A few days before the close of the New York state legislature on June 2, the fate of Assembly Bill A7389C seemed certain: Despite passing in the Assembly about a month prior, the bill was never assigned to the calendar of a crucial committee it needed to go through before going to a vote in the state Senate. Its odds of becoming law looked incredibly slim.
But legislative officials knew they had enough Senate votes for the bill to pass. So, constituents made phone calls, supportive legislators pressed their colleagues, and with just a few hours to go before the legislature closed for the year, the bill passed in the state Senate. In the wee hours of the morning on June 3, the New York state legislature passed the first moratorium on fossil-fuel powered proof-of-work cryptocurrency mining of any kind in the country. “Hundreds of people calling by the hour every day for the days leading up to the final hours of session proved to legislative leadership how concerned New Yorkers were,” New York state Assembly member Anna Kelles, sponsor of the bill, told The Daily Beast in an email. “The voice of the people was the most important factor in driving this bill over the finish line.”
Members of the cryptocurrency industry see those final hours differently: as a swift, surprising move that puts New York on path toward eliminating their sector entirely.
“Our efforts to secure enough votes in opposition to the bill were essentially thwarted,” John Olsen, New York state lead of the Blockchain Association, told The Daily Beast. “We were certainly surprised … between being told that this bill is likely not going to move, to 24 hours later, it’s on the Senate floor.”
The bill now sits with Gov. Kathy Hochul, who has yet to signal a commitment to either signing or vetoing it. At contest is the emissions footprint of a form of digital currency mining that environmental advocates, including Kelles, say is fundamentally at odds with New York state’s climate goals. In 2019, the state committed to a landmark set of environmental targets when it passed the Climate Leadership and Community Protection Act (CLCPA)—including one to limit its emissions by 85 per cent by 2050 from 1990 levels.
But the possible proliferation of Bitcoin mines that are powered by fossil fuel plants would thwart any efforts to reach this commitment. The state is home to 49 retired power plants that could be brought back to life with little difficulty. Kelles and her counterparts fear those plants look attractive to an industry that, by nature of its setup, has exponentially growing energy needs.
Major cryptocurrencies like Bitcoin and Ethereum are currently validated through a system called proof-of-work, which tasks miners to compete against each other to solve a guess-the-number style algorithmic puzzle with random, brute force attempts. The winner earns the right to mine a new token.
At one point, mining Bitcoin in this fashion could be done on a laptop; today, entire facilities are devoted to it, collectively amounting to a carbon footprint larger than entire countries. Mining a single Bitcoin is estimated to have the same environmental impact as millions of visa transactions.
For years, most of the world’s major crypto mining operations were run out of China, and were powered by hydroelectricity. But the country’s crackdown on mining shifted many to move their crypto mines to the West. A growing number of mines in the U.S. are expanding their operations by latching onto sources of cheap fossil fuel power, notably in areas where old infrastructure is available for the taking. This includes sites where orphaned oil and gas wells spew methane, active drill rigs flare stranded natural gas, and struggling power plants are perched, with their equipment, waiting for a lifeline—all sitting ducks for crypto companies looking to get ahead as affordably as possible.
One of those setups exists in Dresden, New York. The Greenidge Power Plant, formerly a coal-powered facility, was decommissioned in 2011 when its owners went bankrupt. A few years later, private investment and equity firm Atlas Holdings came along, purchased the plant, and, as reported by Grist, earned state grant funding to convert the plant to run on natural gas. Atlas reopened the plant in 2017, and two years later began using it to mine Bitcoin.
With the 2017 permits came the right to withdraw 139,248,000 gallons of water per day from the nearby Seneca Lake through an intake pipe that sucks in both wildlife and water indiscriminately; to discharge it back into the lake at 108 degrees Fahrenheit; and to emit 641,000 tons of greenhouse gasses per year—all while the machines whirr 24/7.
