HomeMy WebLinkAboutLAC-PPF Report to Town Board on Crytpo 12.3.21 pdfReport to the Town Board, Town of Lansing
Information about Cryptocurrency Regulations and Potential for Bitcoin Mining
Development
Submitted by LAC-PPF
Lansing Advisory Committee on Power Plant Future
December 3, 2021
Introduction
Reason for submitting this report to the Board at this time
The LAC-PPF (Lansing Advisory Committee on Power Plant Future) has become aware of information
that indicates that the owners of the former Cayuga power plant, Cayuga Operating Company and
Beowulf, may be in the process of seeking regulatory approval for a Bitcoin Mining facility to occupy the
former power plant site. Previously, it was understood that the site was intended to be a data center. The
LAC-PPF has the responsibility of providing information to the Town of Lansing Board regarding issues
about this property that could be of importance to the Board and the residents of the Town of Lansing. For
the reasons outlined below we believe the information we are sharing is of interest to the Board and is
potentially actionable to protect the interests of the residents of the Town.
This report covers:
1.Information showing that a likely intended use of the former power plant site is for BItcoin Mining.
2.A brief description with comparison of data centers and cryptocurrency mining centers.
3.Potential concerns regarding impacts of cryptocurrency mining: energy use (cost and climate
change), noise production, electronic waste, low job production, and potential thermal pollution to
Cayuga Lake.
4.Examples of how other municipalities have passed zoning and other regulations to mitigate the
risks/concerns associated with cryptocurrency mining. Copies of regulations from Plattsburgh NY
and Missoula County MT are attached to this report and links provided.
Report
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1.Information leading us to conclude that a Bitcoin Mining operation may be a leading
contender for the facility.
Three pieces of information lead us to believe that the developer’s plans for a Bitcoin operation may be
progressing and may possibly come before the Lansing Town Board for consideration within the next few
months.
1)On August 5, 2021, the Town of Somerset, NY Planning Board approved the application for Site
Plan Review of Beowulf Energy’s new subsidiary called “Lake Mariner Data, LLC” for four 60’ X
400’ Data Center buildings for a Bitcoin facility. This power plant site is the sister site to the
Cayuga power plant, which are both owned by Beowulf Energy and Heorot Power. Jerry
Goodenough, long-time manager of the Cayuga power plant, is VP for Development at Heorot
Power and oversees both plants and the proposed “Empire State Data Hub”. Beowulf and
TeraWulf have an agreement to operate this new Lake Mariner Data, LLC cryptocurrency facility
at the Somerset plant location.
2)Communication, on November 6, between a staffer for NYS Assemblywoman Anna Kelles and
Sue Ruoff, chair of the LAC-PPF, indicated that the owners of the facility have been in
communication with DEC (NY State Department of Environmental Conservation) and PSC (Public
Service Commission) regarding the use of the facility for a Bitcoin operation as far back as spring
of this year.
3) An Administrative and Infrastructure Services Agreement between Beowulf Electricity & Data Inc.
and TeraWulf Inc. was filed with the SEC (Securities and Exchange Commission) in April 2021,
and is appended to this report. At the end of this document, three locations are referenced with
designations of power requirements for Bitcoin Mining. One of the three is Cayuga Operating
Company/Heorot Power in Lansing.
Note in Exhibit B of the SEC filing states:
“Facilities: Up to 500MW of Bitcoin mining facilities to be located in Baker, New York. [This is the
Somerset power plant location.]
Up to 100MW of Bitcoin mining facilities to be located in Lansing, New York.
Up to 300MW of Bitcoin mining facilities to be located near Berwick, Pennsylvania.”
(See SEC Note citation in References at the end of this report)
No communications between the owners and any member of the government of the Town of Lansing,
local agencies, or bodies, or NYS agencies are known to this committee at this time.
2.Brief description of data centers and cryptocurrency data mining
Data Centers
Businesses utilize and store a large amount of data for their operations. A data center is a physical facility
that houses business computer systems, networking equipment, power supplies and subsystems, and
ventilation/cooling systems that protect the data center hardware and keep it running. A business may
maintain its own data center, or contract its data processing and storage needs to a third party, where all
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data is stored on the “cloud”, or remotely, on another entity’s computer systems. Such cloud-based data
centers can be an opportunity for specialization and economies of scale for very large data centers to
serve multiple businesses. Google, for instance, has many data centers across the world and for the
years 2017 through 2020 has purchased the same amount of renewable energy as its facilities have
used.
