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Critics of crypto-mining operations say the burgeoning industry is not delivering on promises to provide jobs and economic development to rural areas in exchange for cheap power and tax breaks.
Little available data suggests that the companies that use massive, power-hungry data centers, tend to be located in rural areas. Critics say those operations may be harming rural communities more than they are helping.
According to Earthjustice, a national organization focusing on environmental law, crypto mining’s power usage may be increasing pollution. But because the industry is largely unregulated, measuring its impact on the regions where it operates is difficult.
Crypto mining uses large banks of computers to generate crypto currency by solving complex mathematical problems. The work requires lots of processing power and therefore lots of electricity.
Determining how many crypto-mining facilities are in operation is difficult, according to FracTracker Alliance, an organization that documents how crypto-mining facilities use energy.
“Because there is no centralized registry or clearinghouse for this elusive industry, it is challenging, if not impossible, to maintain an up-to-the-minute and comprehensive tally of all the locations, sizes, and other details about where new cryptocurrency mining facilities are emerging,” the organization said on its web site. As of November 2022, the organization said, there were 165 sites across the country — 84 in operation, 41 proposed, seven under construction and two defeated. The organization said the status of the remaining 33 is unknown.
In Kentucky, several crypto-mining operations have sprung up in the last three years after legislation was passed granting them tax incentives. Among those plants are Biofuel Mining in Inez, Cyber Innovations in Belfry, Umine LLC in McKee, Bitiki Mine in Waverly, Core Scientific in Calvert City, and Ebon International in Louisa. All of these locations are in nonmetropolitan (or rural) counties.
The mining operations require the servers to run 24 hours a day. According to the White House, in 2022, the U.S. hosted about 38% of all global Bitcoin mining activity, up from just 3.5 % in 2020. Earthjustice said between mid-2021 and 2022 crypto mining required 36 billion kilowatt-hours of electricity – as much as all of the electricity consumed by Maine, New Hampshire, Vermont and Rhode Island combined. Earthjustice estimates that energy consumption resulted in nearly 30 million tons of excess CO2 emissions in 2022 alone.
Thom Cmar, an attorney with Earthjustice, said because crypto mining doesn’t fit neatly into other categories of industry, it’s not facing the same regulations other industries do.
“They should be subject to all the same standards that apply to any other industry… but because they are such a new type of facility, there isn’t always good regulation, good reporting or information available as to basic facts,” he said in an interview with the Daily Yonder. “We don’t even know how many of these facilities are in Kentucky or in the United States because there’s no agency that’s clearly charged with tracking that information, let alone reporting it, to the public.”
According to the Texas Tribune, a nonprofit news organization based in Austin, rural counties in the Lone Star State started courting cryptocurrency miners in 2022. Around 30 have located in Texas in the past 10 years, according to the state’s comptroller. Dozens more have expressed interest, the Tribune reported.
One of those operations, London-based Argo Blockchain, wanted to build its facilities in rural Dickens County because it offered what Argo was after – plenty of open land and easy access to affordable power. The crypto-mining company opened a 125,000-square-foot facility in May of 2022 and hired around 20 locals, according to Mitchell Ferman’s reporting in the Texas Tribune. Tax revenue from Argo Blockchain allowed Dickens County, with a population of 1,700 residents, to cut property taxes, give county employees raises and fund investments in infrastructure and law enforcement, the Texas Tribune reported.
“The end result is enhanced services to the community,” Kevin Brendle, the county judge, told the Tribune. “We’re going to be able to do a better job of serving them, and we’ll be able to be competitive in our wages.”
But environmentalists like Josh Bills with the Mountain Association in Berea, Kentucky, worry that the environmental impact may outweigh the benefits. Bills said in an interview with the Daily Yonder that recent legislation in Kentucky exempted crypto-mining facilities from sales tax on their purchases of equipment and electricity. Additionally, he said, the Kentucky Public Service Commission is looking to add more subsidies to the industry by providing them with discounts to their electricity rate in the name of economic development.
In many cases, Cmar of Earthjustice said, discounts and subsidies are given in exchange for jobs. But the facilities create fewer jobs than a fast food restaurant, he said.
“We’re talking about potentially millions of dollars in subsidies for these facilities,” Cmar said. “It’s not normally a good idea for a rural community to be offering millions of dollars to a McDonald’s, so why would it be a good idea to be offering it to a facility that’s also going to be a massive user of electricity and put stress on the electric grid? The value proposition is just not there for communities.”
More stress on the power grid, Cmar said, means more investments into transmission lines. Additionally, it could mean keeping older power plants online that would have been replaced with lower-pollution technology.
