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Coal country may soon become crypto country

February 3, 2022, 12:00 AM UTC

Appalachia: known for its beautiful vistas, long history of Americana music and literature—and crypto mines? 

Coal country energy titans, perhaps acknowledging that U.S. coal production is nearly defunct, are quietly pushing to use their mining legacy and knowledge in a new sector: cryptocurrency. And lawmakers, who have long evoked the noble coal miner for political purposes, are listening. 

In Kentucky, the historic center of U.S. coal production, Democratic Gov. Andy Beshear signed two bills last year to qualify crypto mining for a series of tax breaks. The change would extend clean energy incentives to crypto miners who invest at least $1 million in equipment in the state and would offer them a number of tax breaks. Kentucky wants “to become a national leader in emerging industries which use substantial amounts of energy,” said one of the bills. 

At a Congressional Energy and Commerce hearing last month, Rep. Morgan Griffith (R-Virginia) asked witnesses whether land once used for coal mining could be used for Bitcoin mining. “We have a real asset in southwest Virginia,” he said. “We always hear from my colleagues about reducing coal and so forth. We’re trying to repurpose our industry — in many of my counties a number one industry.”

The mines already in his district, Griffith said are “deep underground” and the “water is 50 degrees [and] air temperature is in the 50s … an attractive natural coolant for large, hot computers for data centers and mining of cryptocurrency.”

Wyoming, which accounts for about 39% of all U.S. coal production, is also jumping on the crypto bandwagon. It was the first state to establish legal banking of cryptocurrency in 2019. Additionally, Sen. Cynthia Lummis (R-Wyoming) plans to introduce legislation this year to limit cryptocurrency regulation and taxation.

Coal-reliant communities in the U.S. are facing the very real threat of fiscal collapse. Nearly 30 U.S. counties are classified as “coal-mining dependent,” meaning that the coal industry is a major employer. In these communities, coal-related revenue often funds a third or more of municipal budgets.

But U.S. coal production fell one-third between 2007 and 2017 and is expected to decline by nearly 75% this decade, according to Brookings, a D.C. think tank. A recent, pandemic-related boom in demand for coal hasn’t been enough to reverse the industry’s decline.

The Chamber of Digital Commerce, a nonprofit group that advocates for cryptocurrency mining, has said that coal states may be a good fit for the crypto mining industry. Many of the states already have the infrastructure in place like old or underused power plants that can be tapped to mine crypto.

But critics worry that areas already impacted by the environmental devastation, health hazards, and greenhouse gas emissions that come with coal production, will now be subject to destruction associated with crypto mining. New Bitcoins are released through a computer and energy-intensive process.

Miners of Bitcoin, the most widely-mined cryptocurrency, use 122.87 Terawatt-hours of electricity annually worldwide, more than the Netherlands, Argentina, or the United Arab Emirates. according to the Cambridge Bitcoin Electricity Consumption Index. Between January 2019 and May of 2021, Bitcoin’s estimated global annual power consumption increased more than three-fold and is now comparable to the entire energy consumption of Washington State. The vast majority of Bitcoin mining, more than 35%, occurs in the United States.

The result of that energy use is a lot of pollution. Bitcoin mining generates 96 million tons of carbon dioxide emissions annually, the similar total emissions from some smaller countries, according to Digiconimist.

And the environmental impact of cryptocurrency mining disproportionately impacts poor and vulnerable communities, researchers at Northumbria University in England have found. Cryptocurrency producers often take advantage of weak regulations and access to cheap energy in economically unstable areas, the researchers said.

At the same time, energy consumption by crypto mining facilities can lead to increased energy prices for local communities. Crypto mining in Plattsburgh, N.Y., for example, reportedly resulted in residential electricity bills rising $300 higher than usual in the winter of 2018, prompting officials to introduce an 18-month moratorium on new crypto mining operations.

Critics in D.C. are also growing concerned about cryptocurrency’s increasing connections to the fossil fuel industry and lobby. Last week, Sen. Elizabeth Warren (D-Massachusetts) sent a letter to six crypto mining companies criticizing their climate practices. 

“Given the extraordinarily high energy usage and carbon emissions associated with Bitcoin mining, mining operations raise concerns about their impacts on the global environment, local ecosystems, and consumer electricity costs,” the letter said. 

“I support a just transition for communities in coal country to ensure they have a secure place in the clean energy economy,” Warren told E&E News, which covers environmental issues. But, “the data shows that crypto mining can have harmful impacts on local residents, including higher electricity costs, increased pollution, and weaker energy grids.”

The situation is reminiscent of the fracking industry, which exploded in rural U.S. communities and created a boom of high-paying jobs in 2008, just as the Great Recession hit. But soon, nearby residents began complaining of polluted streams and increased health problems. The hidden costs of the boom also fell disproportionately onto poor and minority communities

By 2021, energy prices had dropped and the so-called shale revolution dissipated. The high-paying jobs largely disappeared, leaving both economic and environmental wreckage in their wake. Many shale production companies have since pivoted to become crypto mining powerhouses. 

In Kentucky, legislators say they understand the concerns associated with becoming crypto mining hubs. 

“Mining for cryptocurrency takes a lot of electricity,” said Republican Rep. Steven Rudy, who sponsored the bill to ease tax burdens for crypto miners. “It is not just a few people sitting in their mom’s basement or in their parents’ basement writing code. This is actually highly sophisticated, highly technical.” 

But to Rudy, that energy use doesn’t outweigh the immediate economic benefit of crypto mining. 

“We would love to have more industry,” Rudy said. “We welcome industry here.”

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