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Montana Cryptocurrency Zoning Law May Be Country’s First

At a commissioners’ meeting last month, Missoula County put pen to paper on a permanent piece of largely environmental zoning law related to cryptocurrency they believe is the first of its kind in the country.

by Jordan Hansen, Missoulian / April 8, 2021
Students will learn the key components of modern-day investment strategies. (Dreamstime/TNS) TNS

(TNS) — At a commissioners’ meeting last month, Missoula County put pen to paper on a permanent piece of largely environmental zoning law related to cryptocurrency they believe is the first of its kind in the country.

On March 25, the Missoula County commissioners voted to adopt zoning regulations regarding cryptocurrency mining operations aimed at sustainability and the county’s 2030 clean energy goals. The county did not come across any cryptocurrency mining regulations regarding climate change during an exhaustive nationwide look at zoning laws.

Missoula County officials believe it is one of the first counties in the nation to enact cryptocurrency mining ordinances specifically dealing with climate change.

“I think the zoning that Missoula County is about to adopt is one of the first that really addresses the climate change impacts of cryptocurrency mining, and so we’re very excited about this,” said Jennie Dixon, a senior planner with the county’s Community and Planning Services, on March 25.

Cryptocurrency mining operations, which are a type of digital asset retrieval, use tremendous amounts of energy.

The county is pushing the Missoula County urban area toward 100% clean energy by 2030. The new zoning law regulates the location of mining operations, what type of energy the industry can source and what it has to do with its waste.

Hyperblock LLC, a former cryptocurrency mining operation in Bonner, at one point used as much energy as one-third of all households in Missoula County at any given moment. When operational, Hyperblock had 20 megawatts of capacity.

“We’ve made a commitment to pursue 100% clean electricity in our Missoula urban area by the year 2030,” county commissioner Dave Strohmaier told the Missoulian recently. “And the last thing we wanted to do was to see any industries in our county be headed in the opposite trajectory and set those goals backward.”

‘A global crisis’

Diana Maneta, the county’s sustainability program manager, and Dixon has been at the forefront of the zoning regulations.

The topic has been discussed at numerous county meetings for years, which eventually led to the formation of the cryptocurrency zoning project. The ordinances they helped develop have been in the workings since 2018, when they began a deep research dive into the subject.

Early on in the process, five major topics regarding mining operations were addressed: electronic waste, noise, climate impacts, fire safety and utility grid impacts.

The latter two eventually dropped in importance as concerns around them faded.

The county worked quickly on some base proposals and Missoula County adopted emergency interim zoning rules in 2019, which have served as the basis of the regulations as they have developed.

Considering the county’s larger goals regarding energy usage, climate impact became a major focus. Burning fossil fuels releases carbon dioxide into the air, contributing to earth’s climate change.

“Climate change is a global crisis that we need to address and we simply cannot turn a blind eye towards those impacts on our communities that might be heading us in a different direction from an energy usage standpoint,” Strohmaier said.

In early 2019, Hyperblock said it wanted to push up to 60 megawatts of capacity at any given time. NorthWestern Energy outputs around 1,600 MW per year. At one point, statewide cryptocurrency plans NorthWestern received would have totaled around 1,000 MW, Maneta said the company told her.

When interim energy rules went into effect, Hyperblock would have had to source clean energy for any further expansion. The company sourced power from Energy Keepers, which is owned by the Confederated Salish and Kootenai Tribes, and had worked with Hyperblock and its predecessor in the same location, Project Spokane LLC.

Energy Keepers recently settled with Hyperblock after the power company claimed in a suit it was owed $3,691,604 plus interest.

The county has contended the laws were not directly aimed at Hyperblock and in fact welcomes cryptocurrency mining operations in Missoula County.

Energy intensive

Cryptocurrency miners are rewarded for energy investment, as they use lots of electricity.

The base process of mining digital currency is having a special type of computer try and solve what basically is a random number combination that helps provide a layer of security for cryptocurrency transactions.

Operators around the world are trying to update the ledger of all transactions for a cryptocurrency. The fastest to solve the problem and update the overall ledger is rewarded with a piece of the digital currency.

In order to get it, miners have to have a proof of work.

“The proof of work, what you’re proving in order be a part of the system, is that you have invested a lot of money in the form of computational capacity and mostly energy to be part of the system,” Maneta said. “The fact it’s so energy intensive isn’t exactly like a side effect, the whole point of the proof of work system is to show that you have invested a lot of energy into it.”

Replacement machines and upgrades to better machines were also issues. These new permanent Missoula County companies dispose of electronic waste — colloquially known as e-waste — which includes discarded electrical devices.

As part of its commitment to fighting climate change, discarded e-waste generated has to be recycled through a licensed Department of Environmental Quality waste recycling firm.

Noise was another issue, one which was heavily discussed in July of 2018. The Bonner mining operation was forced to replace 144 fans after residents in the area complained about noise.

Under the new zoning laws, facilities may only be present in districts zoned light industrial and heavy industrial.

As for the final two points, it was better understood that large cryptocurrency mine operators rarely overtaxed machines to the point where they overheat, Maneta said.

Utility companies the county worked with, including NorthWestern Energy, were also not concerned about their ability to have service issues associated with increased power demand.

The county looked extensively at fires caused by overheating machines and even considered fires caused by overtaxed transformers and other parts of the energy grid that could have had the potential to spark.

Drawn by cheap power

Whether a new cryptocurrency mine will set up shop in Missoula County remains to be seen.

Cheap energy is the major reason cryptocurrency operations have flocked to Montana and western Washington in recent years. Other areas of major cryptocurrency mining include China and the Republic of Georgia.

One of the most common currencies mined is Bitcoin, which is currently worth around $56,257 per Bitcoin. A year ago this time, one Bitcoin was worth around $7,000. Bitcoin also had a peak in December of 2017 to around $19,000, which was the background for much of the original conversation surrounding the need for more stringent zoning regulations.

“As the price of Bitcoin increased, mining got more lucrative, it got more competitive and people started doing it on a larger scale,” Maneta said. “They started realizing, ‘Hey, if I got to a place where electricity is really cheap and, oh, the climate is cool, because otherwise my computer’s going to overheat, then I can make a lot of money doing this.’”

Montana has cheap energy, much of which is renewable. In 2019 data, NorthWestern claimed 61% of its total output was carbon-free.

Other areas in Montana have seen significant cryptocurrency mining interest.FX Solutions, formerly known as CryptoWatt, operates 35,525 servers near Butte.

Should another operator come to Missoula County, the rules are now crystal clear.

"We're probably not the first place people think of to call, although we do have an important place in the permitting process," Dixon said. "So it's smart to call and find out what the zoning requirements are."

Added Maneta: "We have talked with several folks who were considering cryptocurrency mining in the county and they had questions related to making sure they understood what the county's regulations involved and we talked them through especially the renewable energy requirements.

"So we have talked through at length and provided a lot of information on those to people who are considering it."

(c)2021 Missoulian, Mont. Distributed by Tribune Content Agency, LLC.


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