alt coins. So we call them something else. But the alt coins, so the not Bitcoin. Here’s how most of them work. That’s called proof of work. Proof of work is I have to spend money on energy. I have to spend money on equipment. I have to contribute to the network in order to get a Bitcoin, because when that block is finally mined by the Bitcoin miner right now, they get three point one to five Bitcoin. They’re getting four, three, three and a half hundred thousand dollars. Three hundred and fifty grand to mine a block. That’s a huge reward. That’s properly aligned incentives, meaning that this person has contributed to hash rate, which increases security. They have solved the mathematical problem. They have verified transactions for our transparency and audited the system. Bitcoin’s audited every 10 minutes. The Federal Reserve has never been audited in 111 years. Bitcoin is audited. Bitcoin is money and a monetary policy that competes with the central bank. Alt coins are different. Alt coins are very similar to a penny stock that you would not want to invest in. Your average alt coin is what’s called pre -mined. They use what’s called proof of stake. So they don’t want to use energy because it’s too expensive and they can’t replicate the network because there’s already Bitcoin. So why would you ever go anywhere else except for the hundred and six thousand dollar mining fee? Right. Why would you go anywhere else? Proof of stake is totally different. It’s just I’m going to mint a bunch of coins. They call it pre -mined coins. It just means printed. It’s no different than fiat. They’re just going to push a button, make a bunch of coins. They’re going to give some of those coins to marketers. Those marketers are going to create a market. And then eventually the insiders who own most of the pre -owned coins, they’re going to sell to this marketed community and pull a rug. And some of them don’t pull a rug. Right. There’s some of them that have high demand, but their claims are all the same. Oh, Bitcoin is old. It’s outdated. It’s slow. It doesn’t work. Bitcoin has never been down. It has never been hacked. It is a little slower. But right now, when you’re moving massive amounts of money around the world, you’re using Swift or some of these other things that could take four hours to three days to send money. And everyone’s OK with that, with a $50, $60 fee. You know, Bitcoin gets moved around the globe yesterday. $1 .2 billion in Bitcoin was moved in four minutes for $1 .65. That value in the world is exponential because it goes across borders. It’s Internet. It’s the Internet. It has nothing to do with borders or controlled systems. Now, altcoins by themselves, the average altcoin is 80 percent owned by insiders, 10 percent to a liquidity pool, 10 percent to to the general public. So it’s easy to manipulate the price. And ultimately, the insider is going to dump. So you’re going to you’re going to print some coins. You’re going to hire some marketers. You’re going to pump the coin. And eventually, you’re either going to dump really fast and crush the market or you’re going to dump over a 10 year period. Either way, they’re pump and dumps in the way they’re designed. Period. There’s no way around it. Bitcoin is the only self -sustaining, truly digitally living organism that’s more impenetrable on an electronic or Internet basis than any government facility in the entire world. AI and quantum cannot crack Bitcoin. Quantum is 10 years away from cracking Bitcoin. And by the time that happens, Bitcoin will have upgraded to quantum algorithms and will remain the most safe place in the world for you to store buying power. Is that a pretty good history?  

 

Michael Tanner [00:24:51] I mean, just that was incredible. A lot of a lot of I mean, thank you for that. And I know everybody listening to this specifically me appreciates that. You touched on two things that I really want to dive into as we kind of move into now what you guys are doing. You specifically mentioned this idea of what Henry Ford talked about, a currency backed by energy and that in order to get these blocks, in order to contribute to the network, you have to contribute something. And most of the time, as in these Bitcoin miners are contributing energy. And this is really where that the smashing of energy, oil and gas and Bitcoin has happened. So talk a little bit and maybe a little bit more about that. And then we’ll kind of jump into specifically what you guys are doing with your with your newest fund here.  

 

