Environment VS Profits, Where Will Crypto Mines in New York State Go?

This article is from decrypt.co and translated by Distributed Capital

Many places in China, such as Xinjiang, Gansu, and Inner Mongolia, announced a ban on Bitcoin mining. After many miners prepared to move overseas, some foreign regions also expressed concerns about Bitcoin mining. From an economic perspective, Bitcoin mining can bring good news to economically stagnant regions, promote employment and increase tax revenue. From an environmental perspective, Bitcoin mining has excessive carbon emissions, which is a burden on the environment.

The United States has always been a country where multiple forces compete with each other - governments (state governments, federal government), enterprises, non-governmental organizations, etc. Currently, Bitcoin mining in New York State has been protested by environmentalists, and the confrontation between the parties is in a stalemate. The phenomenon in New York State seems to be a microcosm of the current global mining industry.

The Finger Lakes region is one of the most beautiful areas in New York State, but its natural beauty masks the pain of a region hit hard by industrial decline. Now, some people are introducing a new industry: Bitcoin mining. Bitcoin mining provides people with the opportunity to create digital wealth, but this move has also aroused strong opposition from environmentalists.

Finger Lakes, USA

Greenidge Generation is at the center of this fight. The company was founded in 1937 as a coal-fired power plant, but recently switched to using cleaner natural gas to mine Bitcoin and says it complies with all New York State environmental regulations. Environmentalists claim that Greenidge's equipment not only harms the earth's environment, but could also be a fatal blow to New York State's climate.

Impact on the environment

This conflict in New York State has attracted the attention of the global media. Although Greenidge currently only mines 4 bitcoins a day, it has become a target of public criticism. Public opinion claims that the current environment advocates energy conservation and emission reduction, and Bitcoin is an unnecessary waste of energy.

Greenidge Generation describes itself as a bitcoin mining facility that runs on natural gas 24/7 for electricity. According to the U.S. Energy Information Administration, natural gas emits about 117 pounds of carbon dioxide per million British thermal units (MMBtu), a figure more than 40% lower than coal's 200 million British thermal units (MMBtu).

But natural gas still emits far more carbon than renewable energy sources like solar or wind. And environmentalists are furious about Greenidge Generation using natural gas to mine bitcoin.

“It’s not environmentally friendly,” Mandy DeRoche, deputy general attorney at Earth Justice, told Decrypt, adding, “I don’t think decommissioning power plants burning natural gas 24/7 (except for a few days in the summer or winter) is consistent with greenhouse gas reduction goals anywhere.”

Some New York lawmakers share DeRoche’s concerns. Earlier this month, state Sen. Kevin Parker introduced a bill in the agency’s Environmental Protection Committee. If approved, bitcoin mining centers would not be able to operate until they undergo a comprehensive environmental review, a process that could take up to three years.

The bill states: "The continued expansion of cryptocurrency mining centers will significantly increase New York State's energy use," and also states that mining activities may cause New York State to fail to achieve legally required greenhouse gas emissions targets. This bill is not only about Greenidge mining, but also threatens the state's emerging Bitcoin mining business. If this bill is passed, it may become a model for other US states or countries to curb crypto businesses. Meanwhile, in China, due to the impact of mining on the environment, the Inner Mongolia government has taken strict measures against mining.

Greenidge Generation countered the measure by pointing out that it already has a special permit to operate in Dresde, New York. That permit, in the form of a Title V permit, forces monitoring and control facilities to measure the amount of greenhouse gas emissions they can produce each year. Greenidge received its last Title V permit in 2016 and hopes to renew it in September.

On March 25, Greenidge submitted a package of documents to the New York Department of Environmental Conservation to reapply for a permit. Included in the package was a letter setting out the legal maximum emissions that Greenidge’s mining rigs can produce under the current Title V permit.

Greenidge Generation's data center in Dresden, New York

The company's Dresden plant can emit up to 641,000 tons of carbon dioxide per year. Decrypt has asked the company to provide actual emissions figures, but so far the company has not provided them. According to the Environmental Protection Agency's carbon emissions calculations, the company's maximum legal emissions would require burning about 708 million pounds of coal, equivalent to the average electricity use of 116,000 households in a year or 1.6 billion miles driven by passenger cars.

The environmental impact of the Greenidge facility can also be assessed based on Bitcoin’s overall carbon footprint. Decrypt previously reported that Bitcoin’s non-renewable energy sources (including the natural gas used by Greenidge) generate about 80 terawatt-hours of electricity per year. If extrapolated based on Greenidge’s highest annual carbon dioxide emissions, the carbon emissions generated by Bitcoin miners account for 1% of the total carbon emissions.

