The Crypto Racket

The five members of the Navarro County Commissioners Court had rarely seen such a large audience for their Tuesday meeting as they saw in October when they weighed a Colorado-based company s application for a multimillion-dollar tax abatement an incentive to expand its already-established cryptocurrency mine near the small North Texas town of Corsicana It was standing room only in the small meeting room of the stately county courthouse Roughly a dozen locals occupied the first rows of seats while more than employees of Riot Platforms the company seeking the crypto handout filled up the rest spilling out into the halls Commissioners called on Jackie Sawicky to speak She wore a black t-shirt with a crossed-out Bitcoin symbol below an acronym for the Texas Coalition Against Cryptomining TCAC the organization she d founded in May days after Corsicana informed that Riot s -acre -megawatt MW mine and jobs with it was coming to a bucolic area southwest of town where ranches are strung along a two-lane farm-to-market road On April the City of Corsicana declared Riot was building the world s largest Bitcoin mine The people living off of FM these beautiful people were not informed nor did they consent she narrated the commissioners This is a multibillion-dollar corporation and they are trying to wriggle out of paying their fiduciary obligation to the county adding that a relatively poor county like Navarro could use all the tax revenue it can get A little later Riot Constituents Strategy Director Samuel Lyman painted Sawicky a -year-old permaculturalist who relocated to the -person Corsicana from the Dallas-Fort Worth suburb of Garland in seeking more gardening acreage as a professional activist even though her work with TCAC is entirely unpaid Lyman revealed his firm had already donated more than to area organizations and that the mine s proposed expansion which will more than double its mining output would generate over a billion dollars in taxable sales to offset the tax break Riot workers plenty of of whom had been bussed in that morning from the mine which lies in unincorporated territory beside the -person hamlet of Oak Valley wore gray work shirts with reflective yellow safety stripes Lyman petitioned them to raise their hands if they supported the abatement Hands shot up Riot Platforms is one of Texas biggest Bitcoin players alongside other cryptocurrency miners including the Nevada-based MARA Holdings Inc China-based Bitmain and Houston-based Genesis Digital Assets Such firms mine Bitcoin by using advanced computers to essentially make trillions of guesses at unique strings of numbers in order to add to a collective digital ledger known as the blockchain and earn new Bitcoin something like a craps battle where the challenge is to see who can throw the the greater part dice at once By growing and maintaining this blockchain miners like Riot earn revenue in the form of Bitcoin the oldest and preponderance valuable of the so-called cryptocurrencies that financial invention which has blurred the lines between a currency and a speculative asset while bedeviling establishment regulators While Bitcoin is designed as a decentralized payment system that bypasses banks and credit cards its consumption of Texans true wealth the state s natural support is centralized in the hands of a inadequate companies sucking up massive amounts of water and strength to keep hardware running Around May cryptominers migrated en masse to Texas for its cheap power and deregulated power grid after China outlawed Bitcoin mining Governor Greg Abbott declared Texas open for crypto business and promised to create a new Bitcoin Mecca Since then cryptomines like Riot s consisting of large warehouses or arrays of Conex-style containers filled with stacks of what look like s-era stereo systems laboring day and night at crypto s contrived random numbers meeting have proliferated mostly in remote unincorporated areas where they benefit from largely unscrutinized sweetheart tax deals and sparse regulations The Riot Platforms Navarro County cryptomine site in March Shelby Tauber for the Texas Observer The October commissioners meeting was Riot s second shot at a tax break in Navarro after the county took no action on the proposal in March Sawicky had organized residents to oppose the giveaway Now facing a surprise agenda item the sparse residents able to make the meeting reminded Commissioner David Brewer of a promise he d made to decline tax gifts for the cryptomine Weighing the company s promise to nearly double its workforce to Brewer and two other commissioners provided the bare majority needed for an unprecedented Bitcoin mining expansion clearing the way for the world s first -gigawatt cryptomine expected to consume as much potential as a brand new city with homes The expansion is set to massively increase Navarro County s vigor footprint in a state where an isolated Texas-centric electrical grid already struggles to meet the demands of its growing population industry and latest proliferation of artificial intelligence figures centers and other Bitcoin mines Rising demand means Texas is on track to nearly double its rate of potential