“We need to better understand what’s going on and enforce the environmental laws that we have on coal and gas power plants that are operated primarily for the benefit of cryptocurrency operations,” Sierra Club attorney Megan Waxpress said in an interview. .
The New York law “is a really important first step towards getting this information and a greater understanding of how cryptocurrency miners turn coal and gas into bitcoin and what are the implications,” she said.
Environmental groups have lobbied for a temporary hiatus in New York City’s mining of some cryptocurrencies due to concerns that old fossil-fuel power plants will be reconnected to the grid or computers will be fired up to generate income. energy. They also warned that the industry itself may not be compatible with the state’s new climate law, which requires drastic cuts in emissions.
The law does not apply to cryptocurrency mining using energy received from the power grid. Operations may continue at sites large and small in upstate New York, including a former aluminum smelter in Massena, near the Canadian border, and a former coal plant in Somerset, near Niagara Falls.
The partial ban is due to the fact that upstate New York has become attractive to businesses involved in the mining of digital currencies, including bitcoin. The area is full of old power plants and industrial sites with an unused electrical infrastructure that attracts industry.
According to some owners, the law is likely to discourage companies from coming to New York for fear of further restrictions, and this is due to the fact that the digital currency market also collapsed after the bankruptcy of the Bahamas-based cryptocurrency exchange FTX. more uncertainty.
A cryptocurrency mining facility at a former coal-fired power plant near Seneca Lake in Dresden, New York, November 29, 2021. | Ted Shaffry/AP Photo
Cryptocurrency companies are already moving their investments elsewhere, said Kyle Schneps, director of public policy at Foundry. He said the Rochester-based bitcoin mining company had acquired two out-of-state sites and focused its investment on them.
“The perception in the crypto industry now is that New York is ready to use its climate targets to arbitrarily exclude any politically expedient industry,” Schneps said.
“Any cryptocurrency business, whether proof-of-work or proof-of-stake, that is not yet protected by New York’s special crypto laws is unlikely to develop its business in New York under the current conditions because no one knows who might be next on the cutting board. ”
The moratorium bill freed up the only two power plants that currently burn fossil fuels to run cryptocurrency mining machines, excluding those that have already applied for permits.
“The legislation does not affect our operations and we continue to invest and create good jobs at our plant,” said David Vogel, CEO of Coinmint, which operates a 160 megawatt cryptocurrency mining facility in Massena.
The impact of the new law has already affected one company.
Blockfusion, which owns a Niagara Falls cryptocurrency mining operation that is currently out of business due to the city’s order, has lost insurance coverage due to the statewide moratorium, although it remained intact, said CEO Alex Martini-Lomanto. He supported the moratorium but said he should have gone further and banned any fossil fuel power plant from reopening for any reason. Blockfusion, when it was running, ran on grid electricity, mostly hydroelectric power.
“It’s a lot of circus – media and politics, but the effect is very minimal,” Martini-Lomanto said. “This does not change New York bitcoin mining… it is not retroactive. »
Cryptocurrency industry groups are alarmed by calls from conservationists to push the boundaries of the “proof of work” method that underpins Bitcoin, and the desire to take similar action in other countries. Miners compete in a global competition to perform complex calculations that confirm transactions for a reward. This approach is called “proof of work” and the more powerful the mining operation, the more fees it can earn. And that means a thirst for electricity.
“In a way, all the industry’s concerns about this bill and the rhetoric around it were justified,” said Jon Olsen, Albany-based Blockchain Association lobbyist. “It’s not about the environmental impact of work, but about energy consumption and whether that energy is worth spending on a particular operation. »
Chimneys at the Greenidge Generation bitcoin mining facility in Dresden, NY rise above round hay bales on Monday, November 29, 2021 | Ted Shaffry/AP Photo
Greenidge, a former coal plant turned cryptocurrency mine, continues to operate. The state Department of Environmental Protection rejected an extension of the company’s key flight permit in June, but under state administrative law, the plant can continue to operate during calls. Greenidge also wants to renew its water license.
In addition, the Fortistar gas plant next to a residential area in North Tonawanda in Niagara County with storage containers with cryptocurrency miners and fans outside can continue to operate. The facility, acquired by Digihost, a Toronto-based blockchain company, has a Title V flight permit application pending with the state DEC. The application has not yet been recognized by the agency as completed.
No new applications to operate a fossil fuel power plant for cryptocurrency mining will be approved by the DEC in accordance with the law.
The agency also has a large elevator with a short time ahead. The legislation directs the DEC to complete a “general environmental impact statement” by November 22, which addresses a range of issues related to cryptocurrency mining using the energy-intensive “proof of work” methodology at the heart of the Bitcoin trend.
This sets a tight schedule as the law also requires DEC to hold 120 days of public comment and several statewide hearings on the draft of this document.
The law requires DEC to review the number of proof-of-work cryptocurrency mining locations in the state, the amount and sources of energy used, greenhouse gas emissions from operations, and any anticipated increases and potential impacts of mining expansion. The study will also look at water use and public health impacts.
Details of the outcomes and end product of this process may result in the adoption by the state legislature of additional regulations for the industry. For example, a general statement about the environmental impacts of hydraulic fracturing of natural gas was a key step towards banning the practice in New York City in 2014, also a first in the country at the time.
“We’re hoping DEC will recommend a policy … and determine if this particular screening practice should be implemented and is in line with our climate goals,” Moran said of New York City’s goal of reducing emissions by 85% from 1990 levels. by 2050.
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