Large silver trailers are lined up in a grid pattern Sitting on asphalt on the west bank of the Susquehanna River near Berwick, Pennsylvania, it may not seem like much at first glance. A giant nuclear reactor cooling tower looms above them, belonging to the Susquehanna Steam Power Plant and next to a web of energy-generating infrastructure. But inside those trailers are about 8,000 mining rigs, or supercomputers, designed to run the algorithms needed to mine Bitcoin, and a variety of other activities take place.
The rigs make up Nautilus Cryptomine, which became partially operational in March and aims to be one of the “largest and most efficient” Bitcoin mines in North America.
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The Nautilus is controversial among some environmentalists for its content (the emergence of a controversial cryptocurrency mining industry in Pennsylvania, which could lead to a spike in energy use and emissions in the state). But it also raises concerns about how it got there in the first place. . The mine was opened to take advantage of the sales tax exemption for data centers enacted into law in 2016 and is intended to build different types of industries, such as servers hosting cloud capacity and data storage farms. did.
Nautilus Inc., which is associated with the Nautilus Mine, and its affiliated company Cumulus Data Inc. are two of eight companies in the state applying for sales tax exemption, according to the state Department of Revenue. Although these are the only two crypto-related ventures on the list, supporters say the sales tax exemption will continue, with prices expected to grow from the current $17 million to $90 million by 2027. If this happens, I am concerned that this company may not be the last. Just like that.
In recent years, the Commonwealth has seen a steady construction of energy-intensive mines that produce cryptocurrencies. Pennsylvania has enough fossil fuel reserves to compete with crypto-heavy states like Texas and New York, although there are no regulations for this volatile but fast-growing industry. Some environmentalists are concerned about what would happen if the Commonwealth became a cryptocurrency hub.
Cryptocurrency mining using fossil fuels undermines national efforts to meet climate change goals and contributes to air pollution. An eastern Pennsylvania plant that runs on waste coal has tripled its emissions of nitrogen oxides and sulfur dioxide, two components of ground smog, in a year since being acquired by a cryptocurrency mining company. Ta.
Charles McPhedran, senior attorney for Earthjustice's clean energy program, said in testimony before the House Environment, Resources and Energy Committee in May that “Pennsylvanians, not only the general public, but also government, industry, and environmental organizations, are committed to clean air. I've worked hard,” he said. . “The last thing we need is another source of greenhouse gases or local air pollution.”
In Harrisburg, the fate of tax exemptions that could facilitate this new source of pollution is now uncertain, and attempts to regulate crypto mining face resistance from a growing industry that wants the state to reopen. ing. Cryptocurrency advocates are urging lawmakers not to pass legislation that could signal opposition while downplaying the industry's energy intensity.
According to a report by Earthjustice, from mid-2021 to 2022, the U.S. crypto industry was responsible for more than 27.4 million tons of carbon dioxide emissions.
Pennsylvania Democrats are trying to get ahead of things with new power in the chamber. First step: Curb a program they fear could subsidize the development of a global warming cryptocurrency mining industry with HB 1282. HB 1282 is a bill that would prohibit proof-of-work coin mining operations (commonly abbreviated as POWs) from claiming the sale and use of data centers. Tax exempt. The bill passed the House Environment, Resources and Energy Committee on party lines on June 6 and will require a vote in the full chamber for a vote.
“[POW crypto mining] HB 1282's lead sponsor and majority chair of the House Environment, Resources and Energy Committee, Rep. Greg Vitali (D-Delaware County), said in an interview with Capital. & Major. “As a matter of good public policy, these types of activities that hinder the achievement of climate change goals should not receive state subsidies.”
The state recently ended a month-long budget impasse when Gov. Josh Shapiro signed a major spending bill into law, but both chambers have yet to pass related legislation, including an omnibus tax bill. Meanwhile, Vitali, the author of HB 1282, said he urged House leadership to pass it as part of a larger budget bill whenever it could become a reality. . Lawmakers are not scheduled to return to the Capitol until September.
HB 1282's passage out of committee comes ahead of another vote on broader measures to prevent the full rollout of Bitcoin, which was scheduled but canceled at the last minute at the request of House leadership. The bill, HB 1476, would halt new cryptocurrency mining with a power load of at least 5 megawatts for two years. Required existing crypto mines to report energy production, water use, and emissions to regulators. It also directed regulators to conduct an environmental impact study on the industry as a whole. New York state passed a similar bill last fall. Pennsylvania could pass HB1476 this session, which runs through 2024.
Nautilus is the only cryptocurrency mine in the state to claim sales and use tax exemption for its data centers, but if it holds up, it may not be the last. Critics say further exemptions could subsidize the proliferation of industries that are at best of little use and at worst wasteful by design. In proof-of-work cryptocurrency mining, miners use highly specialized computers to compete with each other to brute force solve mathematical equations, add blocks of transaction data to the blockchain, and generate new blocks as a reward. You must earn the right to receive minted Bitcoins.
This process requires a huge amount of energy. Each computer “uses about three times as much as the average Pennsylvania household, and miners own thousands to tens of thousands of computers,” said PennFuture's Energy and Climate Director. Senior Director Rob He Altenberg testified. At a May 1 hearing of the House Committee on Environment, Resources and Energy on the environmental impacts of cryptocurrency mining. (Separately, PennFuture co-signed a letter to the commission publicly supporting HB 1282, along with the Sierra Club Pennsylvania Chapter, Earthjustice, and Conservation Voters of Pennsylvania.)
