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Cryptocurrency industry fights proposed NY moratorium. Here is what's at stake. – Yahoo News

ALBANY, N.Y – New York is a burgeoning industry for Bitcoin due to its cheap energy and shuttered coal plants. But environmentalists and key state lawmakers are not bullish on its future.
In fact, they want to ban it.
Lawmakers in New York who head powerful energy committees are pushing for a three-year moratorium on permits for power plants that burn fossil fuels to mine Bitcoin, a measure that would be the first of its kind in the nation and may be a precursor to regulatory actions by Congress.
The narrowly targeted measure focuses on gas plants selling or providing electricity directly to cryptocurrency miners who solve complex math problems to validate transactions and earn Bitcoin or other digital currencies.
Despite that focus, the industry is warning that the proposed moratorium would lock New York out of the benefits of an innovative new technology, which has led to massive facilities dotting Upstate New York that were once solely power plants.
“In the tech space, three years might as well be three centuries,” said Kyle Schneps, director of public policy for Foundry, a cryptocurrency company based in Rochester. “A statewide moratorium that has vague language and captures companies that use mostly renewables is a mistake.”
The fight in New York could be a bellwether for the nation.
New York appears to be a leading state for cryptocurrency mining, with multiple companies setting up shop in communities across upstate where cheap hydropower is readily available. While holistic data is limited, Foundry — which runs a large Bitcoin mining pool — says 20 percent of its American mining is done in New York.
The issue in New York dovetails with the debate nationally as Congress is also taking notice of the energy use for some cryptocurrency mining operations and mulling potential actions.
The “proof of work” process underpinning several digital currencies including Bitcoin is energy intensive, requiring large amounts of computing power. The primary ongoing cost input after hardware installation is electricity prices.
Upstate New York has proved an attractive location for cryptocurrency mining, with companies taking advantage of low-cost hydropower, cheap land and underused transmission infrastructure.
Some companies have also pursued a more novel approach: converting old fossil plants that might be called on by the state’s power grid only a few times a year to run more frequently to fuel mining machines.
The trend has alarmed environmental groups and residents near the plants. A moratorium cleared the state Senate last year in the final days of session, but fell short in the Assembly amid opposition from a key labor union.
In a statement, Hochul's office said it would review the legislation and stressed its support for protecting the environment.
"Governor Hochul is taking bold, nation-leading actions to confront climate change head-on, and DEC (the Department of Environmental Conservation) is actively reviewing proposals regarding the role of cryptocurrency mining in New York's energy landscape, especially in light of the Climate Leadership and Community Protection Act," the state's climate law mandating steep emissions reduction over the next three decades, spokesperson Madia Coleman said in a statement.
"We will work with the legislature on these concerns and review the [cryptocurrency moratorium] legislation."
Environmental groups backing the moratorium including Earthjustice, the New York Public Interest Research Group and Sierra Club, warn that unchecked cryptocurrency mining endangers the state’s climate goals.
Even if the mining operations buy renewable energy, that will leave less electricity to power the state’s existing and future needs as more aspects of daily life rely on electrons rather than burning gas, they argue.
But the concerns and the push for a moratorium run contrary to the New York City Mayor Eric Adams' wholehearted embrace of cryptocurrencies. The mayor even converted his first paycheckto Ether and Bitcoin, adding a transaction to be validated using the energy-intensive process environmentalists are decrying.
Assemblymember Anna Kelles (D-Ithaca) said she’s optimistic about getting a moratorium passed this legislative session, pointing to both the Assembly and Senate holding events focused on the issue since last year.
“It’s an absolute priority,” said Sen. Kevin Parker, who carries the measure in that chamber and is the Energy Committee Chair.
“Anything that does not fall in line with the [climate law] can’t continue to operate and so no one has made an argument to me from the crypto side that their projects are sustainable.”
Kelles emphasized that she’s not looking to block the cryptocurrency industry or the use of blockchain, but solely targeting “proof of work,” which requires the solving of complex calculations to validate transactions and earn a fee.
An alternative known as “proof of stake” where coin owners put up collateral for a chance to validate transactions and earn fees is less energy intensive, but has faced some criticism for potentially being less secure. Ethereum, which supports another popular cryptocurrency, is moving toward a “proof of stake” protocol this year.
Kelles and many environmental supporters had initially wanted a broader moratorium on all new cryptocurrency mining operations in New York, particularly as some residents in places where the mining would occur raised opposition.
“If they are connected to the grid and they’re pulling energy from the grid then they are adding to our dependence on fossil fuels,” she said. “I do not see cryptocurrency mining as part of the solution for climate change given the magnitude of energy consumption.”
But Sen. Todd Kaminsky (D-Nassau), who chairs the Environmental Conservation Committee, is not persuaded by arguments about cryptocurrency mining using up renewables. He said the “spirit” of the Kelles/Parker bill "rings very true."