Eric Rice – President, SOVRN Capital [00:25:36] Yeah. So one thing I’ve done as a podcaster is and you’ll know this because I sound like a crazy person for the first 12 months you meet me and then 14 months later, you’re like, that guy was right about everything. I mean, I’m unlikable in the first six months. You get to know me because I do not hold back from the truth. One thing I have found out is everything that when when the mass media and competitors are bashing something, I look into it really detailed. Now, in 2020, one of these altcoin companies paid Greenpeace five million dollars to do quasi science on why Bitcoin mining was destructive for the environment. And if you’re an oil and gas, you all know that mining lithium is far more dangerous to the environment than mining than drilling for oil. We all know that. So in 2020, they paid Greenpeace five million dollars. And they said, you know, I want to produce a report that shows just how much electricity Bitcoin mining uses and why we need to get rid of it, because my coin is better because I minted it myself. I use proof of stake. I’m going to profit from every person, person who buys it. So clearly this is bad for the environment, not for my pocket, but for the environment. In 2022, the same group paid Greenpeace again to do a hit piece called Change the Code. Take Bitcoin from proof of work, which is where everyone needs energy to produce security, to proof of stake. They paid Greenpeace and the entire hit piece. You can look it up online. Go to Greenpeace USA on Twitter, scroll back about a year and you’ll find these hit piece videos of how the dirty oil and gas industry is colluding with Bitcoin to take over the world, pollute the environment and kill the children. The reality of the situation is that we’re actually following their rules. So Bitcoin primarily is on grid, like most guys, you know, they cut a deal with their local power grid company. They buy and sell energy. So they’ll buy excess energy. When the hashrate goes up, it’s more difficult. They turn off their machines. They sell it back to the grid. People don’t realize that on grid mining, which we don’t do on grid mining, number one is very expensive, very low margin, most common mining mistake people make. But that process actually balances the grid like that’s really good for the grid to have somebody buying and selling the energy at will and at the commands of the local or state government. So the other way that we started looking at this was we went into hydro. We went into solar. We went into wind. We went into all these options and flare gas happens to be highly volatile and highly energetic. So solar and wind, we all know, don’t produce enough energy. It’s very difficult to get to five megawatts of energy with with wind and solar without losing a ton of money up front and building out the cost. Now, Elon Musk came out and said he bought a bunch of Bitcoin. I think he has I think he has over a billion dollars in Bitcoin at this point for Tesla. But he said, I won’t buy any more Bitcoin until Bitcoin is at least 50 percent sustainable energy. Which he knows and I know and you know is a stupid thing to say. But at the same time, Bitcoiners got creative. So these on grid power grid deals are now in Africa. They’re in South America. These are going to third world nations that could not afford a power grid because there’s no one to buy the power. They have no electricity, no running water, no future of joining the world. So Bitcoiners went and said, hey, if you build a power grid here, I’ll buy all the energy and lease it out to the people around us, whatever we don’t need for mining. Now you have third world countries with running water, the Internet, electricity, gas in their homes for heat and cooling. And then we started getting into hydro and all these other types of deals. Very expensive. You go from eight cents a kilowatt hour on grid down to like five or six in hydro, around five, six, maybe maybe four and a half in solar and wind. But the flare gas industry was the biggest target for us, you know, coming from oil and gas. It is you are burning off CO2 into the environment, OK, with flare gas. Everyone knows that there’s no mistake around. And the fact that we do it gives easy access to greenies and the EPA to attack us. Right. We all know that. You can see the fire. You know what happens at fire. CO2 is released released in the world. Now, unfortunately, they don’t tell you the byproduct of CO2 in the environment is that you grow more plants that produce more oxygen. Right. Like there’s some common sense in these things. But flare gas was an easy target, highly volatile ethane. So essentially what Bitcoin miners started doing was putting together deals to buy flare gas from oil and gas operators to power these off grid facilities, which is a great model. But they weren’t really beneficial. The good news is you’re taking the CO2 out of the environment and you’re putting it into a mine and you’re producing digital value, digital buying power. Now, oil is no different. It’s just physical buying power. If you have oil, you can sell it and you have buying power. Right. Period. Bitcoin is no different. It’s just digital. So the transformation of this was looking at the flare gas industry. And like we’ve talked about, we’ve we’ve seen this. We’ve seen deals in oil and gas. Guys come in and say, hey, listen, I want to buy your natural gas really cheap from you, but I’ll buy it consistently. And then I’m going to use it to make millions of dollars. And I have and you get nothing from it except a guaranteed buyer at a discount for the natural gas you’re producing. So very few deals are done like that. So what we did is we looked at it and we said, OK, well, let’s take the tax structure from oil and gas, right, where you’re getting tax benefits up front for depreciation and credits for carbon capture, which is a really big thing. So they created these whole models where if you can capture waste, waste gas or waste energy, waste carbon, waste CO2, we’ll give you tax credits. So what we did is we work with an operator in Tennessee and we found a way to purchase all of their ethane that they would normally flare off, separate the CO2, sell it to a CO2 buyer on location, get tax credits and alternative revenue for our project and then use the pure ethane through turbine generators to power sixteen hundred ASIC units to mine Bitcoin at about twenty seven thousand dollars a piece. So the evolution, the way that oil and gas and Bitcoin work together right now is not asymmetrical. It’s very much at odds where the Bitcoiners are trying to, you know, I don’t want to use this term, but in the scam, right, or belittle the oil.  

 

Michael Tanner [00:31:00] I use that term because that’s how I always felt sitting on the other side of the table.  

 

Eric Rice – President, SOVRN Capital [00:31:03] Yeah, I mean, it’s what it is, right. So you can go get three fifty and MCF for natural gas. They’re going to offer you a guaranteed buyer at two fifty. Well, there’s a guaranteed buyer already for three fifty. Everyone needs it. So oil and gas is actually at odds with Bitcoin mining. So, you know, you remember this, like we went to our boss and we basically said, why don’t we go raise twelve million dollars, drill four, two hundred to five hundred MCF a day gas wells somewhere. Very cheap. Use a hundred percent of that gas to mine Bitcoin and create a natural gas Bitcoin fund with the tax benefits of oil and gas that kicks out Bitcoin to all of our investors. Well, oil and gas guys don’t understand Bitcoin. Bitcoiners absolutely understand the science of energy and gas probably better than any. In fact, Trump even said in his speech at Bitcoin twenty twenty four last year, his opening statement was, you do realize this is a room of the smartest people in the world. And I don’t deny that Bitcoiners are are some of the smartest people in the world who just hate the system. They’re kind of like a genius libertarian. They can’t really define what they believe in. They just don’t want anyone overreaching into their freedom. And they want to create that financially. So what we’ve done is kind of bridge the gap and say, hey, listen, we don’t want to buy your gas. We want to work with you. We’ll still buy it at a discount, but we’re going to give you a percentage of the Bitcoin. So that way, you’re turning natural gas into Bitcoin. And if you want to sell it, sell it. If you want to keep it, keep it. You want to spend it, spend it. But we’ve partnered with the facilities and really done a good job at structuring a deal that not only gets us out of on grid mining, which has a benefit, it balances the grid. Our grids are 50, 60, 70 years old in this country. Some of them are breaking. So they need that energy balance. What we wanted to do was was kind of rape the EPA and their tax model and say, listen, we’ll capture the CO2. We’ll sell the CO2 for profit. We’ll pass off our tax credits directly to our investors and we’ll use the remaining ethane to mine Bitcoin and distribute that to our investors in a cold wallet, highly secured in multisig storage every month for the next five years. And after five years, we’ll sell the project for Bitcoin. We will not sell it for fiat. We’ll sell it to another mining operation in Bitcoin and distribute that to our investors as well. So we have really found the loophole from how does oil and gas work with Bitcoin to produce more profit, a better world? We are reducing CO2 emissions, which kills plants. I will state that. We need more plants producing oxygen, but we are using the system against them to mine the most scarce, highly secured, uncensorable, unconfiscatable money the world has ever seen and creating true freedom across the board through reduction of taxes and the increase in the amount of digital assets you hold that no one can take from you. That’s really kind of the purpose of what we’ve built.  

