Not far from the skyscrapers of New York City lies the quiet, scenic Finger Lakes region, known as placid wine country and a destination for tourists. It seems an unlikely venue for a showdown over a cryptocurrency mining venture, but appearances can be deceptive.
Finger Lakes was thrust center stage in the debate over cryptocurrency mining and its carbon footprint last year, and now a bill is before the New York State legislature in the capitol, Albany, that some residents of the region hope will see environmental concerns prevail over the priorities of the currency miners who have set up in the area.
The progress of the legislation will be watched both within New York State and further afield for signs that the crypto-mining industry may face regulatory headwinds in future.
Finger Lakes’ journey to the heart of the state’s debate over crypto mining began in 2018, when the CEO of Greenidge Generation, which had bought a bankrupt power plant on Seneca Lake, concluded that it could profitably mine Bitcoin.
Greenidge ran a pilot test mining project powered by the gas-fired plant the following year before starting a large-scale Bitcoin mining operation in January 2020. Soon after, the company submitted expansion plans to operate up to 30 data center trailers.
That set alarm bells ringing among both the region’s residents and climate activists. In June 2020, a local clean energy activist group wrote to the New York State Public Service Commission, asking it to halt Greenidge’s plan pending a review. The letter said approval of the plan could set an unwelcome precedent allowing loose standards to be applied to other crypto-mining proposals.
Local environmental group Seneca Lake Guardian began sending letters to the state governor, asking for the revocation of Greenidge’s permits in December. It said the Greenidge facility could affect the lake’s aquatic life and increase harmful algae blooms. It also said the Greenidge facility used an old steam turbine that operated at 35% efficiency, little more than half the 65% efficiency of modern turbines, worsening its carbon footprint.
Residents from other counties in New York State have also been seeking regulation of the crypto-mining industry. The legislature in Schuyler County, for instance, postponed a resolution that called on the Department of Environmental Conservation to impose regulations on crypto mining last month.
Also last month, almost 100 protesters demonstrated outside the Greenidge facility, although their voices fell on deaf ears as Greenidge’s expansion plan was given the green light.
Greenidge aims to more than double its mining capacity from around 19MW at present to 41MW by the end of June, and to boost it to 500MW by 2025. It is also set to go public through a reverse merger with homesourcing company Support.com by September.
According to a letter sent to New York’s governor last month by non-profit environmental law group Earthjustice, Greenidge emitted 28,301 tons of carbon dioxide-equivalent in January 2020, when its Bitcoin mining operation started, increasing almost tenfold in the following months to 243,103 tons in December.
Earthjustice estimates that running the Greenidge facility even at its current full capacity of 106MW would lead to emissions of 1,063,024 tons of CO2-equivalent per year — a rate of pollution that could derail the state’s plan to achieve its emission reduction targets. In 2019, New York State passed the Climate Leadership and Community Protection Act, which aims to reduce the state’s emissions by 85 percent and achieve net zero-emissions in all sectors by 2050.
“Among other things, the CLCPA mandates that we reduce total greenhouse gas emissions from all sources in New York State by 40 percent by 2030,” Cornell University Professor Robert Howarth told Forkast.News. “This will certainly require that we use a lot less fossil fuels in the state, including a lot less natural gas. In this context, expansion of the Greenidge facility and other similar facilities that some have suggested for our state is completely incompatible with the CLCPA.”
Howarth is part of the 22-member Climate Action Council, which is set to present its implementation plan for the CLCPA in December, although the plan won’t be finalized until December 2022.
Seneca Lake Guardian Vice President Yvonne Taylor said: “Cryptocurrency mining, especially Bitcoin, powered by antiquated, fossil fuel-fired power plants, will completely negate the bold [greenhouse gas] reductions envisioned by NY Governor Andrew Cuomo in the CLCPA.”