Save one pending permit application, Greenidge is the only plant of its kind currently operating in the state, and would be grandfathered in by the bill, and thus wouldn’t be affected. But according to an analysis by Cornell University engineer Anthony Ingraffea, who testified against cryptocurrency mining in the state assembly last October, there are an additional four former coal-fired power plants upstate like it. Should they all be converted to proof-of-work crypto mines, their collective yearly emissions footprint would constitute eight per cent of the allotted 254-million metric tonnes of greenhouse gas emissions the state is aiming to limit itself to by 2030.
That possibility is a real one if the state neglects to step in, he argued in his testimony, because the increasing complexity of proof-of-work for crypto mining requires more powerful (and more energy-intensive) technology over time.
“If the governor and the DEC of New York say, ‘yep, go ahead, Greenidge, fire back up,’ then the door is open,” Ingraffea told The Daily Beast. “How are they going to say no to anybody else?”
Ingraffea notes that there are other methods of validating blockchain transactions that are less energy intensive that the bill does not target. All forms revolve around what’s called a “consensus mechanism,” or the pathway through which a decentralized community decides who has the right to validate new transactions and add blocks to the blockchain. The proof-of-work mechanism affords the right to mine coins based on the amount of computation effort a user has expended. Another called proof-of-stake affords this right based on how much stake a user has in the currency, or, how much they currently own. Yet another, called proof-of-authority, does so through a user’s identity, or existing reputation.The latter two methods could exist harmoniously with New York’s climate commitments.
But according to Olsen, Bitcoiners feel they are being unfairly singled out by the new bill.
“Based on how the bill was introduced, and the rhetoric from proponents, this really is an anti-crypto bill over a climate protection or environmental justice policy,” Olsen said. “I think the main narrative for the proponents became, ‘well, we have all these decommissioned plants, so naturally, industry is just going to start snatching them up and start these new operations.’ When, generally, Bitcoin miners try to use the lowest form of carbon output and seek to use renewable sources.”
Liz Moran, New York policy advocate for Earthjustice, an environmental law firm that pushed for the legislation, believes this argument is circular: “[Crypto miners] constantly say they aren’t planning to purchase fossil fuel power plants,” she told The Daily Beast. “So if that’s the case, why do they have a problem with this moratorium?”
But Olsen, and others in the crypto sphere who assailed the bill in the weeks before its passing, say, regardless of tangible impact, the bill sends an unwelcoming signal to the industry, which has recently nestled in New York. The state is responsible for nearly 20 percent of Bitcoin mined in the nation. Regulations will only communicate to the parties who make up that percentage that they’re not welcome here.
Olsen is notably spooked by the language of a previous version of the bill that failed, which called for a three-year moratorium on all cryptocurrency mining. This year’s bill is much narrower: Crucially, it does not regulate other forms of mining beyond proof-of-work, nor does it regulate mines that plug into the state’s grid, for which the most prevalent fuel source remains natural gas, according to the Energy Information Administration.
But Olsen fears that future iterations of the bill, drafted after the state Department of Environmental Conservation completes a generic environmental impact statement on cryptocurrency operations that AB7389C mandates, could be broader in scope. In that case, he believes, Bitcoiners would just relocate, and the industry’s overall emissions would remain untouched.
“It does nothing to prevent emissions beyond New York’s borders,” he said, noting that the bill’s primary effect is in its messaging, that “the energy intensity of Bitcoin mining has no place in New York.”
“This really is an anti-crypto bill over a climate protection or environmental justice policy.”
— John Olsen, Blockchain Association
Supporters of the new bill admit that it is, in its narrowness, largely symbolic—but its symbolic nature is both a weakness and a strength. Having created a viable legislative pathway to placing a moratorium on the highest-emitting method of validating block transactions, advocates in New York are hopeful that the bill will send a message to other states vying for something similar, perhaps laying the groundwork for more widespread legislation.
“Even if we’re successful in New York on a moratorium of this practice, the miners will just pick up their machines and go somewhere else where there’s no regulation,” said Yvonne Taylor, co-founder of Seneca Lake Guardian, an advocacy group dedicated to environmental protection in New York’s Finger Lakes region. “There needs to be federal regulations as well.”
