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Bitcoin miners align with fossil fuel firms, alarming environmentalists

four years ago, the scrub power plant in venango county, pennsylvania, was on the verge of financial ruin as power customers preferred to buy cheap natural gas or renewables. then scrubgrass turned to bitcoin.

Today, through a Kennerdell, Pennsylvania-based holding company called Stronghold Digital Mining that bought the plant, Scrubgrass burns enough carbon waste to power about 1,800 cryptocurrency mining computers. These computers, known as miners, are packed into shipping containers next to the power plant, the company said in US filings. uu. securities and exchange commission prior to its initial public offering. coal waste is a byproduct of decades of mining in the region, left behind in huge black heaps. stronghold estimated that it is currently burning about 600,000 tons per year in the bush.

Reading: How does bitcoin mining use fossil fuels

According to documents filed with the SEC, stronghold plans to operate 57,000 miners by the end of 2022, an expansion that requires the purchase of two additional coal-waste power plants in the region.

what happened in scrubgrass highlights a growing trend within the world of cryptocurrencies that alarms some environmentalists. Bitcoin mining is breathing new life into America’s aging fossil fuel power plants, creating a demand that environmentalists say discourages investment in renewable energy sources at a time when moving away from sources of energy is essential. carbon-emitting energy.

Bitcoin and other cryptocurrencies use blockchain technology, essentially a shared database of transactions, where entries must be confirmed and encrypted. the network is secured by “miners” who use powerful computers to compete in a huge guessing game that ultimately verifies the transactions. if a computer “wins” the game, it is rewarded with a newly created bitcoin, currently worth around $40,000. the process consumes a lot of electricity and computers generate a lot of heat, which means they require industrial cooling systems that need even more power.

Because of this, the bitcoin network currently consumes more electricity than many small countries, including the philippines, according to the cambridge bitcoin electricity consumption index.

“Bitcoin mining is essentially wasteful by design,” said alex de vries, a dutch economist, researcher, and founder of digiconomist, a site that tracks the environmental impact of cryptocurrencies. “It is a system in which participants are forced to waste resources to provide some level of network security. the more value bitcoin has, the more money it is worth, the more we spend on resources.”

The trend has accelerated in recent months after the Chinese government cracked down on bitcoin mining, which as of May was home to around two-thirds of the world’s bitcoin mining capacity, according to research firm rystad. energy. On Friday, China went so far as to announce that all cryptocurrency transactions were illegal, dealing another blow to the industry. But the mining crackdown has already led to an influx of Bitcoin mining operations in the United States, with several states, including Texas and Kentucky, welcoming them with open arms, cheap electricity, and tax incentives.

“These miners not only need cheap power, but also a stable source of power because their machines need to run 24/7, and fossil fuel sources are best suited for that” de vries said. “Miners are reactivating idle gas plants and coal mines in places like New York and Montana.”

Illustration of power plant smoke stacks and Bitcoin tokens.

Chelsea Stahl / NBC News; Getty Images

Stronghold officials declined to comment because the company is currently in an SEC-mandated quiet period ahead of its initial public offering. But in a recent filing, it described its operations as “environmentally-beneficial,” pointing to Pennsylvania’s classification of waste coal power generation as a “Tier II alternative energy source.” This classification allows Stronghold to benefit from state subsidies.

Coal waste piles are an environmental hazard full of pollutants that seep into waterways, killing fish and other wildlife, and sometimes spontaneously ignite, according to the us. uu. Environmental protection agency. Burning it for fuel in a power plant like weeds helps clean up waste piles, but it emits carbon dioxide into the atmosphere, as well as other dangerous greenhouse gases.

“Simply put, we employ 21st century crypto mining techniques to remediate the impacts of 19th and 20th century coal mining in some of the most environmentally neglected regions of the United States,” the company stated in the filing .

strength

According to public documents, Stronghold works closely with the Pennsylvania Department of Environmental Protection to prioritize the highest-risk coal waste piles, including those that are already burning or polluting waterways, for burning as fuel for their power plants, removing harmful particles that would be released into the atmosphere from self-igniting batteries.

rob altenburg, senior director of energy and climate at pennfuture, a nonprofit focused on clean energy, said he believes the state is taking the wrong approach to managing the huge piles of coal waste and that burning it in power plants just makes a visible problem invisible.

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“When it burns, you don’t see big towers of black soot,” he said. “And when people don’t see the pollution, they don’t believe it’s there.”

jamar thrasher, a spokesman for the pennsylvania department of environmental protection, said the waste piles “continue to pollute our land, streams and air even while they’re there” and that “currently one of the most effective ways to remediate these batteries is to consume them using the best available technology present in these plants, such as weeds to generate electricity.” He added that “unfortunately, like other forms of electricity generation that use coal, natural gas and oil, this generates emissions of atmospheric pollutants that must be weighed against the environmental benefits provided by this form of generation.”