Our everyday use of personal and business technology is highly dependent upon data centers.
Cryptocurrency Mining Centers
Cryptocurrency is an online currency that does not require the backing of banking institutions or
governments. Proof-of-work cryptocurrencies achieve security by requiring an exponentially increasing
amount of data processing to write to or edit the “online accounting books” of the cryptocurrency. Some
of the best-known proof-of-work cryptocurrencies are Bitcoin, Ethereum, and Litecoin. In order to get
people and businesses to provide this computing work, the cryptocurrency is offered as a reward for the
increasing amounts of data processing required. A facility dedicated to churning out Bitcoin data
processing will thus be rewarded with a Bitcoin, and a larger amount of processing is required in order to
obtain the next Bitcoin.
As of May 2021, it was estimated that Bitcoin-related energy use was about ⅓ that of the entire world’s
traditional banking system data centers. This energy use is growing so rapidly that there is a rising
concern over the climate impacts of this energy use, which would be mitigated if low/zero carbon sources
were used for cryptocurrency mining.
While the exact uses of data centers and cryptocurrency mining centers are different, they fundamentally
share similar hardware, computing, and cooling needs, with magnitudes varying by the scale of either
facility.
3.Potential concerns regarding cryptocurrency mining: Reasons why LAC-PPF believes that
cryptocurrency in the form of Bitcoin mining could affect residents of the Town of Lansing
Cryptocurrency mining has well-documented high energy use, potential for noise production, and large
generation of electronic waste. Additionally, with the location of the proposed site adjacent to Cayuga
Lake, there is a possibility that the site’s cooling system may utilize lake water and thus discharge heat to
the lake.
We have been in communication with two government entities which have experience with Bitcoin mining
operations, and corroborate these concerns. One is the former mayor of the town of Plattsburgh, NY
(Bitcoin mining firm Coinmint LLC facility) and the other is Missoula County, MT officials (Bitcoin mining
firm Hyperblock LLC facility).
These community leaders have expressed to us in person and in writing the following concerns. These
are presented here, with additional research provided.
Energy demands: Bitcoin mining is known to require extremely large amounts of electricity. A number of
small to medium bitcoin mining operations moved to Plattsburgh and resulted in 20-40% increase in the
cost of electricity depending on the season. Plattsburgh had an agreement for a very low electricity rate
for a fixed quantity of electricity from nearby Canadian hydropower. Electricity above the fixed amount
would be charged at the higher market rate. The increase in demand due to bitcoin mining pushed
Plattsburgh above the fixed quantity, leading to increases in electric rates for residents and industries
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alike. Plattsburgh and 35 other municipalities participating in the New York Municipal Power Agency
petitioned the NYS Public Service Commission to be able to charge higher rates to cryptocurrency mining
operations in order to protect their residential and commercial businesses, and were granted approval.
The PSC document (cited in References, below) has a host of useful information.
The energy concerns of Missoula County, MT were based on its goal to reach 100% clean electricity by
2030. With the increased electrical demand needed for cryptocurrency operations, the County passed
zoning regulations requiring any cryptocurrency operation to develop or purchase sufficient new
renewable energy to offset 100% of the electricity consumed and establish that their action will introduce
new renewable energy onto the electrical grid beyond what would have been developed otherwise.
The proposed bitcoin mining operation in Lansing is for up to 100 MW of power usage. 1MW of baseload
energy would power between 500 and 900 homes. 100 MW therefore represents the amount of energy
used by 50,000 to 90,000 homes, far more than the total in Lansing. In general, as demand for a
commodity goes up, price goes up. It is clearly possible that a bitcoin mining center could raise the cost
of electricity in our region, but further research would be required to determine how much. Requirements
for crypto mining operations to offset electricity usage with truly new renewable or other zero carbon
energy sources would be one way to mitigate this effect.