consumption by Increasing strain on the Texas grid worries Navarro locals who have not forgotten the winter storm of when at least Texans died after a polar vortex blasted all counties The storm caused blackouts that affected millions from North Texas down to the Rio Grande Valley Texas grid is still very fragile The improvements made so far by the state are inadequate for what s coming Corsicana resident John Blewitt recounted commissioners The crypto industry isn t interested in investing in alternative potency They want a lot of force a lot of electricity right now which means burning fossil fuels The industry creates an enormous carbon footprint Situation change is real Lee Bratcher president of the Texas Blockchain Council a cryptocurrency industry group informed the Texas Observer that approximately mines are operating in the state in together consuming about MWs enough to power homes But the biggest users are just larger operations that each consume more than MWs of ability Texas is the national epicenter of Bitcoin mining with only about total mines operating outside the state s borders as of according to the New York Times Riot s first Texas facility miles south of Corsicana in Rockdale at the moment holds the record for world s largest cryptomine though only until the firm s Navarro County expansion is complete But Riot s mines need more than electricity The firm requirements just under million gallons of water a day for its unexpanded mine according to documents obtained by TCAC and reviewed by the Observer since the lightning-fast number-crunching will swiftly overheat the hardware if it isn t kept cool The amount represents roughly an eighth of the City of Corsicana s current daily maximum water usage Riot representatives informed commissioners in October they re drilling two wells to tap water from the Woodbine Aquifer and will store rainwater at the mine s -acre retention pond for use but Corsicana is ceding at least part of its own water supply from local reservoirs records show to keep Riot s computerized miners immersed in a thermally conductive liquid It s potential and water that locals like Theresa Hibbitts say they can t afford to lose in a county that was under a burn ban due to drought conditions at the time of the abatement decision and in a state whose grid operator regularly warns Texans to conserve vitality during winter storms and summer heat Hibbitts recalled how the county s lakes were nearly depleted during droughts in and when she reported It was cheaper for me to go buy a new set of sheets than to wash them While Navarro County is no longer in drought Hibbitts and others here know how expeditiously that can change One minute we got a life preserver trying to stay afloat and the next minute all the churches have Pray for rain on them as she put it Riot s tax abatement came after the company made an annexation deal with the hamlet of Oak Valley In exchange for adding the mine site the township will gain more than million in electricity franchise fees to repave bumpy roads and build a park Oak Valley residents including Dawn Horn however aren t buying the firm s PR She explained the Observer she would live with potholes over blackouts In latest visits to the existing Oak Valley facility the Bitcoin operation s immersion cooling systems so far seem to be staving off notable noise trash another issue locals fear Other cryptomines that avoid the expenses and reservoir consumption of liquid immersion cooling typically use industrial fans that create a steady thrum Numerous Navarro residents worried Riot s expansion could bring the same maddening din generated by another cryptomining firm that s keeping their Hood County neighbors up at night MARA Holdings Inc acquired its -megawatt cryptomine in unincorporated Hood County just over miles northwest of Navarro in January The mine looks something like the final stage of the classic Space Invaders arcade competition come to life resembling primitive graphics of aliens descending in ships The facility s giant trapezoidal cooling fans look like they ve just landed atop rows of containers housing thousands of mining computers Instead of fast-paced music they emit a fluctuating drone The mine was first sunk here in on the same property as Constellation Vigor s fracked gas plant in the rolling hills near Granbury a fast-growing suburb outside Fort Worth The whir of the mine s fans mixes with the churn of the gas plant which supplies the mine s power The gas plant which leases roughly of its acres to the mine received a seven-year tax abatement from Hood County in that expired this year Constellation also hopes to use taxpayer funds to add eight new gas-fired turbines to its plant that would generate MWs the exact amount of electricity MARA s mine uses Citing financial uncertainty related to the project s permitting process the company withdrew an application for a taxpayer-funded loan under the Society Utilities Commission PUC Texas Vitality Fund undertaking in March but it noted it will likely apply for a different taxpayer-backed loan under the PUC s Completion Bonus Grant Venture Cheryl Shadden a nurse anesthetist and TCAC member and her eight dogs