To Encourage Investment, Hochul Should Veto the Crypto-Mining Moratorium

Among the bills rushed to the governor’s desk in the last flurry of activity during the legislative session was a two-year moratorium on certain types of cryptocurrency mining.

The bill would prohibit the issuance of new or renewed air emissions permits to fossil-fuel power plants that provide behind-the-meter energy for the purpose of powering crypto mining operations that use proof-of-work authentication. It would also prohibit granting permits for expansion of existing operations.

So far Governor Hochul – who promised to position New York as the most business-friendly state in the nation – has avoided taking a firm stand on the crypto moratorium. While expressing concern about the environmental effects of the emissions from crypto mining, she also spoke favorably about its prospects for job creation.

Now she has no choice but to climb down from the fence and make a public decision for or against it.

If she signs the bill, at the end of the moratorium the Department of Environmental Conservation (DEC) would issue a generic environmental impact statement (EIS) on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.

Supporters of the bill worry about greenhouse gas emissions from the energy intensive proof-of-work process, which uses large numbers of computers in an effort to be the first to solve algorithms and earn the resulting cryptocurrency. These emissions, they argue, conflict with the state’s Climate Leadership and Community Protection Act, which aims to cut the state’s greenhouse gas emissions by 85 percent (from 1990 levels) by 2040.

But the crypto “mines” are often located in previously closed power plants or industrial sites, making productive new use of abandoned facilities. Behind-the-meter energy production means the energy is produced and used on-site. The crypto mining firm in that case is not buying energy on the market and competing with other customers, potentially driving up energy costs as happened in Plattsburgh. And any extra energy they produce can be sold into the electrical grid.

If New York is to be a business-friendly state, it must welcome investment from new industries and not drive them away, which is what a moratorium would do. Crypto-miners will avoid investing in a state that’s put them on notice.

And the moratorium isn’t necessary in order to issue a general EIS. The DEC can develop one with or without a moratorium.

So, supporters of the bill have tipped their hand about what outcome they want. While claiming this is just a temporary moratorium, there’s no doubt that a permanent ban on natural-gas fueled crypto mining is their ultimate goal.

Crypto firms, for their part, are well aware of New York’s Climate Act, and know that they’ll soon need to transition to non-greenhouse gas emitting energy. So, imposing an immediate moratorium wouldn’t have much impact on emissions in the long run.

So far, Hochul’s approach to making New York “business-friendly” has been to give handouts to favored businesses. But that’s not the way economically successful states thrive. The proven approach is a simple and fair regulatory environment that imposes reasonable costs and doesn’t make firms jump through hoops and play political games.

Creating separate standards for specific industries is a dangerous game. It warns potential investors to stay away if they value a reliably level playing field.  If crypto miners can demonstrate that their operations meet current state emissions standards, they should be permitted, just like any other activity.

It appears that just the threat of the moratorium has already had a chilling effect on crypto firms’ investment in the state, with the state’s share of the industry falling by 50 percent.

State officials should not fool themselves about how easy it is for businesses to vote with their feet, especially  those with options. And many states are totally open to crypto mining.

The legislature, when it meets next, can still direct the DEC to consider developing a general EIS for crypto-purposed power plants. A moratorium isn’t necessary to achieve that. But the rules should be written prior to implementing them. The purpose of an EIS is to determine whether an activity is acceptable. To ban first, then study whether a ban is justified, is a backward way of conducting the public’s business.

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