 

Michael Tanner [00:33:35] It’s really incredible. And I think, you know, to kind of put in perspective, I think what you guys are doing relative to I think what a lot of people do is you said it exactly right. Most people come in and say, hey, we’re just going to buy your gas. We’re going to participate in the upside of Bitcoin ourselves. And that’s hard for an oil and gas operator to understand. And I think what you guys have done, you’ve really kind of combined all three stakeholders that sometimes are at odds with each other, but you all be able to participate in and when Bitcoin goes up, the LPs and all of the rest, the other stakeholders, the operators, you guys as kind of the managers of this fund all participate both in the upside and downside. And we’ll get into a little bit of the structure of your guys’s fund. But, you know, talk to me about so, you know, everyone should first off. This will be a link in the description. Go sign up for your guys’s investor portal and the link will be in the description below. We’ll flash it here below. Go sign up for that so you guys can view all of the material. But specifically, you guys are doing eight point three five megawatts of off grid Bitcoin mining. And again, you you covered, I think that’s important. The off grid component of that means you’re completely isolated. You’re not out there at the whims of what the electrical companies will do. If prices in one area go up, that doesn’t necessarily affect your ability to be able to produce Bitcoin at such a low cost. I mean, your total cost of production for Bitcoin is twenty seven thousand five hundred dollars, which is incredible. But something you also talk about is your net negative energy cost, basically negative four cents per kilowatt hour. So you were talking earlier about the cost of generation for each of the different for each of the different energy sources. Yet you guys are basically on a net basis able to get below zero. Talk a little bit about how that works.  

 

Eric Rice – President, SOVRN Capital [00:35:17] Yeah, so it’s not a direct correlation. So we are investors at the end of the day. So Michael, my business partner, our CEO, he is absolutely the nerdy Bitcoiner, which is why I’m on your podcast, because he’d spin you in circles. I’m the translator of nerd to normal. And and Michael could be totally involved in that side. But a net negative energy cost is done because of two things that we do different from every other Bitcoin miner in the world. Number one, Bitcoin miners just want the gas. They know how to convert it to energy that lowers their costs. I applaud them. It’s amazing. They’re mining at two, three cents, right? So they’re about 40 ,000, 50 ,000. Some of your big on grid players right now need a 90 ,000 dollar Bitcoin just to profit 90. We need 27 to profit. So the big difference between that on the net negative energy cost is the fact that we have an ancillary income stream. So every time we get purified ethane, we’re producing metric tons of CO2. 80 yards from all this is all on one location. There’s no shipping or trucking. So 80 yards from our fractionation plant is a CO2 company. So all we have to do is send them a text message and say, hey, guys, it’s waiting for you. Come pick it up. They wire us money. We have ancillary income. Every time that we produce that CO2 that we’re selling to them, we get tax credits. So when you put together the tax credits, the ancillary income, the the offset augmented income of CO2 sales, along with off grid, self generated energy for the mining unit itself, we get to a net negative energy environment. So a lot of people look at us, some of our investors look at us and say, well, you guys are a CO2 company that that mines Bitcoin. That’s a great way to look at us. Or we’re a Bitcoin mining company that extracts CO2 from ethane. Doesn’t matter what you look at. It’s two businesses in one. So that extra income in the tax credits take us below zero for our kilowatt per hour cost, which is how we can get our our mining numbers down so low.  

 

Michael Tanner [00:36:58] Yeah, I think the third thing I would say is you guys are a tax haven that gives you an inflation proof distribution method when it comes to getting. And that’s the next thing I want to touch on is from the distribution standpoint, you guys actually distribute monthly Bitcoin. Most people who invest in alternative investments are used to quarterly distributions, monthly distributions. If you do oil and gas, most of it’s on a monthly distribution level. But it’s all in cash. You guys do it differently and actually give you Bitcoin, which appreciates on an ongoing basis, which is just it’s it’s not mind blowing. I think it’s just when I mentioned you’ve created, I think the model for investing in Bitcoin, I truly mean that because of the way you guys have set this up.  

 

Eric Rice – President, SOVRN Capital [00:37:41] Well, number one, we’re very dedicated to the ethos of Bitcoin. Decentralization, right? Decentralization is number one, removing central control or power. All of our all of our investors have a vote. So if we get an acquisition offer, it’s not up to the executive team to determine whether we exit. Everyone has a vote. So we have decentralized. We look for consensus, right? Just like Bitcoin has to have in order to change Bitcoin. You’re going to have to get 85 % of all node holders in the world to agree to it. When was the last time 85 % of the world agreed to anything?  

 

Michael Tanner [00:38:09] Right. Never.  

 

