Friday, February 23, 2024

The bitter dispute over a bitcoin mine

A similar bill passed in Montana last May, and the group has said it hopes to enact its successful formula in more than a dozen other states. Bills written in collaboration with the group were introduced last month in several states, including Indiana, Missouri, Nebraska and Virginia.

Founded five years ago as the Energy 45 Fund, the group sought to tout Donald Trump’s energy and environmental agenda and “defend the greatest president in modern history.” Its founder, Mandy Gunasekara, had spent the previous two years at the Environmental Protection Agency, where she played a key role in the decision to pull the United States out of the Paris climate accord and helped repeal the Clean Power Plan, which aimed to reduce emissions from coal-burning power plants.

Gladys Anderson, along with nearly two dozen neighbours filed a lawsuit against the owners of a bitcoin operation, blaming the operation for various health problems.

Gladys Anderson, along with nearly two dozen neighbours filed a lawsuit against the owners of a bitcoin operation, blaming the operation for various health problems.Credit: Rory Doyle/The New York Times

The group is widely lionised by the bitcoin community, both for its legislative work and for its combative stance toward critics of the industry. But the fund’s aggressive approach has riled others in the bitcoin community who say they prefer to build consensus around cryptocurrency operations.

The strife in Arkansas reflects disagreements across the United States as bitcoin mining has grown by leaps and bounds. Environmental activists, troubled by the industry’s electricity consumption and resulting pollution, have called for federal regulation, while backers of the operations say the mines often help stabilise vulnerable electrical grids and provide jobs in rural areas.

Concerns about the Arkansas mines have expanded beyond the initial noise complaints to include their connections to Chinese nationals. The operations are connected to a larger influx of Chinese ownership across the United States, The New York Times reported in October, some of which has drawn national security scrutiny.

A web of shell companies connects the Arkansas operators to a multibillion-dollar business partially owned by the Chinese government, according to public records obtained by residents opposed to the operations. In November, the Arkansas attorney general’s office opened an investigation into them for potentially violating a state law banning businesses controlled by Chinese nationals from owning land.

A lawyer representing the operations said an independent security contractor was responsible for the incident near Greenbrier and the company never authorised any guard to “brandish a firearm.” They also said that the attorney general’s investigation was based on a “misunderstanding” and that they are legally allowed to conduct business.

Despite efforts to build bipartisan support, the Satoshi fund has succeeded predominantly in red states. But in Arkansas, where the state Legislature is dominated by Republicans, it is conservatives who have led calls to repeal the law, including Senator Bryan King, a poultry farmer whose district includes a property purchased by one of the companies tied to the Chinese government. He said it was not fair that the bitcoin operators received special protections under the law, which shields them from “discriminatory industry-specific regulations and taxes,” including noise ordinances and zoning restrictions.

“They’re in a protected class more than any other business out there,” King said.

As restrictions introduced in Congress have failed to gain traction, states and cities have stepped in to fill the void. But as Arkansas has demonstrated, unsatisfying results can leave residents feeling betrayed.

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‘It’s exhausting’

“Hell” is how Gladys Anderson describes life since the bitcoin operation near Greenbrier opened last May less than 100 yards from her home.

Computers have been running mostly around the clock, she said, creating so much noise — they require constant cooling by loud fans — that her son no longer goes outside. “The reason we moved out here was to get away from people, get away from noise,” she said.

Her son, who requires full-time care for autism, has also grown more agitated and aggressive, she said. “It’s exhausting mentally, emotionally, physically,” Anderson said.

In July, she and nearly two dozen neighbours filed a lawsuit against the owners, NewRays One, blaming the operation for various health problems, including increased blood pressure, anxiety, difficulty sleeping and mood swings.

The lawsuit also suggests the mine has depressed property values.

“Who would want to purchase property near the noisy site?” one of the residents, Rebecca Edwards, wrote in an affidavit. “Short answer: No one.”

Lawyers representing NewRays are seeking to have the case thrown out, citing the Right to Mine law, among other arguments. Recently, the same judge overseeing the lawsuit ruled in a separate case that a local ordinance restricting noise at a related operation was likely to be discriminatory, violating the state law.

A lawyer for NewRays disputed the allegations made by Anderson and the other residents, telling the Times that the company looked forward to defending itself in court. As for the lawsuit at the related operation, in which NewRays is a partner, the lawyer said the mine would be a “responsible neighbour” and hoped to find additional ways “to give back to the community.”

The industry is often criticised for its vast energy use — often a boon for the fossil-fuel industry — and noise is a common complaint.

The industry is often criticised for its vast energy use — often a boon for the fossil-fuel industry — and noise is a common complaint.Credit: Getty Images

After the law was signed by Governor Sarah Huckabee Sanders in April, 49 of the state’s 76 counties enacted ordinances limiting noise levels at data centres, including cryptocurrency mining operations, before it took effect in August, according to the Association of Arkansas Counties. The legality of those ordinances and local governments’ inability to regulate the industry are now central to the struggle between residents and the bitcoin operators, with some elected officials who voted for the state law now opposing it.

“What wasn’t explained was the nature of these crypto mines and how they can cause an intolerable noise with no regard for neighbours or wildlife,” Representative Jeremiah Moore, a Republican whose district includes a bitcoin operation, said in an email.

Moore said the mining bill had been disingenuously promoted to lawmakers as protecting an industry that would create jobs and benefit nearby communities. He recently joined several other lawmakers in drafting a proposed statewide ban on industrial-level cryptocurrency mining.

Senator Joshua Bryant, a Republican co-sponsor of the pro-mining legislation, said in an interview that the law was meant to protect the property rights of bitcoin miners and that he believed a significant amount of pushback was a result of misdirected anti-Chinese sentiment.

Bryant said he that was exploring the possibility of a statewide noise ordinance “to address potential health and safety harms to citizens of the state” and that “ultimately, we have to continue to figure out how to live with our neighbours.”

When a mining computer lands on numbers that bitcoin’s algorithm accepts, the payout is currently worth about $US250,000. The more computers an operation has, the better chance of earning the payout.

The primary sponsor of the law, Representative Rick McClure, also a Republican, did not respond to requests for comment from the Times.

A primary backer of the legislation was Cryptic Farms, a bitcoin-mining company run by Cameron Baker, an Arkansas native. Baker said his company did not anticipate that “bad actors” might exploit the law.

“It wasn’t really on our radar that somebody was going to come in right behind the passage of this bill and present themselves as this perfect villain that does everything wrong,” he said in an interview.

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Tom Harford, an executive at Cryptic Farms who leads the Arkansas Blockchain Council, an industry group, said that he regretted putting residents in a position “where they have no recourse” and that “no law is perfect.”

In Greenbrier, as the lawsuit wears on, Anderson said she and her neighbours have struggled to pay their lawyer. A fundraiser in October brought the community together, but the proceeds barely put a dent in their debt. Still, she said, as long as they can afford it, they will fight the mine.

“I don’t want to be run out of my home,” she said.

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