Cmar cited a case in Sullivan County, Indiana (located on the outskirts of a small metropolitan area along the southwest border with Illinois). In Sullivan County, a crypto mining facility moved in across the street from a coal-fired power plant that was slated for closure because it was no longer needed. When the crypto plant moved in, the plant stayed open solely to power the crypto mining operation, he said.
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“There have been a few other examples of this in different states throughout the country,” he said. “Coal-fired power plants are the largest polluters, not just from a climate perspective but also from a from a toxic air and water pollution perspective, and they’re being kept online for years after their otherwise useful life because of these crypto-mining facilities setting up shop right next door to take advantage of places where they can find quick access to cheap energy. And it’s slowing down the process of transitioning away from fossil fuels.”
Lee Bratcher, president and founder of the Texas Blockchain Council, said crypto mining operations may be loud, but they are not pollution generators.
“Bitcoin mining facilities are similar to data centers in that there are no direct, Scope 1 emissions from the computers,” he said in an email interview with the Daily Yonder. “The air that comes out of the machines is the same as the air that went into them. So there is no truth to the claims that these machines directly contribute to air pollution or water pollution.”
Bracher said that the mining facilities use less than one-tenth of global energy consumption and much of that is from renewable sources.
“Bitcoin miners use a higher percentage of renewable energy than any other major power user with estimates ranging from 40%-58% of total bitcoin mining being from sustainable electricity,” he said.
And, he said, the mining operations bring in economic development at many levels.
“We’ve consistently observed an uptick in employment opportunities in the areas where bitcoin mining operations are established,” he said. “Economic impact analyses suggest that there are over 2,000 Texans employed directly at bitcoin mining facilities in rural areas of the state and there have been an additional 20,000 indirect jobs created in those communities as a result of this economic catalyst. These aren’t just transient or temporary positions; they’re often full-time roles with competitive benefits contributing to the livelihood of local residents.”
But without knowing who they are and where they are, it’s difficult to determine what they are doing and whether they’re living up to their claims, critics said.
Lane Boldman, director of the Kentucky Conservation Committee, said that having more information about crypto mining facilities – where they are located, how they are procuring their energy, and how much energy is being used — is a step in figuring out how to better regulate them.
“For the ones that are grid-tied, we can learn more about those operations if there is an application review on any special energy discounts, but that is not the case with all operations,” she said. “Some of these operations can be very small and dispersed. Some can procure their energy from old oil and gas wells for example, and can set up shop almost anywhere where there is a reliable energy source and access to the internet.”
Knowing where they are would help communities battle the impact the facilities can have, like noise and water pollution, Boldman said.
“A lot of times these operations are set up in rural communities without adequate planning and zoning, so we know of areas that have set up shop and then we receive calls from adjacent landowners who have been immediately impacted by the noise, for example,” she said.
Lastly, Boldman said, power usage by the crypto-mining facilities may cause utility rate increases for those who can afford it the least.
“Our biggest concern is with the high-energy use of these operations in areas where energy prices are already high or the communities are impoverished,” she said. “We’re burning huge amounts of energy that does not produce anything. This increased load on the grid has created issues in certain regions and has led to increased energy prices.”
Currently, state and federal officials are working on how to regulate the industry. Several states are looking into the industry, officials said. Among them, New York has moved to put a two-year moratorium on any new crypto-mining permits as the state studies the impact the facilities have on the state’s efforts to reduce its greenhouse gas emissions.
And in Kentucky, the Kentucky Public Utilities Commission rejected a proposal from Kentucky Power to give millions in energy price discounts to a planned crypto-mining facility in Louisa for Ebon International which is proposing a 250 MW facility. Kentucky Power has proposed delaying the closure of the Big Sandy gas plant until 2041 to serve the crypto-mining plant, while increasing rates for residents by as much as 18 percent.
This March, U.S. Sen. Edward Markey (D-Mass.), chair of the Senate Environment and Public Works (EPW) Subcommittee on Clean Air, Climate and Nuclear Safety introduced the Crypto-Asset Environmental Transparency Act earlier this year. That bill would require crypto-mining companies to disclose their emissions and for the Environmental Protection Agency (EPA) to investigate crypto mining’s impact across the country.
“The crypto industry is growing, and so is a plume of pollution around their mining facilities,” Senator Markey said in a statement. “While we’re working together as a nation to face down an existential crisis that puts the health and safety of our people and our planet in jeopardy, crypto miners are sucking megawatt after megawatt from our public grids and emitting skyrocketing greenhouse gasses, just so they can make a buck for themselves. We can’t afford to let this industry run roughshod over our communities any longer.”
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by Liz Carey, The Daily Yonder
October 9, 2023
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