A teacher and seventh-generation resident of Dresden, Taylor has spent the last year pushing the New York State Department of Environmental Conservation to deny a key permit renewal that Greenidge power plant would need to continue operating. That’s on top of working full-time—she’s a “school teacher by day and a volunteer activist every other waking moment,” she told The Daily Beast—and supporting Kelles’ legislation for a limited proof-of-work moratorium. With one victory under her belt, she’s now turning her attention to taking her fight nationally.
“My spring break, just this past April, I traveled to different communities in West Virginia and South Carolina, to meet with people there and talk to them about how they’re being negatively impacted by crypto mining,” Taylor said.
“They oftentimes are enamored by the promise of jobs and revenue and just welcome [crypto miners] with open arms. Only later to discover that those promises made aren’t kept, and there are a lot of negative implications.”
— Yvonne Taylor, Seneca Lake Guardian
These trips were in service of a national coalition Taylor is building against fossil-fuel powered proof-of-work mining, which includes input from groups in East Tennessee, where “at least eight cryptocurrency mines,” per local broadcaster WBIR are drawing the ire of residents, and Cook County, Georgia, where noise pollution from Blockstream mine is affecting quality of life. She says their stories are “hauntingly similar.”
“These crypto miners come in under the guise of being a data center,” she described. “The town decision makers aren’t really well equipped to understand what’s really coming. And they oftentimes are enamored by the promise of jobs and revenue and just welcome them with open arms. Only later to discover that those promises made aren’t kept, and there are a lot of negative implications.”
Had New York’s bill not passed in the legislature, its executive branch could’ve passed one on its own, a white paper from the Columbia University Sabin Center for Climate Change Law laid out in March. It’s the same authority that former Governor David Patterson employed when he passed a limited moratorium on hydraulic fracturing in 2010; it was also the first state to do that, and within three years, at least 400 cities and municipalities in more than 20 states had passed similar ones.
But Taylor said she can’t celebrate the moratorium until it’s passed into law, a contingency that seems increasingly wobbly as state Hochul has waffled on a decision to do so. The governor told reporters on June 7 that she would be “looking at the bills very, very closely,” over the next six months, which could drag out to her gubernatorial election in November. Most recently, New York City Mayor Eric Adams urged her to veto the bill.
The crypto industry is aggressively pushing her to do the same. The weeks before the moratorium’s passage in the senate saw Hochul’s campaign for governor receive thousands of dollars of donations from crypto groups. At least $40,000 came in from Ashton Moniat, CEO of Coinmint, which operates a crypto mine out of a former aluminum plant in Massena, New York.
Perianne Boring, founder and president of industry group the Chamber of Digital Commerce, called the bill a “significant setback for the state” in a statement issued before it passed. (New York State lobbying records show that the Chamber spent at least $6,500 on lobbying in the state in 2021; per OpenSecrets, it’s spent more than $200,000 on lobbying at the federal level this year alone.)
“Our sincere hope is that Governor Hochul will see the devastating effect this moratorium will have on New York and not sign this bill,” the statement reads.
Other cryptocurrency pundits have joined a chorus echoing resistance to the moratorium. Foundry, a mining company headquartered in Rochester, issued a statement on June 3 expressing its disappointment with the bill. Ethereum founder Vitalik Buterin tweeted the following day his opposition to a ban on proof-of-work mining.
But Kelles, author of the bill, remains steadfast in her commitment to seeing it passed into law.
“It has been estimated that proof-of-work cryptocurrency mining alone could put us over the 2.0 degree centigrade increase in global temperature, a tipping point for runaway climate change,” Kelles said. “We simply cannot afford to allow proof-of-work cryptomining to endanger New York’s efforts to reduce greenhouse gas emissions and meet our climate goals.”
The post New York State’s Crypto Mining Ban Means a Foggy Future for Bitcoin and Others appeared first on The Daily Beast.Last Update: Wed, 15 Jun 22 20:47:10