How Pennsylvania politics are shaking up the state’s crypto scene

Pennsylvania’s once-free crypto landscape may soon become a little less welcoming to companies hoping to use their waste coal tax credits and data center sales tax breaks to establish bitcoin mining operations. And now the half-dozen or so who have settled in Keystone State to take advantage of its many energy options are facing new legislation that, if adopted, could slow the industry’s rapid growth.

For the past few years, Pennsylvania has been a desirable place to mine crypto because of several energy options – nuclear power, plentiful fractured gas, and plentiful “waste coal” whose cleanup is subsidized by the state.

Earlier this year, the Democrats took over – by a majority of one seat – the state’s House of Representatives, meaning they also took control of every House committee. Notably, this includes the Environmental Resources and Energy committee, which had previously overlooked the industry’s rapid growth.

The committee’s previous chairman, Daryl Metcalfe, a Republican, had long been criticized by political opponents as a climate change denier. In 20019, Metcalfe infamously dismissed concerns about carbon emissions, saying that because he liked vegetables “and plants need CO2, I want to make sure we have plenty of CO2 out there so we have green grass and green vegetables growing.” ”.

The committee’s new chairman, Rep. Greg Vitali, a Democrat who was previously Metcalfe’s opponent, takes a different approach. Vitali has now introduced two new laws that he hopes will put a brake on the rapidly accelerating cryptocurrency industry.

The first bill, announced to other members on May 17, specifically aims to exempt cryptocurrency mining companies from using a 2016 law that established a tax exemption for server farms or other data storage companies. Since 2021, this program has increased: in that year, the state exempted US$ 5 million in taxes, an amount that should reach almost US$ 86 million by 2027.

Vitali’s second and broader bill, due to be introduced soon, aims to slow the expansion of cryptocurrency mining. If enacted, it would impose a halt on new proof-of-work cryptocurrency mining operations such as Bitcoin. The bill would also require companies to provide relevant information about energy use to the state’s Department of Environmental Protection, which would study the issue further and assess what additional industry regulations are needed, if any.

Cryptomining companies have yet to comment extensively on the new pieces of legislation. Kerri Langlais, chief revenue officer of TeraWulf, a company that uses Pennsylvania nuclear power to mine Bitcoin, said the company could not comment on the legislation that has not been formally introduced. But she offered a new talking point, saying mining “can have a symbiotic relationship with the power grid” as it can convert “underutilized energy generated by renewable sources into bitcoin, a global asset with an unlimited shelf life.” (Despite a tax break, TeraWulf just announced a first-quarter loss of more than $26 million and a cumulative deficit of more than $212 million.)

Another company, Stronghold Digital Mining, takes a different approach: It uses state subsidies to burn “waste coal” – a low-grade form of coal that has been left around the state for decades, sometimes in piles hundreds of feet high. . (In 2020, the head of the Department of Environmental Protection told a state committee that 9,000 acres of coal waste remain — and 40% of that area is already “burning continuously.”)

Stronghold owns and operates two such waste coal-fired Bitcoin mines in Pennsylvania.

Stronghold CEO Gregory Beard recently testified before Vitali’s committee, essentially saying his company is doing well in cleaning up these toxic sites.

“When we burn it, we remove almost all of the harmful toxins from the flue gas,” he said.

However, during the same committee hearing, Rob Altenberg, senior director of energy and climate at PennFuture, said that burning waste coal is just “turning” pollution into another form: air pollution. Meanwhile, even carbon-free nuclear energy also has its problems.

“Miners say they promote clean generation because they can absorb wasted clean energy,” he said. “As we see in Pennsylvania, it’s much more common for them to use polluting fossil fuels to power their 24/7 operations, but there’s a more basic issue. We have no clean energy to waste.”

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