Eric Rice – President, SOVRN Capital [00:38:10] So consensus is important to us. The other thing is the Bitcoin ethos. Like, I hate cash. Like, I love cash and the fact that it provides privacy. They’re trying to get rid of that. They want everything going digital so they can track everything. But as far as the actual value of paper money, I hate it. They inflated away. You’re losing right now. Last year, you lost six point five percent on your cash holding. So you had a hundred thousand dollars. You know, you have ninety three thousand dollars in buying power today. It’s the opposite. So when I look at my own home, right, so I bought this house in 2020. At the time of purchase and the price of Bitcoin, it would have cost me forty four Bitcoin to buy my home. Forty four. Now, my house is doubled in value. And if I bought my house, doubled in value today, it would cost me about six Bitcoin, seven Bitcoin. Excuse me. I’m sorry. I’m sorry. We have a much higher valuation with our pool. So maybe like eight and a half Bitcoin. But either way, it was forty four Bitcoin four years ago. It’s eight and a half. It’s deflationary. So as as as Fiat inflates, Bitcoin deflates. So we don’t want to have investors come in. We do have them ask all the time, can I just get cash? And we’re like, sure. What we’ll do, what we do with our investors for distribution is simple. We work with a company called Unchained Capital, where I have a hundred percent of my Bitcoin, except for what’s in my lightning wallet to spend at stores. I have a hundred percent of it there. We provide multisig storage, which is the highest level of storage and security you can possibly get. It’s like having a safe deposit box where you need two keys to turn it. So just having one key isn’t good enough. You need to multi signatures to move your Bitcoin. Even in my level of participation with Unchained Capital, I’m a premier client. So every time I sell or distribute Bitcoin, I have to produce a video. And in that video, I have a hostage word. So if I use a specific word in my video, the people at Unchained will know that I’m under duress not to release my Bitcoin. It’s the most highly secure environment you can possibly find. So every month we mine Bitcoin. We’re part of a pool. So we’ll produce Bitcoin. Some months it’ll be a lot. Some months it’ll be a little, but every month it’ll be something. And we distribute that Bitcoin directly to your wallet. It goes to your wallet within, you know, two to three minutes from distribution time. And then you’ll get a notification saying more Bitcoin has been deposited into your wallet. And if you remain with Unchained, as we suggest, you’ll be able to sell and liquidate that and have a wire sent to you the next day. So it’s highly liquid. We advise people to be to hold on to it. Bitcoin has produced 44 percent returns since 2020. Like you can look at the volatility, but annually, it’s the number one asset in the world for the last 14 years. Why would I want to sell the best appreciating asset in the world for something that loses six percent a year and give it to my clients? We want to be able to get new people into Bitcoin. These types of deals, by the way, are these mining deals that have really high profit margins, primarily go to private equity or family offices. No one else has a chance. That’s the model. That’s the market. So the rich just get richer than the ones in the know make more money. So we deal with family offices. So we have 100 investor limit. So we are raising 15 to 20 million from family offices anywhere between 10 and five million will be allocated by accredited investors, normal people like us to get you into the industry. Ultimately, we want to be able to fund these with accredited investors, which will take a lot of education. But that distribution model is important because it works like like reverse dollar cost averaging. So think of it this way at two hundred and fifty thousand dollars per unit. Right now, that’s two and a half Bitcoin. I just convert everything into Bitcoin. My house is Bitcoin value. Now, two hundred and fifty thousand dollar unit. It’s two and a half Bitcoin today. Our projections are at this cost basis that every unit will have anywhere between four and four and a quarter Bitcoin produced for them mine directly. These are called Virgin Bitcoin, by the way, a Bitcoin that hasn’t been sold in the market actually has a premium in the private market. People want full whole coins that have never been sold in exchanges. So we have buyers right now. We have buyers left and right that will pay eight percent overmarket for our Bitcoin. So we could sell it and produce more cash. But selling it for eight percent today just just eliminated to 44 percent next year. That’s the way I look at it. So reverse dollar cost averaging, I put two hundred and fifty thousand two and a half Bitcoin today over the next five years. I’m going to get back four to four and a quarter Bitcoin. Great return. Now, if we see a 44 percent appreciation rate over that five year period, that’s like putting two hundred and fifty thousand dollars of buying power into our system today with 52 percent tax benefits and an ongoing three percent tax credit for carbon. And I’m going to get back. Let’s call it you know, I’ll look at projections. I like to make things in understandable format. Two and a half Bitcoin to four and a quarter Bitcoin in five years. What does that mean? Let’s look back at the last five years. It’s twenty twenty five. We’re at one hundred and six thousand five years ago. We were at ten thousand. OK, so if we put those into perspective, I’m putting in two point five Bitcoin, two hundred and fifty thousand in buying power today. I’m getting four point four Bitcoin back over a five year period, which many people project five years from now will be just to be conservative. Say a three hundred thousand dollar Bitcoin be very conservative. So I just put in two and a half Bitcoin to get four. So I put two hundred and fifty thousand dollars in to get one point two million plus tax benefits back over a five year period. And I didn’t have to spend another dollar on Bitcoin to get to my four Bitcoin. It is reverse dollar cost averaging. This is the way I believe Bitcoin mining should and always should be done.  

 

Michael Tanner [00:43:03] No, I again, and this comes to the next point I wanted to talk about, which is, you know, if you even are in Bitcoin, the model that you have created is so much more efficient than just buying Bitcoin on the open market. I think one of the really this is very rare, guys. I do, you know, I do due diligence for projects all the time and never in a data room do I see the data model. Usually what I see is a screenshot of a, you know, cash flow model that who knows what the inputs are, who knows if they’re summing things correctly. Well, you guys say, screw it. We’re just going to go throw the entire model in the data room. Do with it what you want. I think it’s I think it’s fascinating. And again, all this is available in your guys’s investor portal. That link is in the description below. But you have this great, you know, I’m looking at it right now. You have this great chart, which basically shows the difference between mining Bitcoin via your fund and just buying Bitcoin on the open market, which is it’s almost a two to one advantage being in your fund versus actually just buying Bitcoin on the open market yourself.  

 