Note that for any regulation based on this proposal, care needs to be taken to specify that the total
electricity usage be offset, as opposed to requiring the same power (megawatts, MW) be installed, since
the sustained electricity generated by 1 MW varies very significantly between sources such as coal,
nuclear, wind, and solar. For instance, a 100 MW solar operation in New York State typically generates
an overall average of 15 MW, with peak operation occurring periodically during high-light, high-sun days.
Noise: Both communities cited noise as a particular concern. Bitcoin mining computers generate
considerable heat which require a controlled environment to work properly. One typical solution is an AC
system with fans of sufficient capacity to cool the plant. The noise production of these fans is such that
these communities felt the need to regulate it. Noise is of concern for nearby residents but is of even
greater concern with this site as sound carries over water extremely well. A human voice speaking at
conversational volume can be heard over a mile away in calm conditions. Recreational value of the lake
and its environs stand to be adversely affected, beyond the municipal boundaries of the Town of Lansing.
Ambient noise restrictions/limits at the boundary of any proposed site should be considered.
The Missoula County zoning regulations require cryptocurrency mining operations to be located only in
Light Industrial or Heavy Industrial districts and be reviewed as a conditional use. If adjacent to a
residential district or within 500’ of a residential property boundary they would be reviewed as a special
exception.
Plattsburgh regulations on cryptocurrency mining also focused on noise, as noise was the major
complaint of neighbors and other residences near facilities.
Environmental Concerns
LAC-PPF, having reviewed the information provided by Plattsburgh and Missoula County officials, has
determined that the following environmental impacts should be of concern to the Town of Lansing. This
list is not exhaustive or final.
Thermal impacts: The Cayuga Operating Company in Lansing used lake water to cool its coal-
fired plant. A Cayuga Bitcoin operation might opt for a lake-based cooling system rather than a
conventional A/C system. Thermal output of the plant could have impacts on aquatic life of the
lake, and its recreational value.
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Greenhouse gas emissions: Although some solar energy might be used to run a Cayuga
Bitcoin operation, some power from the grid is likely to be necessary. Although grid power may be
designated to be from “green” sources, it may be taken from other consumers and the increased
grid demand may have to come from fossil fuels.
Electronic waste: Computer computing power continues to rapidly increase, and it is not
uncommon for computer equipment to be upgraded and replaced every few years. Large
cryptocurrency mining operations would thus generate large amounts of electronic waste which
could damage the environment if not disposed of properly. Missoula County, MT passed
regulations which require all electronic waste from cryptocurrency mining operations to be sent to
a Montana Department of Environmental Quality-licensed electronic waste-recycling firm for
electronics recycling.
Jobs:
Quoting from the PSC:
“NYMPA’s petition noted that these customers do not bring the economic development
traditionally associated with similar load-sized companies. First, these customers tend to require
high quantities of power and have extremely high-load density and load factors; and second, the
customers have few associated jobs, and make little to no capital investment in the local
community. As a result, there is no traditional impediment for the customers to pull up stakes and
move their equipment to another location. The potential for sudden relocations would result in
unpredictable electrical use fluctuations in the affected areas”
“In some cases, these customers account for 33 percent of the municipal utility’s total load, an
extraordinary amount of power for a single customer to use. By comparison a large paper
manufacturer, which might employ hundreds of workers, uses roughly one-fourth the amount of
electricity on a per square foot basis that these high-density load customers. In its petition,
NYMPA cited a request from a cryptocurrency company for 5 MW of electricity to be added to the
Village of Akron, Erie County. If Akron were to comply with the request at existing rates, Akron’s
annual average bulk power supply costs would have increased 54 percent with a direct impact on
retail rates.”
Source: NYS Public Service Commission (PSC) Document “PSC Allows Upstate Municipal Power
Authorities to Charge Higher Electricity Rates for Heavy Electricity-Using Cryptocurrency
Companies”
Summary
This report provides the Lansing Town Board with copies of cryptocurrency regulations passed by
Plattsburgh NY and Missoula County MT, to address their community concerns. (The Plattsburgh
regulations were included in our previous report to the Town Board in April 2021.)
The LAC-PPF hopes that by providing the Town of Lansing with these examples of actions of these
communities, they may serve as a basis for considering local regulation in order to pre-empt adverse
effects to the town and its residents. The Town of Plattsburgh, in particular, advised that taking steps in
advance of any proposed operation that would have adverse impacts is particularly advisable.
