PA Climate War: Crypto Mining Dispute Heats Up


A grid of large silver trailers sits atop a patch of asphalt on the western bank of the Susquehanna River near Berwick, Pennsylvania. Nuclear cooling towers loom over them, next to a web of energy-generating infrastructure. Inside the trailers, however, is a hive of activity — nearly 8,000 mining rigs, set up to mine bitcoin. This is the Nautilus Cryptomine, which came online in March and aims to be one of the largest bitcoin mines in North America.

The Nautilus Cryptomine has raised concerns among environmentalists. It could lead to a spike in energy use and emissions in the state. It was made possible by a sales tax exemption for data centers that was enshrined in law in 2016. It was intended to build out a different type of industry, such as server or data storage farms.

Nautilus and Cumulus Data are the only two crypto-related ventures on the list of eight companies that have claimed the sales tax exemption. Advocates fear that more crypto-related ventures will follow, should the exemption remain in place.

The lack of regulations has allowed a steady build-out of energy-intensive crypto mines in Pennsylvania. To prevent the state from becoming a bitcoin hub, the House Environmental Resources and Energy Committee passed HB 1282 on June 6. The bill would preclude proof of work coin mining operations from claiming the data centers sales and use tax exemption.

HB 1476, a two-year moratorium on new crypto mines with at least 5 megawatts of power load, was scheduled for a vote but was killed by House leadership at the last minute. The bill would also have required existing crypto mines to report their energy generation, water use and emissions to regulators.

An Earthjustice report found that, from mid-2021 to 2022, the cryptocurrency industry was responsible for an excess 27.4 million tons of carbon dioxide emissions. Crypto currency mining, when fossil fuel powered, contributes to air pollution and hurts the state’s efforts to reach its climate goals.

Rep. Greg Vitali (D-Delaware County) is attempting to get ahead of the industry with HB 1282 and HB 1476. He argues that a tax exemption that would bolster this new source of pollution should not be in place. Vitali’s two-year crypto moratorium bill would give regulators time and a mandate to study the environmental effects.

Stronghold Digital Mining runs two plants on coal waste left over from another energy era. It bills this as an environmental benefit and earns tax credits for doing so. Dominic Folino, president of the PA Blockchain Coalition, is skeptical of environmental concerns and warns against bills that could “deter [crypto] organizations from coming to Pennsylvania.”

Despite fears that narrowing the sales and use tax break could disincentivize a bitcoin rollout, there is little evidence that it was introduced for this purpose to begin with. The exemption was tacked onto a 300-page omnibus bill in the 11th hour of budget proceedings in 2016, with no reference to cryptocurrency.

Pennsylvania must not subsidize a new polluting industry, said Earthjustice attorney Charles McPhedran. Regulations would offer crypto a path toward being a good actor, said Folino. But he added that it is a matter of comparing apples and apples when considering energy consumption.

The fate of the sales tax exemption is uncertain. Lawmakers are not scheduled to return to the Capitol until September. Critics argue that the program will disproportionately serve large tech corporations. If it remains in place, it may not be the last.

Copyright 2023 Capital & Main

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