Eric Rice – President, SOVRN Capital [00:44:08] Correct. Correct. Yeah, the difference. We get asked that question all the time. And I always advise people go buy Bitcoin like I’m never going to say go buy Bitcoin. It’s the most highly liquid, secure asset. You’re going to find the best performing asset in the world for 14 years. Have some Bitcoin. But if you’re going to make a big play, you know, like I went into Bitcoin, I was doing twenty five dollars a week into three coins when I started with crypto, eventually realized that all the cryptos are going to end up being regulated securities if we have any scruples as lawmakers and Bitcoin is the only truly decentralized commodity. So I went full into Bitcoin a thousand a month and then I put in two hundred thousand and then I put in another couple hundred thousand. And I kept putting hundreds of thousands of in and I didn’t have access to these types of deals. Otherwise, I would have put five, six hundred thousand dollars into mining operations that are this efficient because of taxes. So buying Bitcoin is liquid. However, I’ll give you an example. So my first big Bitcoin purchase was at sixteen thousand eight hundred. The absolute bottom for the last few years, I bought the very bottom. Now, when I sold Bitcoin to get into this deal, because Michael and I are investors, almost our entire executive team have put money into this deal ourselves, I put out, you know, I sold for Bitcoin at the time for seventy thousand. So I now have a capital gain from seventeen to seventy thousand. The reason I did it is I sold that Bitcoin knowing that that’s going to be offset by the tax benefit I get in the mining operation. More importantly, it eliminates that in the future for me. I would rather recoup my four Bitcoin. I would rather recoup them immediately over the next five years, just have them deposited at a higher and higher and higher cost basis. I don’t care. It’s not a stock. I don’t care what the price is. I care about how much I have of it. I don’t care what my cost basis is. I just want to get to two hundred Bitcoin. You get to two hundred Bitcoin, you’re pretty much set for life. Right. So we have to look at it from that perspective. So I could buy Bitcoin. I could spend, you know, two hundred and fifty thousand dollars buying two and a half Bitcoin. I’m going to get four in my fund. So I look at it from that perspective. But if I buy them at one hundred and it does go to three hundred. Right. So just giving an example, five years from now, I want to sell them or I want to spend them or I want to use them to buy a house. People are buying houses with Bitcoin now, by the way. But I say I want to I want to liquidate. I now have a two hundred thousand dollar long term capital gain for every coin that I sell. I have a huge tax burden coming. So I want my four Bitcoin in hundred, hundred and twenty five, hundred and fifty, hundred and seventy five, three hundred, five hundred a million. I want that tax benefit for my tranches because Bitcoin is different than anything else you’ll ever find. It’s finite scarcity really eliminates like the price doesn’t matter to me. The the amount of Bitcoin matters to me. So I look at it from that perspective and looking at it wisely from a tax perspective, I’m getting monthly liquidity from an investment every month. I’m getting Bitcoin that I could liquidate and sell right now. And if I liquidate it right away, I don’t have a cost basis. Right. I received it at one hundred and fifty thousand. I sold it at one hundred and fifty thousand. No tax basis. Or I can hold on to it and it’ll it’ll add up. It’ll pile up and eventually I’ll have multiple full coins, which if I sell one, my tax basis is going to be two hundred and fifty thousand versus one hundred and six thousand today. It just makes more sense at this at this dollar level to be able to purchase it. Now, we’re looking at 28 states adopting it as a as a strategic reserve, which kind of scares me. That’s how you would implement a CBDC is governments buy all the available Bitcoin and then you have to use the CBDC for your day to day transactions. That’s part of the process. So while we know that this is happening and that the United States is talking about it, there’s plenty of rumors that the UAE has already started a reserve. The Prince of Serbia came out and said that, yes, Bitcoin strategic reserves are already happening. You haven’t heard about it yet because none of us are telling anyone that you have looked El Salvador, which is now mining. They’re putting nodes in every person’s home in the entire country to keep it decentralized and they’re buying Bitcoin every day. There is a race for something that has absolute scarcity. Last year, there were nine hundred new Bitcoin a day produced by the system mined today. There’s four hundred and fifty in three years is going to be two hundred and twenty five and then one hundred and twenty two and a half. After that, it gets cut in half. The supply to the new supply to the market gets cut in half every four years. You want to own as much of this digital real estate inside an impenetrable fortress as fast as possible. So buy Bitcoin today and invest in a mine today so that you have constant availability. Four years from now, I’ll be conservative. I’ll say six years from now, there will be less than a million Bitcoin available in the market for sale, less than a million. And that will make that two hundred and twenty five or four hundred and fifty produced every day that much more valuable. There might not even be a million. There were three million Bitcoin on the exchanges when I started in Bitcoin. Today, there’s two point one. So at that race, you have a declining supply curve and an increasing demand curve that have just crossed over. When that fully crosses over, you’re looking at a Bitcoin being in the millions per coin with only a few being produced every day. So owning a mine for an absolutely scarce item is always valuable, but owning the item is valuable as well. So I always advise people buy some Bitcoin, put money in the mine, and you’re kind of done your allocation. If you invest a couple of million dollars into the fund, you know you’re going to get to twenty five or thirty Bitcoin over the next coming five years and you don’t have to come out of pocket. Two hundred and fifty grand, three hundred thousand dollars. You put you put your money in right away and it gets released to you every single month through our mining procedures.  

 

Michael Tanner [00:49:06] It’s it really blew my mind when I was going through your your your data model. Like, wait a second, like this is even superior to buying Bitcoin on the open market. So if you if you are buying Bitcoin on the open market, highly recommend checking out what they’re doing. I want to quickly touch on two things. One, your guys’s returns somewhere in that 20 to 25 percent IRR. Great. Everybody loves that. Your multiple uninvested capital, a nice two to three and a half X. And a lot of that has to do with my next question. It is the appreciation of Bitcoin. And the interesting part is so you also have another tab on your model which says Bitcoin price assumptions. And we’re sitting I’m literally looking at it right now. We just cracked one oh six. I had it scrolled up. I scrolled down. Yeah, we just cracked one oh six. It’s almost at one oh seven. You go to the Bitcoin assumptions tab, which is basically a month by month Bitcoin assumptions tab. You got to scroll all the way to January of twenty twenty eight to get to the point where you guys have under your model, basically all the Bitcoin assumptions prior to that are below where Bitcoin is currently trading. Obviously, there’s volatility, but it goes to show, in my opinion, to somebody who has been on the buy side of or on the sell side of deals. You know, when you’re writing a sell side deal, everything is you got to look at with a glass half full. You got to make sure you try to, you know, not juice the numbers, but you’re trying to take every most aggressive assumption you can you feel comfortable making in order to make the returns look good. And on the buy side, you do the you do the opposite. You have the you basically take a chainsaw to the assumptions and hack them all down with you guys. You’ve done that. You’ve hacked your assumptions down to the point where the there’s a lot of upside available in here. It’s really incredible.  

 

