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Wednesday, May 24, 2023

How Pennsylvania Politics Are Shaking Up The State's Crypto Scene - Forbes

Pennsylvania’s once freewheeling crypto landscape may soon become a little less welcoming to companies hoping to use its waste coal tax credits and data center sales tax exemptions to establish bitcoin mining operations. And now the estimated half dozen or so that have set up shop in the Keystone State to avail themselves of its various energy options are facing new legislation that if adopted could slow the industry’s rapid growth.

In recent years, Pennsylvania has been a desirable place to mine crypto because of various energy options – nuclear power, plentiful fracked gas, and abundant “waste coal,” whose cleanup is subsidized by the state.

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

The previous committee chair, Daryl Metcalfe, a Republican, had long been lambasted by political opponents as a climate change denier. In 20019 Metcalfe infamously dismissed concerns about carbon emissions, saying that because he enjoyed vegetables “and plants need CO2, so 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 chair, Rep. Greg Vitali, a Democrat who previously was Metcalfe’s foil, has a different approach. Vitali has now introduced two new pieces of legislation that he hopes will put the brakes on the rapidly-accelerating cryptocurrency industry.

The first bill, which was announced to fellow members on May 17, aims to specifically exempt crypto mining companies from using a 2016 law that established a tax write-off for server farms or other data storage firms. Since 2021, that program has ballooned: that year the state exempted $5 million in taxes, an amount expected to hit nearly $86 million by 2027.

Vitali’s second, and more expansive bill, which is set to be introduced imminently, aims to slow down crypto mining’s expansion. If enacted, it would impose a halt on new proof-of-work crypto mining operations, such as Bitcoin. The bill would also require companies to provide relevant information on energy usage to the state’s Department of Environmental Protection, which would study the issue further and evaluate what, if any, further industry regulations are needed.

Cryptomining companies have not yet spoken out extensively about the new pieces of legislation. Kerri Langlais, chief revenue officer of TeraWulf, a company that uses Pennsylvania nuclear power to mine for Bitcoin, said the company could not comment on legislation that had not formally been introduced. But she offered a new talking point, saying mining “can have a symbiotic relationship with the electric grid,” as it can convert “underutilized power generated by renewable sources into bitcoin, a global asset with unlimited shelf life.” (Despite a tax break, TeraWulf just announced a first quarter loss of over $26 million and has an accumulated deficit of over $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 across 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 waste coal remain – and 40 percent of that acreage already “continually burn.”)

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

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

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

However, during the same committee hearing, Rob Altenberg, the senior director for energy and climate at PennFuture, said that burning waste coal sites is merely “shifting” pollution into another form: air pollution. Meanwhile, even carbon-free nuclear power has its issues, too.

“Miners claim they promote clean generation because they can absorb wasted clean energy,” he said. “As we see in Pennsylvania, it’s far more common for them to use polluting fossil fuels to power their 24/7 operations, but there is a more basic issue. We don’t have clean energy to waste.”

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How Pennsylvania Politics Are Shaking Up The State's Crypto Scene - Forbes
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