“The idea of saying no more crypto mining in New York, I think would be a catastrophe,” Kaminsky said. “There's no doubt there has to be a future where there is not increased fossil fuel use because of crypto mining. The question is how can we get there, how can we work with industry, with the business community in doing so, so that it is not seen as being the state slapping down an industry that no longer wants.”
The Kelles/Parker bill includes a requirement for the state Department of Environmental Conservation to conduct a study of the environmental impacts of existing and potential future cryptocurrency mining operations in the state within two years. Kelles said that could drive additional regulations.
“A moratorium on fossil fuels is a common sense first step, but we would like to see the state go farther and evaluate the potential environmental harms of the industry as a whole,” said Liz Moran, a policy advocate for Earthjustice.
Despite compromises struck to narrow the bill’s focus, Kelles said she’s not surprised by the industry pushback.
“This is the first bill in the country that would put any regulations on mining,” Kelles said. “The intention is to prevent any opening of the door to any environmental regulations… If that door is opened and that precedent is set, the concern is other states would follow suit.”
One company that would likely be impacted by the moratorium already has an operational Bitcoin mine in the Buffalo area at an old automobile parts manufacturing plant.
Digihost International also has equipment in place to run a 60 MW gas plant in North Tonawanda to power cryptocurrency mining rigs — all they need is the final sign off on the sale of the plant from the state’s Public Service Commission.
“We’re waiting with the plug until we get approved,” said Nick Williams, the in-house counsel at Digihost.
Williams said the company has been scouting other potential sites in New York, but the moratorium puts that into question.
The North Tonawanda plant in Niagara County in Western New York meets DEC emissions regulations, he said. The plant’s Title V air permit, which addresses emission standards, expired last year and an application for a renewal has been submitted in a timely manner, according to DEC.
Williams said the company has contracts in place for renewable natural gas injected elsewhere into the pipeline system to supply the North Tonawanda plant. That’s an interim solution, he said, but one that starts to reduce carbon emissions.
The state should focus on applying existing environmental regulations to cryptocurrency companies, not a moratorium, he said.
“These environmental controls are very important but you don’t want to freeze an entire industry while you figure out how to apply them,” Williams said.
The industry argues that cryptocurrency mining can provide extra revenue for aging fossil fuel generators to keep them online to supply backup power when renewables aren’t available.
They can also incentivize renewables that otherwise would not run or be profitable because of transmission constraints or low demand. Cryptocurrency machines are also getting more efficient, even as the calculations get more demanding, they say.
A pioneer of using fossil fuel plants to mine Bitcoin is the Greenidge power plant near the shores of Seneca Lake. A private equity firm bought the coal plant after it was closed, converted it with government assistance to run on natural gas in 2017 and then started mining Bitcoin in 2020.
After public outcry over the increased runtime and emissions at the plant, the company committed to buying carbon offsets for all the gas it burns.
New York’s climate law prohibits offsets for electricity generation to achieve the state’s emissions reduction goals. The landmark law also sets a mandate of carbon free electricity by 2040. But because the plant runs “behind the meter” to power cryptocurrency mining, the Public Service Commission has limited regulatory authority over the emissions of the plant.
The state is currently scrutinizing a renewed permit for Greenidge, which advocates are urging the DEC to reject. The legislation may be too late for opponents of the project, but they’re pushing Hochul to institute her own prohibition and drawing a parallel to the fracking fight.
Former Gov. Andrew Cuomo banned hydraulic fracturing in New York in 2014.
“If we’re going to achieve our climate goals, this bill absolutely has to be passed,” said Yvonne Taylor, the vice president of Seneca Lake Guardian who resides on the lake. “Right now this is a town by town fight and these guys are throwing around lots of money.”
Even cryptocurrency companies that say they don’t own or contract with fossil fuel plants are concerned about the proposed moratorium.
Foundry, which is based in Rochester where its CEO is from, employs about 90 people. The company provides infrastructure and support for mining, offers financing and runs a distributed “pool” of miners, among other activities.
Schneps said he’s concerned the moratorium could capture companies that rely partly on fossil fuels now but are working toward reducing carbon emissions. “A lot of companies… need to rely a little bit on other sources,” he said.
“The cryptocurrency industry is not trying to ask for any special treatment, we’re trying to have equal treatment,” Schneps added. “Just because we’re new doesn’t mean we shouldn’t have the same access to energy as other industries.”
The current version of the legislation specifies that the moratorium would apply to new or renewed permits for fossil plants providing electricity “behind the meter.” That means it would only impact miners co-located at a fossil plant, not cryptocurrency companies pulling electricity from the grid — even if most of the electrons they buy were produced with fossil fuels.
Hochul’s administration has been largely opaque on the issue of cryptocurrency mining.
The DEC and Public Service Commission declined to appear because of pending permit decisions at an Assembly hearing on the issue in October. Assemblymember Steve Englebright called the no-shows “disrespectful.”
Nansen, a blockchain analytics platform, has released its 2021 ‘State of the Crypto Industry Report’ showing crypto has gone multi-chain, with attractive yields and digital collectibles.
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