Eric Rice – President, SOVRN Capital [00:50:50] Yeah, I mean, it kind of comes down to the executive team. So, you know, Michael, Joel, Jeff and I, we’ve we’ve all had been in startups. We’ve all been on both sides of the table between Michael and I. We’ve invested in over 100 private companies together. So we’ve been on the side where, hey, our numbers are going to be huge. We need your money. And the other side, we need your money. Our numbers are going to be huge. So we took the approach of if we’re going to go raise capital, we have to think like those who deploy capital and looking at it from their perspective, we built a full due diligence file. Michael did an incredible job on that for everything from from our tax opinion all the way down to full clarity on our assumptions of projections and full transparency of every document. But when it came down to the numbers, we wanted to be conservative because of the volatility you may meet. I may meet someone today and they’re like, wow, Bitcoin is the best thing ever. It’s one hundred and six thousand. And it may drop down to eighty two next week. And I meet someone else and they’re like, well, you’re over projecting. It just lost 20 percent. We wanted to take standardized market returns. So S &P 500 type returns and apply them to Bitcoin to be conservative. So our model in twenty twenty five shows eighty four thousand dollar price point. We’re twenty thousand dollars over that. That’s fantastic. Your normal kind of entrepreneur looking to raise money as fast as possible would rejigger their deck immediately and say, well, it’s not 20 to 25 percent annual return. It’s actually 43 and a half percent annualized return because of the price of Bitcoin today. That changes quickly. Volatility builds stability when it comes to a current. All new currencies start out being highly volatile until they’re not. And then they’re used for trade. So Bitcoin is already 16 years into that model. The volatility is actually reducing. We’re seeing that pretty steadily. There’s there’s never been a day that I’ve been in Bitcoin where there aren’t more buyers than sellers. I’ve never seen that. So we wanted to be conservative with it. So, yeah, 20 to 25 percent annualized return based on Bitcoin breaking, basically breaking one hundred thousand dollars at the end of twenty seven, early twenty eight, which it’s already done. So the numbers are a lot better. But we would much rather, you know, you’ve been in deals a long time. Michael, imagine if somebody came to you and they said, you know what, I’ve got this 83 percent return. You’re going to love it. It’s totally safe. No one’s going to listen to you. So and I discard them immediately. So we didn’t we kept our numbers the same. Now, when we did the numbers, you know, we projected, I think, seventy two thousand for twenty twenty four, which it hit one hundred. But we looked at it from that perspective and we’re like, let’s keep it. Let’s just keep it. We’re going to keep everything where it is. It could be forty thousand tomorrow morning, just like the stock market could lose 70 percent the next day. So we just kept everything at the basic kind of S &P returns. Normal market returns for an unnormal product and really focused in on the energy arbitrage. That is that is that is the basis of Bitcoin. All Bitcoin miners do the same thing. All of us. We all buy a six units. These A6 units do the computing power. We manage the money and the energy contract. So for us, the value of Bitcoin is enticing for an investor. But the the value of our deal for an educated investor is the fact that we’re at net negative energy. So for us, it doesn’t matter if Bitcoin went down to forty thousand today. We might be one of the only miners in the world that will still mine. Everyone else would shut down because they’re losing money on energy. So looking at it. Yeah, from that point and from the basic, you know, failures of power grids like we’ve seen that and we probably will see that moving forward. So if a power grid goes down, everyone attached to that grid can’t mine. If we have some sort of World War three event with an EMP and energy goes down, we’ll still be mining. We are completely bulletproof from all of the normal tragedies that occur in data centers and electronic implementation.  

 

Michael Tanner [00:54:06] No, that’s it. Again, I can’t say this enough. You guys have really solved. I think what are the big pain points for both investors when they think about, well, I want to get into Bitcoin. I don’t just want to buy it. How do I think about allocating capital this way? You know, to wrap up here, you know, something else, having been in deals a long time, I always like to look at the fee structure. Two things that jump out to me when I saw your feed structure. First off, a small load fee of only about five percent. No management fee. Rare, extremely rare. A standard 20 percent carry and no waterfall. I also think that’s critical. And so what that tells me is somebody who does due diligence for other investors, they I get deals sent to me all the time. Hey, can you look at this deal and tell me what you think? I tell people, well, hey, there is no alignment of incentives between this between the GP of this fund and their potential LPs. They’re sucking you dry for fees. And they’re basically using the divestiture to goose the returns. One, you’re not using divestiture to goose your returns to the alignment of incentives, a .k .a. when you make money and you mine and not make money. When you mine Bitcoin efficiently, you participate in the upside along with your LPs. And when you don’t, you participate in the downside, just like your LPs. I think, you know, having looked at deals across all different industries, it’s rare to see a structure that that’s this simple. And it’s again, it’s what I find really attractive about what you guys are doing.  

 

Eric Rice – President, SOVRN Capital [00:55:34] Well, it kind of goes back to the ethos. You know, we’re in this for Bitcoin. So other people are looking at this of like, how do I create a deal that people want to invest in and then how do I profit from the deal? I don’t need to worry about profits with Bitcoin. I don’t care if the government buys it. I don’t care if corporations buy it. I don’t care if you buy it. It’s going to succeed because around the world, people are starting to realize that tyranny is being imposed upon civilization and the only life raft is Bitcoin. You can claim crypto all you like, but all of them get hacked. None of them have the security and none of them have the ability to be uncensored. They all have a human being. They all have a board of directors, which can be influenced to change the network regardless of what they say. That’s just human nature. Now, we look at it from the perspective of, you know, we have a load fee. Five percent. Traditionally, you’ll see 10 percent. That is fiat in inbound for the company. So that funds the company that allows that pays us for finding the deal for investors. That’s kind of the easiest way to think of it. It’s our sales and marketing to put this deal together. That ends at 25 million. So we have no new income from this fund moving forward, except for the Bitcoin mind. So the reason we’re doing this is pretty simple. We believe in Bitcoin. We believe in U .S. energy. We want to make U .S. energy as prominent as possible. We believe in removing taxation from people. I think it’s theft. I don’t care what anyone says. Taxation is unconstitutional and voluntary, by the way, if you read the tax code. So if we can help Americans reduce their taxes, find unconfiscatable, uncensorable money that appreciates at 45 percent a year, 44 percent a year over four years. You know, we want to be able to provide that for the general public, because most people have no idea how to do anything but buy and sell crypto. So we wanted to build an environment at Sovereign where we become that go to place for private Bitcoin mining deals. We know we work with you like we vetted this deal with you. We ran it across your desk and said, hey, what do you think? We work with multiple vetting sources on every deal that we speculate with. To reduce our speculation. And if we can do that for investors, then we’ve created a business for ourselves that will be, you know, very asymmetrical with the goals of us. The energy producer, the miner, the investor, our LPs, the whole the whole gamut. So the 20 percent carry very standard. We’re not in this for fiat money. We have plenty. Like our executive team are successful people. We don’t need money from raising capital constantly or management fee. There’s no management fee in Bitcoin mining. There’s one guy who makes sure that everything is online all the time. The computing units do the work. So a management fee to us was ludicrous considering I can manage it from a terminal in my home. I don’t even need to be in Tennessee for it. We do have money we need for security. Like there will be armed guards around these facilities. We do need to have fencing put up and all that good stuff. Nobody will know what it is. They just look like pods in the middle of nowhere. But the beautiful part of this is that it’s all about Bitcoin. We’re not in this to make fiat money off of our investors. We’re in this to rally up fiat capital and convert it into Bitcoin for our investors and for ourselves. So we make all of our money on the back end, with the exception of five percent upfront, again, lower than most people. But all of our intention is to be able to put together the best, most efficient energy system in the world to mine the most scarce asset human beings have ever seen. That’s really our whole purpose.  