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LAC-PPF Recommendations
The recommendation of the LAC-PPF is that the Town of Lansing should initiate further investigation to more
fully assess impacts, and opportunities for mitigation of potential issues arising from a Bitcoin mining operation
at the Cayuga Power Plant/Heorot Power. We believe that this is a matter of great urgency.
The proposed 100 MW of bitcoin mining represents a tremendous amount of energy use, and could have major
impacts on surrounding municipalities and energy costs. Ways to mitigate the risks include noise regulations,
requirements to completely offset energy use with new sources of renewable or other zero carbon energy
sources. Electronic waste could be mitigated with requirements for waste to be recycled through electronic
waste recycling facilities registered under the NYS Electronic Equipment Recycling and Reuse Act.
A pause for further investigation might take the form of a moratorium, along the lines of the one proposed
statewide by NYS Assemblyperson Anna Kelles. NYS Assembly Bill A7389B proposes a moratorium on
consolidated operations that use proof-of-work authentication methods to validate blockchain transactions.
LAC-PPF recognizes that this is a complicated subject and, to do justice to it, the Lansing Town Board should
take sufficient time to research it. LAC-PPF has been told by one community that it is best to “have your ducks
in a row” before you have to deal with a concrete proposal. Being familiar with the subject matter, we have
good reason to believe that the Lansing Town Board needs time to gather further information in advance of any
future deliberations.
Attachments provided with this report
A.Plattsburgh NY cryptocurrency regulations
Notes: Plattsburgh’s former mayor, Colin Read, indicated their major concerns were: noise and vibration,
high temperatures in the facilities for workers, waste heat released to the outside, and fire suppression.
These regulations were designed to address these concerns. Additionally, the cost of energy for
community residences and businesses rose sharply following commencement of Bitcoin operations.
Link to Plattsburgh’s Cryptocurrency Regulations:
https://www.cityofplattsburgh-ny.gov/sites/cityofplattsburgh.com/files/city-clerk/local-laws/LL-6-2018.pdf
B.Missoula County, MT cryptocurrency regulations
Notes: Missoula County’s main concerns were: noise and vibrations, electronic waste due to frequent
replacement of Bitcoin computers with new versions (every 1 1/2 years), excessive energy consumption
(wanted to require development or purchase of NEW renewable energy to offset 100% of Bitcoin energy
use).
Link to Missoula County’s Cryptocurrency Mining Zoning Regulations:
https://www.missoulacounty.us/home/showpublisheddocument/75210/637666330170030000
In this article about Missoula’s regulations, they specifically indicate “proof-of-work” cryptocurrency, which
is the most energy intensive type (ie Bitcoin).https://missoulacurrent.com/business/2021/03/
cryptocurrency-missoula-county-2/
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References and additional information
Background information on Bitcoin and energy use
Data Centers: Data Centers | IBM
Cryptocurrency Mining:
Proof Of Work Vs Proof Of Stake – What Is POW & POS Mining?
(bitcoinexchangeguide.com)
How Much Energy Does Bitcoin Use? - CoinDesk
Bitcoin reports from the media
Bitcoin miners flocked to upstate New York for cheap energy, then it got complicated (cnbc.com)
Cheap power drew bitcoin miners to this small city. Then came the backlash | PBS NewsHour
Bitcoin mining comes to the falls: https://www.niagara-gazette.com/news/local_news/bitcoin-mining-
comes-to-the-falls/article_e4efd70a-ab0f-5ba5-ba6a-a4e986b94f4c.html
Niagara Falls Bitcoin site agrees to tone down the noise: https://buffalonews.com/news/local/niagara-falls-
bitcoin-site-agrees-to-tone-down-the-noise/article_04b0016c-4c9e-11ec-94a6-570a11f0ffd3.html
Referenced in this report
NYS Public Service Commission (PSC) Document “PSC Allows Upstate Municipal Power
Authorities to Charge Higher Electricity Rates for Heavy Electricity-Using Cryptocurrency
Companies”
SEC Note citation: https://www.sec.gov/Archives/edgar/data/1083301/000110465921098354/
tm2123603d2_ex10-4.htm
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