live across the road When she moved to this acreage west of the Brazos River years ago this was an idyllic rural area Now she endures relentless racket from the mine and plant combined While the background noise may not feel straightaway jarring it peaked at about decibels around the same as a loud vacuum cleaner on the Sunday in September I visited as measured by an app on my phone In the s the federal Noise Control Act tasked the U S Environmental Protection Agency with setting and enforcing noise standards to protect community vitality In decibels was designated as the maximum limit for -hour noise exposure to avoid hearing loss But by Congress had stripped funding for the effort forcing state and local governments to address excessive noise In Texas that authority is largely delegated to municipalities in the form of noise or nuisance ordinances Unincorporated areas like Shadden s area in Hood County lack regulatory authority Cheryl Shadden with two of her eight dogs at her property across the road from the Marathon cryptomine Shelby Tauber for the Texas Observer During my September visit to the area I could sense the impact of the mine s din While talking with Shadden for about minutes as she built decorative wooden pumpkins on a workbench a faint headache began to creep in from my temples a tiny fraction of the disquiet and distress that she and her region describe living with for two years now Shadden says the noise is worse at night That s when the mine runs at full threshold penetrating her walls with noise up to decibels based on her own app readings levels that leave her ears ringing She declared she and certain neighbors have suffered hearing loss migraines and vertigo that they believe is directly related to their prolonged exposure to the low-frequency resonance The World Medical Organization recommends no more than decibels for sleep quality MARA s sound barrier which purportedly helps residents on another side of the mine doesn t do anything for those elsewhere Last summer Shadden put one of her dogs down after it developed anxiety and began ripping out its fur Locals believe other animals and wildlife are affected by the unnatural din though their hunches are hard to prove During my visit we went to see her retired neighbor Tom Weeks He says he and his wife are both light sleepers and have spent countless nights awake He has hypertension and tinnitus and he suffered a pulmonary embolism and massive blood clot this past summer conditions he believes have been exacerbated by the noise A veterinarian has prescribed gabapentin to treat his dog s anxiety In Texas the state does virtually nothing to regulate cryptomines Although miners face up to in fines each day if they failed to register large mines consuming over MWs by the PUC s February deadline no state agency places strict rules on the mines noise levels or asset consumption Hood County residents can appeal to the Texas Commission on Environmental Quality TCEQ but it regulates only the mine s power source Constellation Capacity s Wolf Hollow II gas plant The people have been left out of this thing since day one Weeks stated the Observer There has been no consideration or concern for human beings at all It s just wrong Next we visited Virginia and Nick Browning a couple who have lived for over years on property north of the plant and mine While Nick isn t bothered by the cyptomine s noise given his deteriorating hearing Virginia is kept awake and suffers bouts of vertigo after sleepless nights Particular days I look like I m drunk I mean that s how I walk I can t walk and have my head up she disclosed Shadden Weeks the Brownings and others in the past few days banded together with the environmental law firm Earthjustice to file suit against MARA The lawsuit details myriad physical condition problems residents have announced including a non-cancerous mass doctors exposed in Virginia Browning s brain over the summer and can t explain Residents are seeking an injunction to stop the mine s noise arguing it constitutes a private nuisance under an obscure Texas criminal law which outlines penalties for excessive noise above decibels They re also collecting content for likely personal injury lawsuits against both MARA and Constellation and have successfully pressured leaders in Hood and neighboring Somervell County to pass resolutions opposing the existing mine and proposed gas plant expansion In an email to the Observer Adam Pollock a spokesperson for MARA categorically rejected residents accusations about noise writing in a comment that the company s mine is in an established industrial zone its sound measurements are below legal limits and that there s no link between the company s operations and the alleged ailments MARA is committed to being a good neighbor and has a track record of sustainable business practices and adding jobs and tax revenues to the communities in which it invests he wrote For now locals are celebrating a supremacy related to the gas plant not the mine In February the TCEQ granted residents a contested incident hearing process in response to their challenge to the Wolf Hollow II expansion If the residents prevail an administrative