 

Michael Tanner [00:58:26] And again, I think it’s incredible. It’s hard to find deals that are structured this way from, you know, what you guys put out, the material terms, returns, all that stuff. It’s really incredible. So let’s wrap this up here. But, you know, you’re the expert in this. What didn’t I ask you or what is a if a potential is investor listening, what question would they might have or what’s one thing we didn’t cover that normally comes up that you want to make sure that people know about what you guys are doing?  

 

Eric Rice – President, SOVRN Capital [00:58:55] You covered a lot of them, Michael. You did a great job on this. We actually got a lot of the information out pretty well described and where we are. I think some questions are people ask us transportation costs, which is it’s fully vertically integrated. So the pipeline ends. There’s twenty one hundred gas wells that go in this pipeline. The pipeline ends at our fractionation plant. The CO2 providers 80 yards away and we’re building the facility right next to the fractionation plant. So we’re actually eliminating transportation costs. They used to put this on a rail car right next to it and ship it off on the rail cars. We’re buying it. So we’ve actually eliminated that expense for the for the oil the gas producer as well. So no transportation costs. I think we’ve asked about everyone the taxes you’re looking at. Here’s another thing. You know, with Trump in office now, as of yesterday, this is the twenty first we’re filming this with Trump in office as of yesterday, he didn’t put it in the EO, but he’s going. I believe Trump is going to reverse the depreciation tax where it’s now scaled down to 60 percent. Put that back to 100, which will improve our tax benefits. So right now, with the way we are in depreciation, we’re still at 50 percent depreciation, about two and a half in tax credits just for investing in the fund. You can’t find that type of tax break in Bitcoin anywhere, people aren’t focused on that for the investor. And the other thing, we’ve really covered Bitcoin distribution, which I think is so amazing that most people don’t even get that part of it. But if you don’t have Bitcoin, the one thing I will say, buy Bitcoin, put some money in Bitcoin. I did it blindly and then I learned and I studied the system and now I would say for my savings capital, it’s about 90%. So about 90 % of my savings capital is in Bitcoin. If you study Bitcoin, you’re already in oil and gas, you start to put the pieces together. I think this is the really the pinnacle apex point, the launch point of a really good collaboration. There’s a reason why, I mean put pieces together, there’s a reason Trump is talking about Bitcoin strategic reserve at the same time as American energy dominance. You’re looking at those two things hand in hand. We’re building a nuclear facility in Pennsylvania primarily used to mine Bitcoin. Russia is building two nuclear facilities to mine Bitcoin. This is your chance as an investor to get in on the on the very ground floor of an independent, fully decentralized off -grid operation that will actually out -compete a lot of these places for the next two to three years while they figure it out. So that timing in the market couldn’t be better for people. I think that’s one thing that I always try to explain to people. We have projections, like you said, that show $100 ,000 Bitcoin at the end of 27, early 28. We’re already there. Our model has already proven itself out to a certain extent. And the only thing that’s going to change is that at the halving, it’ll cost us about $56 ,000 per Bitcoin versus $27 ,000 to produce these assets for you. It’s much easier to invest in an operation that produces gold than it is to buy and sell gold on the market. We already know how to buy and sell. We already know how to mine. And we have the energy contracts with a lot of our background help from guys like you to put this deal together. This is how we put all of our deals together. They will always be done this way. We’re going to run it up the chain with 10, 12 different people, get their opinions, find out what we can add to it and continually provide the best offer in this space. This space will be very talked about in 2025. It will be extremely top of mind in 2028 when the next halving comes. The next problem in Bitcoin is going to be in 2028. There will only be 225 Bitcoin a day produced in the open market. That is going to be a pinnacle point. And it’s really good as an investor to sit back and say, well, I got into this three or four years ago. I’m already prepared. But that’s when the that’s when the acquisitions will occur. So I think you covered everything about the deal itself. I don’t think there’s any question in here I haven’t heard before. And I’m trying to think of stuff that I hear regularly that are asked. And I think we’ve kind of covered it all. My friend did a great good.  

 

Michael Tanner [01:02:24] And if anybody listening has questions, I again, I really encourage you to go check out their their portal where you can view all the material, sign up, contact both Eric and Michael Wade. I can’t speak enough about Michael Wade and your whole team, Joel Beasley and the Justin Ballot. I mean, you have an incredible management team that I think has really the skill sets match perfectly for what you guys are doing there at Sovereign Capital. And specifically with this fun digital midstream Genesis. So I, this was great, man. I really appreciate you taking time out of your day to come on. I mean, for everybody listening, please go again, take a look and we will be back next time with another deal.  

 

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Nikola, a hydrogen-electric semi-truck maker, filed Chapter 11 after a spectacular market collapse.

With news of another green company going under, the green industry would never have fully developed if the federal government had not chosen winners and losers. [emphasis, links added]

It’s another victim of the climate change cult.

Nikola, a hydrogen-electric semi-truck company, filed Chapter 11 bankruptcy this week after a spectacular collapse in market value.

Riding high on the Democrats’ loudly touted Green New Deal, investors flocked to Nikola when the company went public in June 2020, with the company’s market value jumping to $27 billion, putting it higher than Ford — even though Nikola had yet to sell a single vehicle.

But green was the future, or so Democrats and the Biden administration insisted, and investors jumped on board the green dream gravy train, fearful of being left behind.

The trouble is that this green dream train suffered from the same limits that plague all EVs. They cost too much and fail to deliver on the promised results.

To be fair, Nikola, whose founder was Trevor Milton, was found guilty of fraud in 2022.

Nikola’s commercial depicting the company’s new semi-truck was infamously rigged. The truck depicted was, in fact, empty of any batteries and was rolled downhill in a deceitful effort to portray it as pulling a load.

The ad included the caption: “The Nikola Hydrogen Electric trucks will take on any semi-truck and outperform them in every category: weight, acceleration, stopping, safety and features — all with 500-1,000 mile range!” But that was never true.

Furthermore, Nikola delivered fewer than 500 of its initially reported orders of 14,000 heavy trucks. It also struggled with development problems. In 2023 the company had to recall 209 trucks over electric battery fire issues.

Meanwhile, the price tag on these trucks was $351,000, nearly twice the price of an internal combustion engine (ICE) truck.

To make matters worse, the sale price was half of the truck’s production cost. Even with Nikola buyers getting a $40,000 tax credit from Joe Biden’s Inflation Reduction Act, Nikolas was still far more costly than ICE trucks.

