In the wake of controversy over a state law passed last year, the Arkansas Senate approved seven resolutions today that open the door to bills addressing cryptocurrency mining.
The Arkansas Data Centers Act of 2023 limited the ability of local communities to regulate Bitcoin mining operations. It was passed with little discussion during last year’s legislative session just eight days after it was introduced.
But some lawmakers are now expressing regret, with local communities increasingly concerned over the operations’ heavy use of water and energy. Local residents have also complained about severe noise problems, both for their own quality of life and negative impacts on livestock and wildlife. Some are concerned that their property values could fall.
The 2024 fiscal session, which began Wednesday, is generally only for passing budget-related bills. For a bill to be filed on a non-budget matter during the fiscal session, both the Senate and the House must approve a resolution to consider it by a two-thirds majority. If that threshold is cleared, the bill itself can then be filed and go through the normal legislative process.
The Senate easily okayed resolutions from Sen. Joshua Bryant (R-Rogers) and Sen. Missy Irvin (R-Mountain View) on Thursday, as well as five resolutions from Sen. Bryan King (R-Green Forest). They will now need two-thirds approval in the House to proceed.
A sixth resolution by King, which would impose a usage fee on crypto mines for “extraordinary electrical energy,” fell short, with 21 senators voting yes, four voting no and six not voting (another three were excused and not present). King had the vote expunged and could try again — he told me that he considered it a crucial element to addressing the current problems. It’s possible he could pick up enough support from a few non-voters to get it over the two-thirds threshold.
Four Democrats chose not to vote on any of the resolutions. One of them, Sen. Greg Leding, explained his reasoning: “I understand Arkansans’ concerns on this issue, but I’m also reluctant to set a precedent of opening our fiscal session to issues beyond fiscal matters.” That wouldn’t preclude him from voting for one of the bills if he agreed on the merits and it came before him, however.
Bitcoin “mining” (the tech sector loves to use metaphors from the physical world of manufacturing and agriculture) is the process by which Bitcoin transactions are recorded and new Bitcoins enter into circulation. To oversimplify, this process involves solving incredibly difficult cryptographic puzzles requiring networks of high-powered computers. It’s an arms race: Whoever can solve the problems first are rewarded with a healthy payout via newly created Bitcoin.
The problem with these mines is that in order to keep up in that arms race, you need to muster a bunch of computers doing billions of calculations every second, which wastes a massive amount of energy. You also need a cooling system, which often means very noisy fans and a heavy use of water.
All of that sounds like a raw deal for people in local communities where mines are located. Farmers have said their cows are behaving strangely, hunters worry about the impact on birds and other wildlife, and the resource drain could place a burden on the grid or local water supplies.
And it’s not clear that there’s much benefit to communities where a mine sets up shop, other than a local landowner selling property. Critics complain that mines aren’t job creators or drivers of economic growth. Some residents believe they were misled by comparisons to call centers in rural areas, which at least produce a small number of jobs and don’t have the sort of negative side effects that come with a crypto mine.
Critics have also raised the issue of connections between the operations and businesses partially owned by the Chinese government, leading to the state attorney general’s office opening an investigation over potential violations of a state law disallowing businesses controlled by Chinese nationals from owning land in Arkansas.
Bryant was one of the co-sponsors of the 2023 bill. The resolution he introduced Thursday attempts to address the China question, as well as imposing certain distance requirements on the mines from residential or commercial areas and requiring some noise mitigation. This is likely the proposal that the mining operations were involved in developing as a compromise, but will probably be viewed as “lipstick on a pig” by critics, because it still denies local governments the ability to regulate the operations. It will be the resolution to watch if there is haggling over details on a solution during this fiscal session. A lot of lawmakers, including those, like Bryant, who are generally supportive of the mining operations, want to see something passed this session, whether or not it addresses the underlying problems.
Irvin’s resolution would create more regulation and oversight at the state level and set noise limits.
King, one of the most vocal critics of the 2023 law, has the most aggressive approach, fully returning regulatory power to local governments, as well as imposing a more stringent system of fees and oversight on the mining operations. He opposes new statewide mandates or regulations on the issue, preferring to leave it up to local cities and counties.
