March 25, 2024
State Legislation Alert
As Alarm Grows Over Crypto Mining’s Energy Consumption, Bitcoin Lobbyists Peddle State Bills
Summary
Full text (with examples)
A New “Model” Bill Carves Out Special Protections for Crypto Miners that Can Threaten the Grid and Raise Electricity Rates
Energy-intensive crypto mining has strained local electric grids, raised electricity rates for residents, increased local air and water pollution, and prompted noise complaints from neighbors across the U.S.
A Bitcoin advocacy group, Satoshi Action Fund, published a model bill to shield commercial crypto mining operations from local oversight and fair electricity rates. The model bill (formerly called a “Right to Mine” bill and now rebranded as a “Blockchain Basics” bill) includes:
- A ban on localities enacting zoning and noise ordinances to protect neighbors from the roar of crypto mining operations’ high-velocity fans, which are audible for miles.
- Provisions that would interfere with utility regulators’ oversight of crypto mining, which is necessary to ensure reliable, affordable electricity. The model bill prevents utility commissions from doing their job — setting appropriate electricity rates based on costs, risks to utilities and to the grid, and impacts on other customers.
Crypto Mining Consumes Vast Amounts of Energy and Can Strain the Grid
Proof-of-work crypto mining operations consume vast quantities of energy and often run around the clock. Crypto mining operations may now consume up to 2.3 percent of U.S. electricity, according to the Department of Energy’s Energy Information Administration (EIA). Many U.S. crypto mining facilities draw power from the grid, which often increases emissions from fossil-burning power plants that pollute our air and water, and that contribute to climate change.
The EIA recently reported that crypto mining’s hard-to-predict energy demands threaten to cause brownouts and blackouts during times of peak demand, such as during a cold snap or a heat wave.
In Texas, the state grid operator, ERCOT, warned that crypto miners “exhibited inconsistent behavior during resource scarcity events” that brought the grid perilously close to failure.
Crypto Mining Drives Up Electricity Prices for Everyone Else
Crypto mining facilities often receive discounted electricity rates while utilities can pay millions for upgrades to the grid to serve crypto mines. The utility may need to buy additional electricity from the market, usually at a higher cost, when there may not be enough power generated locally to power crypto mines during peak periods.
Bitcoin mining already raised electricity costs for non-mining Texans by $1.8 billion per year, or 4.7%, according to conservative estimates from consulting firm Wood Mackenzie.
The Kentucky Public Service Commission approved $12.7 million in infrastructure upgrades for Big Rivers Electric to provide service to Blockware Mining in Paducah, and other customers will share those costs.
In Plattsburgh, New York, Bitcoin miners used so much of the city’s cheap hydroelectric power during a cold spell that the city utility was forced to buy more power on spot markets, which raised electricity rates significantly for residents.
The Nebraska Public Power District spent $17.6 million — 18% of its annual capital budget — constructing infrastructure to serve crypto mining facilities in 2020.
Crypto Mines’ Non-stop and Harmful Noise
Crypto mines create significant noise pollution that can severely impact local residents and animals. Many crypto mines use high-velocity fans to cool their banks of computers which creates significant noise, audible for miles. The roar of fans has been compared to standing next to a jet, a running motorcycle, or a highway.
A local farmer in Elk County, Pennsylvania, said, “My family, farm, and businesses have been severely impacted by the constant noise from the site, and it has led to death for some of my animals as well as health issues with my horses.”
A resident of Cherokee County, North Carolina, said it is “like living on top of Niagara Falls.”
A resident of Limestone, Tennessee, said it is “like a jet engine idling on a nearby tarmac.”
Adel, Georgia, residents described the noise as an inescapable drone that is driving many of them crazy. “It’s comparable to torture,” said a city councilor. Another local resident said the noise “sounds like 1,000 hair dryers blowing in unison.”
In Hood County, Texas, local residents have complained about physical and health impacts as well as impacts to livestock: ‘People let us know how it’s impacting their life, with migraines, nosebleeds, vertigo, hearing loss, and seizures.’ — Nannette Samuelson, Hood County commissioner; “Residents have watched in amazement as rabbits, birds, and other wildlife have fled the area to escape the noise.”
Crypto Mines Often Promise Jobs and Economic Development, But Do Not Deliver
Crypto mines do not bring substantial jobs to communities. These facilities require few employees to keep the machines running. Local communities often offer tax abatements or subsidies based on false or undocumented promises of economic development.
