At a public hearing on cryptocurrency mining last week, members of the Assembly seemed to emerge with two imperatives. First, determine whether the practice of mining Bitcoin has harmful environmental effects that warrant regulation of the industry, and second, explain to New Yorkers what the hell cryptocurrency mining is.
For those who don’t regularly pore over Bitcoin blogs, cryptocurrency mining might be a foreign term – something Assembly Member Pamela Hunter reminded her colleagues and panelists of at Wednesday’s hearing. Despite its name, cryptocurrency mining does not actually involve mining the earth for coins. In basic terms, it involves thousands of computers stored in warehouses competing around the clock with other computers in other warehouses to solve puzzles that allow them to unlock new digital currency like Bitcoin as they’re released into circulation.
Why should crypto-wary New Yorkers care? Because Bitcoin mining is already happening in the state. Cryptocurrency mining has been steadily gaining the attention of lawmakers and environmental activists who are concerned about the climate costs associated with the massive amount of energy required to power the specialized computers that make up the mining operation in this particular method, known as “proof-of-work.” An analysis by The New York Times found that mining Bitcoin consumes more electricity annually than Finland. (Yes, the whole country.)
The purpose of last week’s Assembly hearing was to hear testimony on whether the proof-of-work method of Bitcoin mining hurts New York’s ability to meet goals to reduce greenhouse gas emissions, and whether action to regulate the practice is needed.
One such site near Seneca Lake doing proof-of-work cryptocurrency mining currently relies on its own converted natural gas power plant to fuel its work. The site is the subject of scorn among some local residents and activists across the state who argue it and other sites like it contribute to air and noise pollution, water quality issues and electronic waste.
The future of that mining site is currently in the hands of New York state and its 2019 blockbuster climate law, the Climate Leadership and Community Protection Act. Greenidge Generation, which runs the plant in Yates County, is in the process of applying for air emissions and acid rain permit renewals from the state Department of Environmental Conservation. If the department finds that the site does not comply with the state’s climate law – and the greenhouse gas reduction goals it contains – and denies the permit renewals, it could set a precedent that keeps similar cryptocurrency mining sites from cropping up around the state.
That’s the outcome that some lawmakers, environmental groups and residents hope for. And a separate decision by the department last week – to block permits for two new natural gas power plants on the basis that they wouldn’t comply with the CLCPA – might bode well for those hoping that the state denies the permit renewals for the Bitcoin mining plant too. “Obviously the ruling for Danskammer and Astoria is – I don’t want to say promising – but it was definitely encouraging,” said Assembly Member Anna Kelles, referring to the blocked proposed plants, Danskammer Energy Center in Newburgh and the Astoria Gas Turbine Power plant in Queens. Those plants were not planned to be used for Bitcoin mining, but the concerns about harmful environmental effects associated with them are some of the same ones that are raised with Bitcoin mining plants.
In a statement earlier this month, the department said that Greenidge, the cryptocurrency mining site, has yet to demonstrate that it complies with the CLCPA, including the greenhouse gas reduction goals the law contains. The state is required under the law to reduce greenhouse gas emissions by 40% of 1990 levels by 2030 and by 85% by 2050. Still, the DEC has not yet made a final decision on whether to grant or deny a renewal of Greenidge’s air emissions permit. Greenidge, meanwhile, maintains that the site does comply with the CLCPA. “We support the CLCPA's goals and will continue to do our part to help the state meet them,” a spokesperson for Greenidge wrote in an email. “Importantly, even if our facility were to run at its full permitted capacity, our potential emissions equate to only approximately 0.23% of the state’s greenhouse gas emissions reduction target for 2030 under the CLCPA.” The company also notes that a portion of the power generated at the plant is provided to the grid and announced earlier this year that it is carbon neutral thanks to voluntary purchases of carbon offsets.
If the department denies the plant’s permit renewal, it won’t block new cryptocurrency mining sites outright, but it could set a precedent for others hoping to set up shop in New York. “Other applications can be brought forward, but I think that the message is clear to them that unless they can clearly outline that their plan aligns with the CLCPA, they can expect a similar response,” Kelles said.
Russ Haven, general counsel at the New York Public Interest Research Group, testified at last week’s Assembly hearing that proof-of-work cryptocurrency mining threatens the state’s climate change goals. Haven said the DEC’s decision to block those two proposed power plants is not only a monumental ruling on its own, but signals the steep hill that power plants turned Bitcoin mining operations face in demonstrating that they can comply with the climate law. Other activists have pointed out, however, that permits for proposed new power plants might be easier to block than the renewal of permits for an existing site like Greenidge.
But the Greenidge site is just one location, and last week’s Assembly hearing highlighted more sweeping steps some lawmakers are pushing to keep other power plants from being converted to mine Bitcoin. A stalled bill from the last legislative session would enact a moratorium on businesses that use this kind of energy sucking proof-of-work method for cryptocurrency mining. State Sen. Kevin Parker sponsored the bill in the Senate, where it passed at the end of last session, but it failed to advance in the Assembly, where Kelles carried it. Environmental advocates want to see that bill passed.
The bill, and other efforts to regulate cryptocurrency mining, face opposition from business groups and the International Brotherhood of Electrical Workers who say the Bitcoin mining plants create jobs and bolster the state’s technology industry. The Parker/Kelles bill would put a moratorium only on plants that use the proof-of-work method of cryptocurrency mining. Kelles rejects the notion that passing the bill would shut down the Bitcoin business in New York, noting that there are other methods of mining that are less energy intensive.
Though it failed to advance this session, Kelles’ bill – and scrutiny of the Bitcoin mining industry – may get more attention in the next legislative session. “The fact that this hearing even existed on this topic is an indication that there is a tide shift in people’s understanding not only of cryptocurrencies, but specifically, the negative environmental impacts of the proof-of-work validation method, as opposed to the other forms of validation,” Kelles said.
As for the Greenidge site, the DEC’s public comment period is open until Nov. 19, at which point the department will review the comments and either make its determination on whether to renew the permit, or request additional information and hearings.