The Hardin Generating Station, a coal-fired power plant that is also home to the cryptocurrency "mining" operation Big Horn Data Hub, is seen on April 20, 2022, in Hardin, Montana (pop. 3 777). Energy from burning coal is used to power thousands of computers that are kept on site to produce the digital currency known as bitcoins. (AP Photo/Matthew Brown)

Lured to rural America by cheap energy, relaxed zoning regulations and struggling economies, cryptocurrency companies promise rural communities they will bring high-paying jobs and keep utility rates low.

But some question whether the companies will follow through on their promises and what hidden costs there may be to allowing cryptomining into rural America.

In Athens, Tennessee, city manager C. Seth Sumner said the city has been negotiating with a cryptocurrency operation to come into the city limits. Originally, the company wanted to purchase land from the city, but instead chose to go with a private landowner.

The benefits of cryptomining facilities, he said, are jobs and low energy rates. The city of Athens provides electricity for the area.

“There’s a handful of jobs that come from these (companies), but the biggest benefit that we really derive from it is probably from the sale of energy,” Sumner said in an interview with the Daily Yonder. “They’re high users, and where we have extra capacity, it largely helps us to keep our low rates lower for longer because we now have a user who would be making up a financial difference for the utility.”

Cryptocurrency is mined through computer calculations. A cryptomining facility uses hundreds of servers all operating at the same time to accomplish complex calculations that generate cryptocurrency, or manage the transactions behind cryptocurrency trading.

Those servers use an enormous amount of power. In Polson, Montana, for example, a proposed data center would use about 50 megawatts per year – about a quarter of the 208 megawatts produced annually by SKQ Dam. One megawatt is enough to power about 750 homes, analysts said, meaning the data center will use the same power at 37,500 homes in Northwest Montana.

“Our community gets the benefits package from that extra revenue so that we don’t actually have a rate increase or may not need a rate increase, just to keep up with costs, for a number of years,” Summer said.

Providing energy to the data center would mean building out infrastructure as well, he said.

“Through this deal, we’ll actually be getting a substation built next to this facility by our utility that will make the existing industrial site a lot more attractive for further investment and job creation,” he said.

In rural Kentucky, cryptocurrency operations have been popping up all over, said Lane Boldman, executive director of the Kentucky Conservation Committee. The industry is largely unregulated, she told the Daily Yonder, so it’s hard to know how many are starting up and where they’re located.

In some cases, large server banks come into buildings that once served as high-energy users, like old steel plants, Lane said, but in other instances, small operations made from a shipping container full of computers do the digital currency calculations.

“Basically, as long as you’ve got access to some kind of energy source and the internet, you can be running this stuff,” she said.

And that’s where the problem lies, Lane said. Without regulations, there’s no way to tell where they are, what they’re doing, or what kind of waste they may be generating.

In Kentucky, said Jason Bailey, executive director of the Kentucky Center for Economic Policy, the legislature has been very aggressive in providing tax breaks for cryptocurrency operations, but not on regulations.

Bailey said cryptocurrency mining operations are able to get corporate income tax abated, as well as sales tax, meaning the taxes they pay when they purchase electricity or materials that go into the construction of their facilities are abated. Bailey said the crypto companies can even get the income taxes of their employees diverted to the company, which takes money out of the tax base of local school districts.

“It is a hefty set of tax breaks to these operations even though they employ very few people and are certainly based on speculation and uncertainty at best,” he said in an interview with the Daily Yonder.

While the companies promise jobs, he said that most employ under 10 people to manage their server farms. Other jobs for the companies may not even be located in the same town as the cryptomining facility, Bailey added.

So, what is the benefit of having cryptocurrency operations in rural communities?

“That’s a great question,” Bailey said. “What is the benefit? In fact, there could be substantial costs when you look at the noise pollution and the impact on the electricity grid, and the kind of strain and additional costs.”

In some rural areas, elected officials are taking a closer look at these operations.

This month, the New York legislature is looking at whether or not to put a moratorium on crypto mining operations. And in Tennessee, at least one community has passed noise regulations to bring cryptocurrency mining operations into line.

David Adkins, executive director of the Council for State Governments, said while the council doesn’t have a position on the mining facilities and data centers, it’s his feeling rural communities should step carefully when it comes to cryptocurrency operations.

“There are still environmental costs to crypto mining that have not yet been fully determined,” he told the Daily Yonder. “I realize many rural areas are desperate to find new avenues for growth and job creation and many can offer attractive electricity rates to incentivize the siting of an industry that is energy-hungry, but as a matter of public policy, many governmental jurisdictions are reasonably reticent to take the risks represented by crypto. Time will tell, but for now, crypto looks to many like a bridge someone in Brooklyn is trying to sell you.”

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