In Rockdale, Texas, a crypto mine promised to create more than 300 jobs but only hired 14 people.”
Cryptocurrency-specific tax incentives in Kentucky are estimated to cost Kentucky taxpayers at least $9 million a year in lost revenue.
Fitch Ratings found “cryptomining operations typically bring in very little additional economic benefits in the form of jobs or ancillary business to a local economy.”
Communities Foot the Bill When Crypto Mines Relocate
Communities can be left footing the bill when highly-mobile crypto mines relocate. Adding crypto mines to the grid sometimes requires additional electrical infrastructure, but often nothing stops them from leaving an area if a cheaper opportunity arises somewhere else.
In Washington state, a crypto mining operation declared bankruptcy, leaving more than $700,000 in debt for grid upgrades that were paid for by ratepayers.
In Arkansas, after a utility invested in expensive upgrades on its behalf, the crypto mine left virtually overnight to seek cheaper electricity rates elsewhere.
Crypto Mining Causes Local Air, Climate and Water Pollution
Crypto mining that relies on burning fossil fuels for electricity, directly or indirectly, causes all of the air and water pollution impacts of the underlying method of generating electricity. Air pollution exposure, especially to particulate matter, is estimated to cause 7 million premature deaths annually and result in the loss of millions more healthy years of life around the world. A study published last year found that Bitcoin mining alone has the potential to push the planet past the targets set by the Paris Agreement. Many crypto mining operations use massive amounts of water to power and/or cool their operations, often discharging hot water into local bodies of water, threatening aquatic life.
Riot Bitcoin, located in drought-stricken Navarro County, Texas, will use in peak summer months. Water shortages in 2022 forced ranchers to sell cattle in record numbers not seen in a decade.
A recent study determined that Bitcoin mining in the United States consumed in 2021 as much water as 300,000 households — the equivalent of all the households in Washington, D.C.
Crypto Mining Generates Enormous Levels of Electronic Waste
Crypto mining results in enormous amounts of electronic waste. ASICs, the specialized machines used exclusively in the proof-of-work crypto mining process, have a limited lifespan, and recent changes in the hardware (to mine faster) potentially increase machine turnover and thus the annual amount of electronic waste.
Satoshi Action Fund’s Model Bill Would Deliver Special Protections for Crypto Miners at Our Expense
The model legislation would ban state utility commissions from setting electricity rates for miners that are different from other industrial businesses. But by their own admission, crypto miners act very differently on the grid than most industrial customers, abruptly shutting down for instance, but only when price signals — from electricity markets or crypto markets — are favorable to them. Nearly every state already requires its utility commission to not unduly discriminate and set reasonable rates, to create a level playing field for all industries including crypto mining. There is no need to change the law to favor crypto miners, to the detriment of others.
Crypto miners have frequently found places to operate where they are able to pay significantly less for their electricity than average ratepayers, be they residential, commercial, or industrial. This is why crypto mining operations frequently open in states where they can get economic development discounts or subsidies and/or access to lucrative demand response payments. Establishing specific statutory language that is solely about protecting or privileging crypto miners is not fair, especially when crypto mining already imposes so many costs and burdens on others. In many places crypto mining’s growth was driven by state and local tax breaks, such as property tax abatements, sales-tax and franchise fee refunds or exemptions, incentives on income taxes and wage assessments, grants, loans, and other inducements.
The model legislation would prohibit local noise and zoning ordinances. Communities should be able to protect themselves from crypto mining’s excessive, non-stop noise. These bills would thwart local communities’ right to ensure crypto miners reduce unnecessary noise pollution.[1]
Utilities and electric service providers must be able to protect the grid and other ratepayers from crypto mining’s immense energy demands and unique behavior. Before encouraging Bitcoin operations to proliferate and granting them special rights, we need to consider the impact on our communities, our grids, and on our electricity rates.
[1] A 2024 New York Times article covered some of the consequences of passing a bill like this, which happened last year in Arkansas. They include very angry communities, several lawsuits, and efforts to revoke the law. See also "Safe and Sound: How the Environmental Protection Agency Can Protect Us from Dangerous Noise" from the Center for Progressive Reform.
Earthjustice is addressing the explosive growth of energy-intensive cryptocurrency mining in the United States by challenging harmful proof-of-mining operations through air, water, and solid waste permitting; advocacy at public utility commissions as well as federal and state venues; and highlighting how this industry is negatively impacting utilities, energy systems, emissions, communities, and ratepayers.