Carbon in the crosshairs
Despite their failure to stop Greenidge, residents of Seneca Lake are “excited” about the bill that has been introduced in the Senate, according to Taylor. The legislation proposes a three-year moratorium on all cryptocurrency mining operations until their environmental impact is assessed by the state. It has been referred to New York’s Environmental Conservation Committee for review.
The bill, whose purpose is to regulate crypto mining to ensure that the state is on track to achieve its CLCPA targets, stipulates that all crypto-mining facilities must undergo a review by the Department of Environmental Conservation. All reviews would include a “cumulative impact assessment” of a cryptocurrency-mining center’s greenhouse gas emissions throughout its projected lifetime, as well as its impact on air and water quality, and on wildlife.
Based on the review results, the department would submit an environmental impact report subject to 120 days of public comment and at least one public hearing in each of New York state’s eight regions.
If the bill is passed, cryptocurrency-mining centers that are found to have a large carbon footprint — such as Greenidge — would not be permitted to operate.
“Residents and decision-makers across NY State are realizing that everything we are doing or have done to fight climate change is meaningless unless we address this energy-intensive industry,” Taylor said. “We’re very excited about this new bill that will involve a comprehensive analysis of the environmental impacts of Bitcoin.”
The bill asserts that crypto-mining operations globally consume as much energy every year as Sweden (Cambridge University research equates the annual global energy consumption of Bitcoin mining to that of Argentina). Any increase in crypto-mining operations in New York State would hinder the state’s compliance with the CLCPA, the bill says.
If the legislation passes, Greenidge will not be the only company it affects. Cryptocurrency miner CoinMint’s 435MW data center is also located in New York, a facility that’s also used by Riot Blockchain, another major crypto miner. However, the environmental impact of the CoinMint data center is potentially lower than that of Greenidge’s, since hydroelectricity comprises part of its energy mix. Greenidge, CoinMint and Riot Blockchain had not responded to requests for comment by press time.
David Yermack, a professor at New York University, says the global crypto-mining industry will not be rattled by the bill.
“Most crypto mining takes place near sources of renewable energy, where the marginal cost of generating power is close to zero,” he says. “That’s not really New York State. I think the impact on the mining industry of this New York bill will be negligible for that reason.”
He adds: “I think much of the environmental concern about crypto mining is overblown due to the economic forces that should cause crypto miners to locate near abundant sources of wind and hydropower. If any crypto mines use too much energy, they can be easily regulated by local governments via taxes or prohibitions, as New York appears to be doing.”
Cleaning up crypto
Although New York is the first U.S. state to take steps towards regulating crypto mining, the industry has faced pushback elsewhere.
In March, China’s Inner Mongolia region introduced draft measures to “clean up and shut down” all crypto-mining operations amid environmental concerns over cryptocurrency mining and in line with Chinese leader Xi Jinping’s sustainability goals.
The law dealt a blow to crypto miners in Inner Mongolia, who had become so reliant on the region’s supply of cheap electricity that they accounted for 8 %percent of all Bitcoin mining worldwide.
In India, cryptocurrencies have long been the subject of a regulatory tug of war, with the country’s central bank adopting a hostile position towards them but the Supreme Court overturning the bank’s attempt to ban trading in them. Lawmakers have been considering an outright ban on private cryptos since early this year.
New York’s crypto-mining bill may be subject to similar countervailing forces. Although Democrats hold a majority in the state Senate, it is unclear where they stand on the bill, according to at least one local news report. However, some residents of Seneca Lake remain hopeful that they will see off the miners.
Taylor said, “If Governor Cuomo is really serious about the CLCPA, he will quickly sign the bill once it reaches his desk,.” says Taylor, of Seneca Lake Guardian.
She says getting the bill passed before the current legislative session ends in June will be an “uphill battle,” but that local residents are “cautiously optimistic.”
In upstate New York, the battle lines over crypto mining have been drawn. In other parts of the U.S., and of the world, they may just be taking shape. However the legislature in the state capitol votes, it’s fair to assume that this carbon conflict with crypto miners will not be the last.