Environmental activists filed a lawsuit against a New York state agency on Friday for approving a cryptocurrency mining company’s takeover of an upstate power plant.
The group said the move violates the state’s landmark climate law that was passed in 2019 and the lawsuit is the first to test how energy-intensive crypto mining legally holds up against the state’s climate goals.
In September, the New York Public Service Commission (PSC), which oversees and regulates public utilities, greenlit the takeover of the Fortistar power plant in North Tonawanda, a town close to Niagara Falls, by Canadian crypto mining company, Digihost.
The Clean Air Coalition of Western New York and the Sierra Club, represented by the non-profit Earthjustice, argued in their filing to the supreme court of Albany county that the PSC’s approval of the transfer violated the state’s sweeping climate law, the Climate Leadership and Community Protection Act (CLCPA), that was passed in 2019.
The act set ambitious targets for the state, including having 70% of the state’s electricity generated by renewable energy by 2030, zero-emissions electricity by 2040 and an 85% reduction in statewide emissions by 2050.
In their lawsuit, Clean Air and the Sierra Club said that the Fortistar plant was used as a “peaker” plant that would run 10 to 74 days a year, only when there was high demand for electricity, like in cold winters and hot summers. As a crypto mining plant, the facility would be running 24/7, producing up to 3,000% more greenhouse emissions, according to the court filings.
The groups argue the CLCPA broadly requires the state to conduct environmental reviews when making approvals and decisions, to ensure the state will ultimately meet its climate goals. The PSC “refused to consider the CLCPA and its requirements” when undergoing the approval process, which started in April 2021, according to the court filing.
Along with increasing greenhouse gas emissions, the groups argue that several communities around the Fortistar plant have been designated as possible “disadvantaged communities” under the state’s climate law, meaning those living in the area bear greater environmental burdens and have experienced historical disinvestment.
The law “requires all state agencies – including the [commission] – to consider greenhouse gas emissions and impacts to disadvantaged communities when considering administrative approvals and decisions,” said the court filing. “If such an action would threaten the CLCPA’s greenhouse gas reduction mandates, it cannot proceed without a justification.”
In response to environmental concerns that were brought to the PSC by Clear Air and the Sierra Club during the approval process, Digihost said it would convert the facility to renewable natural gas, with the ultimate goal of using all hydrogen by the end of 2023, according to public filings. The company also told the commission that its mining facility was approved by the North Tonawanda planning commission, which conducted its own environmental review.
Mining crypto, like Bitcoin, is very energy intensive. If Bitcoin mining were its own country, it would rank 36th in annual electricity consumption, according to the Cambridge Bitcoin Electricity Consumption Index, which tracks electricity consumption used to mine Bitcoin.
After China – once the center of crypto mining – banned it in 2021, the US became the largest hub for mining. Companies flocked to states with cheap electricity and large power plants, including New York, Texas and Kentucky.
While other states have been more welcoming to the crypto mining industry, state officials in New York have recently blocked the growth of mining, citing the state’s climate change goals.
In June, Greenidge Generation, a mining company that took over a power plant upstate, was denied the renewal of a key air permit by the state’s department of environmental conservation, which cited the CLCPA as the impetus for its decision. Greenidge is currently fighting its permit denial and is still in operation.
In November, Governor Kathy Hochul passed a two-year moratorium on new crypto mining operations using fossil fuels in the state. Digihost’s takeover of the plant precedes the bill being signed into law, making it exempt from the moratorium.
Hochul, when signing the bill, said it is “a key step for New York as we work to address the global climate crisis”.
Advocates for crypto mining say miners help bring jobs and economic activity to rural areas, though critics say the amount of job creation is negligible. Mining advocates also argue that crypto mining has been unfairly singled out in the state for its electricity usage and miners are likely to head to states that are more friendly to the industry.
“To date, no other industry in the state has been sidelined like this for its energy usage. This is a dangerous precedent to set in determining who may or may not use power,” the Chamber of Digital Commerce, an advocacy group, said in a statement upon the moratorium’s passage.
The lawsuit also comes at a tumultuous time for the crypto industry after the collapse of FTX, once one of the largest crypto exchanges, in the fall. Following the company’s demise, the price of Bitcoin fell below $16,000, leaving many miners with plummeting assets.