judge could submit a recommended proposal for TCEQ to deny or modify the permit If approved the plant s new turbines known as Wolf Hollow III will add hundreds of thousands of tons of toxic emissions to the area Those include climate-warming greenhouse gasses and volatile organic compounds In August Shadden and her neighbors traveled to the Texas Capitol to testify against the Wolf Hollow III application for a taxpayer-funded loan from the PUC That s where I met Danny Lakey who lives on a hill within a mile of the mine and gas plant He indicated me screenshots of a sound-measuring app with a reading of decibels Shadden communicated members of the Texas Senate Committee on Business and Commerce that since the cryptomine began operating in the gas plant has been running at percent quota sometimes shaking houses when it has to blow off pressurized steam through valves to control compressor surges While Houston was without power during Hurricane Beryl in July she declared she saw valves blow regularly at the Wolf Hollow as it strained to supply power to MARA s round-the-clock cryptomine Shadden and others also lobbied legislators in promotion of resurrecting Senate Bill an ultimately unsuccessful bill introduced by GOP state Senator Lois Kolkhorst in which would have limited cryptomining incentives including the demand response programs in which large crypto firms can sell force back to the Electric Reliability Council of Texas the state s grid operator during peak demand times SB would have capped those incentives at percent and withheld abatements from miners consuming more than MWs The efforts ended in disappointment The PUC approved Constellation s Texas Power Fund application in September before the company voluntarily withdrew its bid to likely reapply for a different loan Meanwhile the Legislature has only moved in crypto s direction since the Capitol visit Texas first legislative session following the reelection of President Donald Trump who vowed to make the United States the crypto capital of the world has put Sawicky Shadden and other environmental advocates on the defense This session state Representative Giovanni Capriglione and state Senator Charles Schwertner both Republicans introduced separate bills to create a strategic Bitcoin reserve As of early April the Senate had passed Senate Bill which would allow the state to build a crypto stockpile boosting the industry Trump signed an executive order in March that would create a similar federal reserve In a New York Times analysis uncovered that large U S cryptomines combined to pump million tons of carbon defilement into the atmosphere per year The rampant advancement of cryptomining in Texas and elsewhere pushed the Massachusetts-based Quiet Communities Inc to file a lawsuit against the EPA to revive Noise Control Act regulations rolled back in the s In addition to the ongoing Hood County circumstance Earthjustice Deputy Managing Attorney Mandy DeRoche reported the Observer that the organization is litigating other cryptomine cases in Florida New York and Pennsylvania involving communities impacted by noise or indirectly impacted by gas and coal ash plant impurity exacerbated by cryptomining The firm she mentioned is considering petitioning the EPA to implement federal noise statutes specifically for cryptomines Various analysts had expected the Bitcoin bubble to burst in after the infamous collapse of the FTX crypto exchange where customers had exchanged cryptocoins for conventional currency or other cryptocurrencies Depositors withdrew assets shortly before FTX CEO Sam Bankman-Fried s arrest on charges of fraud conspiracy and money laundering But prices rebounded even after Bankman-Fried s conviction Miners began expanding while pouring million into the federal elections primarily backing Trump and GOP legislators including Senator Ted Cruz who owns at least three cryptomining machines in the West Texas town of Iraan In Cruz disclosed a purchase of between and in Bitcoin following an endorsement by the Texas Blockchain Council TBC Bitcoin prices have rallied spurred by Trump s executive order supporting crypto improvement and deregulation But as cryptomining expands it is also becoming more cutthroat requiring ever-increasing computing power more advanced hardware and even more force A BloombergNEF model predicted that if the cryptomining peak loads triple Texans peak electricity rates could soar by percent If the expansion is sixfold rates could increase by percent Right now according to TBC s Bratcher the industry is growing by to MWs a month THE PEOPLE HAVE BEEN LEFT OUT OF THIS THING SINCE DAY ONE The development of Texas cryptomining industry massively increases consumption of fossil fuels that cause situation change And its advocates actively promote a political agenda that includes environment denial TBC spent more than half of its revenue in on a lobbying firm A Greenpeace statement noted that TBC advisory board member Genevieve Collins also directs Americans for Prosperity Texas funded by the Kochs and the American Petroleum Institute which is among the greater part vocal opponents of potency and environmental policies aimed at addressing the