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altenburg and other air quality advocates favor alternative approaches to remediation, including planting seagrass over waste piles to secure the surface and mitigate leaching problems or moving residual carbon to a lined landfill that prevents leaching into waterways: one measure the arippa coal waste lobby estimated would cost around $30 per tonne.

altenburg said he thinks if the state diverts the generous subsidies given to coal-waste plants and considers the social cost of carbon emissions, it might as well pay for remediation. but that would be politically unpopular.

“It’s much easier for our legislature to pass a tax cut for a business than a bill that spends money on environmental cleanup, even if the latter is more profitable,” he said.

This year, the pennsylvania environmental council recommended reforming the state’s alternative energy standards, which currently allow subsidies for coal-fired plants, to phase out fossil fuel energy sources such as power plants. carbon waste, unless they use carbon capture technology.

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Chinese migration

since china kicked out bitcoin miners in the spring, the proportion of bitcoins mined using renewable energy sources has decreased as miners have migrated to countries with power grids that rely more on fossil fuels said pete howson, bitcoin expert and senior lecturer in international development at northumbria university in the uk.

Many miners turned to China’s neighbors, including Kazakhstan and Abkhazia, recognized by most countries as part of Georgia, both of which have power grids powered almost entirely by fossil fuels.

Others were looking for larger, more stable energy markets.

“many ended up in north america because there was enough cheap energy and they could do deals with fossil fuel companies,” said cryptocurrency expert david gerard.

Until the crackdown, bitcoin miner poolin did most of its mining in china, using mostly fossil fuels in inland mongolia and hydropower in sichuan.

the day after china announced the ban, poolin’s vice president, alejandro de la torre, traveled to texas.

“a very important factor for mining is the cost of electricity, and in texas it is very cheap. there is a lot of oil, plus wind and solar power,” he said. “There is also a favorable political environment for bitcoin mining.”

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in June, the texas government. Greg Abbott tweeted his excitement that Texas would be the next “crypto leader” as crypto kiosks were rolled out in grocery stores.

crypto advocates in houston host a monthly bitcoin meetup, which in August brought together some 200 representatives from oil and gas companies and bitcoin mining companies to discuss energy trading, cnbc reported.

de la torre, who attended the meeting, said poolin is particularly attracted to the use of natural gas, a byproduct of the oil industry, which is otherwise burned in torches.

“The narrative is that bitcoin mining is destroying the earth,” he said. “But we can install a machine that captures the burnt gas and passes it through a generator to produce electricity. removes the pollutant from the atmosphere to create energy used for mining.”

endless expansion

while poolin moved its headquarters from hong kong to austin, texas, its employees traveled through other states to see if they could find deals on cheap energy or incentives to set up operations.

“Kentucky has very attractive incentives,” he said. “That’s where all the coal-fired power plants used to be, and many have closed. this means that there is a lot of electrical infrastructure that is not being used.”

in late march, the kentucky government. andy beshear signed a couple of bills that offer tax breaks to cryptocurrency miners who set up shop in the state.

Signs of this type of alignment are occurring in the United States.

In new york, a former coal-fired power plant on the shores of seneca lake has been converted to natural gas and bitcoin mining has begun. Greenidge Generation, the company behind the power plant, on its website described its mining operation as “more than twice as efficient” as the global standard and “100% carbon neutral” through offsets. However, local residents said the power plant is polluting the air and heating the lake, as previously reported by NBC News. a full thermal study will not occur until 2023.

Greenidge’s CEO told nbc news in July that the lakefront facility was operating within its federal and state environmental permits and had created 31 jobs.

in montana, near the north dakota border, a colorado startup called crusoe energy systems is using natural gas, a byproduct of oil production, as fuel to generate electricity for bitcoin miners in storage containers in the place. The gas used by Crusoe, purchased from the oilfield owner, Kraken Oil & gas, otherwise it would burn in torches, emitting co2 and other pollutants. Selling the gas to crypto miners is beneficial to miners and energy companies, advocates say. the process still generates co2, but also creates some value.

de vries sees the process, which is being replicated around the world, including gazprom in siberia, differently.

“Making a byproduct of fossil fuel extraction profitable can extend the longevity of the energy source, potentially making it operate longer than it would otherwise,” he said.

howson agreed.

“Instead of building renewable infrastructure to generate clean energy,” he said, “bitcoin mining is creating an incentive for fossil fuel power plants to be more profitable and continue doing what they are doing.”

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