Senate panel advances crypto mining measures
Amended versions of two bills meant to impose greater restrictions on crypto mining in Arkansas cleared the Senate’s City, County and Local Affairs Committee on Thursday.
The bills are Senate Bill 78 and Senate Bill 79, sponsored by Sen. Joshua Bryant, R-Rogers, and Sen. Missy Irvin, R-Mountain View, respectively. The amendments made to the bills make each of the two senators a co-sponsor on the other’s bill, among other changes.
Senate members approved the amendments before voting on the bills. Bryant and Irvin said many of the changes were made so the bills would complement each other.
“We worked conjointly to make sure that we had the strongest language possible,” Irvin told the body.
The Arkansas House of Representatives approved a pair of resolutions Wednesday authorizing Bryant and Irvin to introduce the bills.
It voted down six others with a similar purpose that were presented by a single lawmaker, Rep. Josh Miller, R-Heber Springs. Each of those resolutions would have authorized Sen. Bryan King, R-Green Forest, to introduce a bill focused on placing restrictions on the operation of crypto mines, although King’s resolutions had cleared the Senate earlier.
Changes listed in Bryant’s amendments to Senate Bill 78 included clarifying accept
able noise-reduction practices when property owners have standing to file a lawsuit in circuit court to enforce such noise reduction techniques, and editing the language of its foreign ownership prohibition to prevent conflicts with Irvin’s proposed legislation.
Irvin’s amendments largely replaced her original bill.
In addition to editing the language of a section on foreign ownership to align with those in the amended Senate Bill 78, her amended version removed a line that prohibited local governments from imposing different requirements for a digital asset mining business than what is applicable to any requirement for a data center, as well as a line prohibiting local governments from rezoning an area with the intent or effect of discriminating against a digital asset business.
It also includes penalty language for foreign parties that violate the rules set out in both bills.
Under both senators’ amendments, a prohibited foreign-party-controlled business includes one in which the party possesses an “ownership interest of greater than zero percent.”
The previous version of Bryant’s bill defined a controlling interest as meaning an ownership interest of 15% or more.
“We want to kick them out,” Irvin said.
The amendments also states that civil penalties and damages received by the attorney general’s office under the section on foreign-party-controlled businesses would be split in half between the state Oil and Gas Commission fund and the attorney general’s office.
Bryant described his bill as “an attempt to clarify local control and make sure that local control does have the authority to regulate within their jurisdictions.”
The proposed legislation also clarifies that people “acting in their individual capacities” have the right to crypto mining within their home, which Bryant labeled a hobby.
Digital asset mining in the home is limited to what a resident’s utilities can provide based on their normal retail rate, he said.
Addressing lawmakers’ concerns over the electricity use of crypto mines, Bryant said such operations aren’t economically viable unless they have a low rate for electricity consumption.
Because of that, businesses that operate crypto mines often agree to a special “interruptible” rate under which electric utilities can notify them to pause their electricity use as needed to ensure adequate supply to other customers, John Bethel, director of public affairs for Entergy, told the committee. Interruptible customers typically experience several interruptions throughout the year, with the most likely periods occurring in winter and summer.
Such customers are given either a 30-minute or one-hour notice in advance of the need to halt their usage, depending on their rate schedule. According to Bethel, Arkansas’ crypto mining customers have the shortest notice.
Those that fail to heed those interruption notices more than two times in a 12-month period are no longer eligible for that service schedule, and their rates increase.
Bryant said such an increase “basically ruins their business model” by rendering such mines too expensive to be cost-effective.
Several committee members expressed skepticism about the effect a rate change may have on such businesses.
Committee chairman Sen. Scott Flippo, R-Bull Shoals, said that a mine that makes considerable money may decide it’s worth the punishment to continue its operation, and that the twice-ayear penalty bar is too loose.
“I just think an operator that gets two chances every 12 months to get back in compliance seems a little lofty to me,” he said.
However, Bethel said his company uses similar terms and conditions with other entities that use more electricity than even crypto mining operations, and that he believes the rate schedule takes into account the utility’s ability to provide reliable energy.
Two members of the public also spoke before the committee.
Jerry Lee Bogard, a rice farmer and landowner, agreed with lawmakers’ concerns over adequate supplies of electricity in areas where crypto mines operate. He said it’s not uncommon in the late summer months to get notices from utilities that brownouts or service stoppage may occur. That stoppage hurts his ability to pump water, he said.
He also expressed worry over areas’ water supplies. While one crypto mine may not cause a significant disruption to supply, several more can be a cause for concern, he said.
Despite his continuing anxieties over these issues, Bogard added, “I think these bills do a fabulous job of addressing some of these, what I call, tier-one concerns,” referring to problems such as noise levels.
He further encouraged committee members to consider “unintended consequences” that can occur when accommodating a new industry.
“This is not the only time we’re going to have this conversation,” he said.
Arkansas Rice Growers Association Chairman Kenneth Graves said his association doesn’t want any crypto mines operating in the state, but that he understood that option was “not on the table.”
“Crypto mines, when they come in, they take,” he said. “They don’t give.”
Among the concerns Graves listed was a lack of local control in regulating crypto mining, water disposal, national security in the event of foreign ownership of an operation, and their effect on internet use for the DeWitt School District campus located roughly 2 miles away from such a facility.
Flippo asked him whether he believes the bills would make his feelings regarding Arkansas’ crypto mining situation “slightly more palatable,” to which he answered in the affirmative.
However, Graves closed by recounting a dream he said his 90-year-old mother recently had.
“[She] dreamed lightning struck a crypto mine and it was on fire, and nobody was in a hurry to put it out,” he said.
The committee will meet Tuesday, 15 minutes after the adjournment of the Senate or at the call of the chairman.