“There is no way to waste energy in a clean way.”
~ Pennsylvania Congressman Greg Vitali
According to a 2022 Earthjustice report, from mid-2021 to 2022, the U.S. cryptocurrency industry was responsible for over 27.4 million tons of carbon dioxide (CO2) emissions. The overall energy consumption of Bitcoin mining is comparable to that of an entire country.
The Nautilus is powered by nuclear energy and can claim carbon neutrality. But other crypto mines across the Commonwealth can't do that. For example, Stronghold Digital Mining uses coal waste to power two of its mines, while others connect directly to natural gas wells. And although there are no emissions, the Nautilus connected to PJM still diverts Susquehanna Steam's clean power from the grid, creating a gap that will likely be backfilled by fossil fuels. .
“There's no way to waste energy in a clean way,” Altenburg told Capital & Main.
Vitali's two-year cryptocurrency moratorium bill would give regulators time and power to investigate these effects. Vitali, the bill's lead sponsor, previously told Capital & Main that a committee vote on the bill, scheduled for June, was delayed by House leadership following input from labor unions and the oil and gas industry. He said it was canceled by. But he remains committed to the bill and plans to pass it again in his committee when the House returns to session in the fall.
Controversies have also arisen over energy sources. Stronghold Digital Mining, one of Pennsylvania's better-known cryptocurrency operations, operates two plants using coal waste left over from another energy era, and some lawmakers are wants to remove coal waste in his constituency, Vitali said. Stronghold claims this as an environmental benefit and receives a tax credit. “We're just trading one problem for another, air pollution,” Vitali said.
When asked about his stance on HB1476, the virtual currency moratorium bill, Stronghold told Capital & Main that he supports policies that foster innovation and have a direct impact on the local environment. Ta. He did not take a stance on the tax exemption bill, HB 1282, as he did not apply for a sales and use tax exemption.
Vitali said he also met with Talen Energy, one of the two companies that owns the Nautilus cryptomine. Vitali said he was told by the company that the data center's sales and use tax exemption was an important factor in choosing to locate in Pennsylvania. If Nautilus expands in the state in the future, the loss of eligibility for tax credits could increase costs. His Talen, the parent company of Cumulus Data, and TeraWulf Inc., co-owner of Nautilus, both declined Capital & Main's requests for comment on the bill.
Regulation will provide a path to “good agency” for cryptocurrencies, said Dominic Forino, chairman of the PA Blockchain Federation. The PA Blockchain Coalition, a nonprofit organization dedicated to advancing blockchain-related policies, has spent nearly $50,000 on lobbying efforts in the state since its launch in August. But he warned against “potentially dissuasive legislation” like the Vitali bill. [crypto] Prevent organizations from coming to Pennsylvania. ”
Despite concerns that the reduction in sales and use tax breaks could stifle the deployment of cryptocurrencies, there is little evidence that they were introduced for this purpose in the first place.
He is also skeptical about environmental issues. “We always hear that crypto mining uses more energy than the country of Argentina,” he said. “And I've also heard the other side and seen from many sources that Christmas lights use more energy than Argentina. So it's a question of comparing apples to apples. I think.”
Despite concerns that the reduction in sales and use tax breaks could stifle the deployment of cryptocurrencies, there is little evidence that they were introduced for this purpose in the first place.
“Virtual currency, when this bill was passed, that wasn’t even thought of,” Altenburg told Capital & Main about the sales and use tax exemption.
The exemption that Nautilus is claiming and Vitali is trying to narrow is called the Computer and Data Center Equipment Program, which was created in 2016 amid the frenzy of that year's annual budget negotiations. It was similarly expanded in 2019 and 2021. .
The bill was added to a 300-page omnibus bill in the 11th hour of the 2016 budget debate and, according to the 2016 bill summary, “…requires new investments from companies that operate servers and data storage equipment. It is said to be designed to attract The initial budget was $5 million a year. In the initial implementation of this program, cryptocurrencies were not mentioned, nor were they mentioned in floor discussions. At the time, Pennsylvania didn't have any cryptocurrency mining options, and Bitcoin mining didn't require the energy it does today.
This bill was expanded in 2019 with a $7 million budget in a similar process as part of a larger omnibus tax law package passed after budget negotiations. The program was amended again in 2021, introducing measures to change the sales tax refund mechanism to exemption. At the time, the state's first cryptocurrency mine was coming online.
“This was one of the issues that was secretly included in one of the budget proposals,” Vitali recalled. “There wasn’t a lot of general awareness from other legislators or the public. The primary purpose was not directed at crypto data centers in general.”
At the time, critics argued that the program would disproportionately serve big technology companies. That hasn't happened yet. But it could lead to another industry. Some environmentalists fear becoming a sleeping giant.
“Pennsylvania should not subsidize new polluting industries,” said Earthjustice attorney McPhedran, who co-signed an open letter supporting HB 1282.
“We have a legacy of fossil fuel pollution,” McPhedran added. “We don’t need … tax breaks that favor polluting industries.”
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