setting predicament Another TBC board member Riot Platform s Head of Citizens Initiative Brian Morgenstern worked in the first Trump administration as deputy press secretary at the White House the same analysis noted He collaborated with former Power Secretary and Texas Governor Rick Perry to form the America First Initiative Institute which has championed drill baby drill policies In its years as a crypto leader Riot has already rebranded twice In the company changed its name from Bioptix to Riot Blockchain and then to Riot Platforms in as part of an effort to pitch itself as a details center operator Riot like other cryptominers thrives partly on population largesse In addition to tax breaks roughly a quarter of its total revenue million came from force subsidies for not executing its primary function mining Bitcoin as part of its participation in ERCOT s demand-response scheme Chris Jones an electrician who worked at the Navarro County Riot facility for over a year troubleshooting the power system supplying the facility s hardware alleged in March that Riot is attempting to misclassify its facility near Corsicana as a statistics center in its application for an exemption from state sales taxes even though he suggests it doesn t meet the legal requirements In December and February Jones a -year certified electrician filed multiple complaints to the Securities and Exchange Commission the Texas Attorney General s Office and ERCOT describing alleged irregularities by Riot including possible misuse of population funds and misrepresentation in the firm s financial reporting He also filed a complaint with the federal Occupational Safety and Strength Administration OSHA about what he described in the complaint as ungrounded current running through the facility s electrical conduits That place is a death trap I m surprised someone has not got killed up there yet Jones communicated the Observer It s the greater part dangerous place I ever worked and I used to work in coal mines Records show OSHA moved to close Jones situation in February after receiving a response from Riot Platforms Vice President of Safety Frank Durant who explained he d investigated and corrected the issues Jones described Jones sent a rebuttal to the agency disputing Durant s declares on February Jones was fired he mentioned on March after sharing his concerns on social media The agency is now analyzing Jones termination as expected retaliation according to OSHA documents and emails Jones shared with the Observer In an email to the Observer a Riot Platforms spokesperson called Jones proposes categorically false writing While it is disappointing that a disgruntled employee feels the need to make these statements our focus is on our business and continuing to be a positive contributor to the Navarro County population During the Navarro Commissioners Court hearing in October Riot Senior Vice President of Operations David Schatz narrated commissioners and residents that the firm has already improved the land it bought in We have about acres that s unused that we planted trees on that is protected that we do not touch Nobody explained us we had to do it because we re good stewards of the district he noted Citing two meetings the firm held for the community Schatz noted Since Day Riot has been transparent about what we re doing here including what we ve done in the past This is a rinse and repeat of what we ve done in Rockdale We have a proven track record Sawicky however informed the Observer that those populace events were only held after TCAC members and others demanded more accountability with a week-of-action protest and petition campaign She notified the Observer she was forbidden from livestreaming the supposedly constituents meet-and-greet with Riot representatives at the Corsicana Opry last May and was monitored by a safeguard guard Police escorted her out of a second event at the Opry the following month after she announced she pulled out her phone to film Cheryl Shadden Shelby Tauber for the Texas Observer Trump s reelection and the county s abatement decision were the last straw for Sawicky She disbanded TCAC in November and began packing her things to move to New York state She plans to put her Navarro County home on the field My time and strength and activism is valuable so I m going to spend it where it s going to have the biggest impact and where it s appreciated she commented I don t have any hope for this state It s terrible It s getting worse She and Shadden vow to continue their advocacy against cryptocurrency mining but as members of the National Coalition Against Cryptomining NCAC For now Sawicky will help NCAC form a board and obtain its c status Shadden meanwhile is strategizing about how to incorporate her Hood County society as a township Maybe then she ll win the right to enact a few modest regulations for the Wolf Hollow gas plant and Marathon s cryptomine We ve got to do something Shadden advised the Observer I mean how long are all of these communities throughout Texas going to tolerate this This story was supported by a grant from the Fund for Investigative Journalism The post The Crypto Racket appeared first on The Texas Observer