Another problem that plagued the company was the lack of an established hydrogen refueling network nationwide.

Ann Rundle, vice president for electrification and autonomy for truck market forecaster ACT Research, observed, “How do you expect somebody to adopt that truck if there wasn’t a practical way to fuel it?”

In the end, the reality of free market forces finally caught up to Nikola. CEO Steve Girsky admitted, “Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate.”

Translation: We couldn’t survive in a free market.

Nikola joins a growing number of failed EV companies, including Fisker Inc., Lordstown Motors, and Last Electric Mile Solutions, who have gone under in the last couple of years.

And if it weren’t for a $6 billion bailout from Joe Biden’s Energy Department, Rivian Automotive would have been added to the list.

If the EV industry is going to survive and grow, it needs to do so on its merit. It will need to compete in the free market without relying on handouts and favorable regulations from the government, artificially juicing its existence.

Furthermore, if EVs are the future, they must innovate well beyond their current limited capabilities. If they do so, they will win over the market.

Read more at Patriot Post

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Everything about New York’s vision for a net zero economy is unraveling, and its utopian climate plans have only gotten worse.

​

Back at the beginning of the year, I had a post titled “New York On The March To Climate Utopia.” The post took note that everything about New York State’s vision for a zero-emissions economy and for “climate leadership” was in the process of falling apart.

Its contracts for vast offshore wind farms to replace fossil fuel generation had either been completely canceled (the majority) or rebid at much higher and uneconomic prices (the minority).

Its two contracted facilities to produce “green” hydrogen to back up the intermittent wind and solar had run into financial difficulties and were likely to fail.

Its one big contracted high-capacity transmission line to bring the imaginary upstate wind and solar electricity to downstate markets had also been canceled, without stated reason but almost certainly because of unworkable economics. …

In the few short weeks since that post, you would think that it would be almost impossible for the situation of New York’s utopian climate plans to have gotten any worse.

But in fact, the situation has gotten worse — much, much worse.

On January 20, President Trump was inaugurated, and he immediately went to work dismantling federal support and subsidies for “green” energy.

By this January 20 Executive Order, Trump “temporarily” withdrew all of the Outer Continental Shelf from leasing for wind power projects.

That appears to nix most, although perhaps not all, of New York’s offshore wind plans. (Although the pause in leasing is said to be “temporary,” there is no commitment that the leasing will ever resume.).

Also on January 20, Trump signed another Executive Order titled “Unleashing American Energy.” That one, in Section 7, ordered an immediate halt to all disbursements of subsidies to “green” energy projects under the Inflation Reduction Act or Infrastructure Investment and Jobs Act:

All agencies shall immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 (Public Law 117-169) or the Infrastructure Investment and Jobs Act (Public Law 117-58), . . . and shall review their processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds for consistency with the law and the policy outlined in section 2 of this order.

New York was likely relying on receiving many billions of dollars under these Acts to prop up its wind, solar, transmission, and green hydrogen schemes.

Again, the pause from this EO is only “temporary” but in all likelihood, these funds will never come back during the Trump presidency, if ever.

Meanwhile, New York State’s Climate Leadership and Community Protection Act of 2019 (Climate Act) remains on the books.

That statute commands the complete restructuring of New York’s energy economy to reach “net zero” greenhouse gas emissions by 2050, with a most immediate first deadline of 70% of electricity generation from “renewables” by 2030.

They never had a credible plan to achieve that, but they pretended they were going to do most of it with the big offshore wind buildout. Now that that is dead, they don’t even have a fake plan.

And also meanwhile, New York City’s statute known as Local Law 97 also remains on the books.

That’s the statute that mandates that all residential buildings over 25,000 square feet convert to electric heat by 2030 — the same year that the State’s Climate Act mandates 70% of electricity generation from “renewables,” of which the large majority can only come from non-existent wind and solar.

Thus we have the city mandating a huge increase in electricity demand by 2030 at the same time that the state is mandating the dismantling of our existing reliable electricity generation with no credible plan to replace it.

Back in 2022, a group of co-op owners and boards in Queens brought a case in the New York State courts seeking to get the City’s Local Law 97 declared invalid as “pre-empted” by the State’s Climate Act. The case goes by the name Glen Oaks Village Owners, Inc. v. City of New York.

Since it started, the case has been tied up in motions and appeals.

Initially, the trial court (in New York we call that the Supreme Court) dismissed the case, finding no pre-emption. However, the Appellate Division, First Department, reversed and ordered the trial court to consider whether there was pre-emption.

Rather than going back to the trial court, the City decided to try to appeal to the Court of Appeals, our highest court, to get the dismissal reinstated. The case has just concluded briefing in that court.

On Friday, my co-counsel Cam Macdonald and I filed an amicus brief in this case on behalf of a group of parties including some co-op owners and a not-for-profit called New Yorkers for Affordable Reliable Energy.

The amicus brief argues that the Climate Act and Local Law 97 are in irreconcilable conflict because the State, via the Climate Act, has no plan or ability to provide the electricity that would be needed to enable compliance with the City’s Local Law 97.

Here is a quote from our Summary of Argument:

The irreconcilability [of the two laws] arises from the simultaneous mandates in Local Law 97 and the Climate Act. First, Local Law 97 mandates that large residential buildings in New York City convert to electric heat by 2030. Meanwhile, the Climate Act requires that 70 percent come from “renewables,” also by 2030.

The latter mandate requires replacing always-available fossil fuel electrical generation capacity with intermittent wind and solar electricity generation, Wind and solar cannot provide continuous electricity supply. Intermittency threatens buildings that have converted to electric heat with losing heat for extended periods in the dead of winter.

The Climate Act, and a “Scoping Plan” developed under it, contain no credible plan to provide the additional reliable electricity needed to heat all large New York City buildings, as Local Law 97 mandates.

I don’t yet have a link for this amicus brief, but I plan to update this post when a link becomes available.

The Court of Appeals has a chance here to save New York City and its residents from their folly. It may or may not take advantage of the opportunity.

If it takes a pass and reinstates the dismissal of the case, Local Law 97 will still fail within a few years at most. It’s just that, in that scenario, a lot of people stand to get hurt.

Read more at Manhattan Contrarian

 

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