In addition to environmental concerns, Earth Justice's DeRoche is concerned that Greenidge's carbon permits were renewed without any real review. "Generally, commercial permits are renewed normally, but for plants like Greenidge, the business behind them is left unattended."

In response, Earth Justice sent a letter to New York environmental regulators warning that Greenidge’s activities are part of a growing trend of abandoned power plants in the state turning into bitcoin mining operations. For example, blockchain company Digihose Technology is looking to develop the Fortistar North Tonawanda power plant for bitcoin mining operations.

Environmentalists worry that the current trend represents the beginning of a new business model that will keep New York from meeting its climate goals for energy conservation and emissions reductions, which are written into state law and require the state to get 70% of its electricity from clean energy by 2030 and 100% by 2040.

“If Greenidge expands, or if other plants like Greenidge convert to bitcoin mining, I don’t know how you can meet carbon emissions targets,” DeRoche said. “They should be phased out, and there are good reasons for that.”

Greenidge's Feedback

In a conversation with Decrypt, Greenidge Generation CEO Dale Irwin refuted the company's criticism and the criticism of the Bitcoin mining industry. Irwin said that Greenidge's restart is not just for Bitcoin mining. However, as early as 2019, Greenidge conducted a pilot project for Bitcoin mining.

He also said that Greenidge's business model is not to let other retired power plants follow its example. Irwin also pointed out that Greenidge is helping to develop the economy in northern New York. "We have about 35 employees now, and when the power plant expands, that number will increase to 40 or even 50," he added. "We have to realize that the average salary of each employee is twice the average salary in the surrounding community, which is very important."

The median wage in Dresden is $38,214 per year, according to a 2020 Census Bureau economic analysis. Meanwhile, Irwin said the median wage at the Greenwich plant is $77,000.

Whether or not Greenidge sets a precedent for other potential miners in the state, Irwin told Decrypt that he plans to remove natural gas generation from his facility in the future anyway. The plan is driven in part by a looming law requiring 70% of New York State's electricity to be provided by renewable energy by 2030. When asked if he was committed to not using natural gas anymore, Irwin said, "We've made that commitment, and at the end of the day, we're not going to have a choice."

Where is Bitcoin Mining Headed in New York State?

Greenidge's mining operation is a controversial one, but also a profitable one. Today, the organization mines about 3.8 to 4 bitcoins per day. Based on recent prices, it now earns about $150,000 a day, a big increase from the $50,000 figure it disclosed to the media in March 2020.

Irwin believes the company provides a valuable service not only to the surrounding region, but also to individuals around the world who use Bitcoin. "Bitcoin has a place in Argentina, where the national currency has a 5,000% inflation rate. It also has a place in Nigeria, where 32% of the population uses Bitcoin. And there are 100 million people using Bitcoin worldwide."

This argument does not convince environmentalists like DeRoche, who believe that abstract benefits like those touted by Greenidge do not offset the harm done by greenhouse gases.

The debate is about to reach a climax. The Senate bill proposing a three-year moratorium on mining appears to be gaining momentum, but its chances of passing are unclear. While New York Governor Andrew Cuomo has yet to take a stance, he has previously described ignoring climate change as a major oversight, suggesting he is willing to sign on to the agreement.

Some, however, are trying to kill the bill. "There is very strong opposition to this bill from various groups in New York," Irwin said. He singled out the International Brotherhood of Electrical Workers (IBEW). "These groups believe it would be a mistake to officially suspend an industry that complies with environmental laws and produces huge benefits."

At the same time, New York and Greenidge are also players in a geopolitical game. Namely, China still accounts for about two-thirds of global bitcoin mining, leading some to warn that the U.S. is ceding control of a key strategic asset to its biggest competitor.

Bitcoin mining in the United States has grown recently, from 4% in September 2019 to nearly 8% of the global share. Meanwhile, in March, UK-based Argo Blockchain purchased land in Texas to launch a Bitcoin mining operation, while Riot Blockchain also invested more than $600 million in a large Bitcoin mining site in the state. These investments can be converted into political capital to help American miners avoid broader regulation.

As for Greenidge, Irwin claims that Bitcoin mining is here to stay. We’ll all be better off if Bitcoin mining thrives in New York State, where regulations are clearer than in China. Many mining operations in China are conducted with coal, and there are no clear rules. “It’s better to have known, measurable, and communicated environmental regulations than to have vague rules.”