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Texas bitcoin miners don’t have to report energy usage yet; Denton touts selling renewables

Riot Blockchain’s facilities in Rockdale are shown during a winter storm in February 2022.
Courtesy photo/
Riot Blockchain
Riot Blockchain’s facilities in Rockdale are shown during a winter storm in February 2022.

In January, the U.S. Energy Information Administration announced that as part of an emergency data collection request, it would require bitcoin mining facilities such as Core Scientific in Denton and Riot Platforms in Rockdale to start reporting their energy use for the first time through a provisional survey called the Cryptocurrency Mining Facilities Report.

Riot Platforms, the country’s largest bitcoin miner, and the Texas Blockchain Council, an industry advocate of cryptocurrency mining companies, responded Feb. 22 with a lawsuit seeking a temporary restraining order to stop the revelation of their energy consumption because they said it would irreparably harm them to divulge proprietary information that the EIA didn’t have the lawful authority to collect.

“This is a case about sloppy government process, contrived and self-inflicted urgency, and invasive government data collection,” their lawsuit alleges.

In response to the litigation, the Energy Information Administration decided Feb. 23 to use its discretion and not enforce any requirement to respond to the survey through March 22. That same day, the federal court in Waco entered a temporary restraining order preventing the EIA from collecting data, according to the EIA’s letter Monday to the Office of Management and Budget, which approved the emergency data collection in late January.

Tuesday afternoon, District Judge Alan Albright canceled a preliminary injunction hearing that had been set for Wednesday in the Western District of Texas since an “agreement in principle” had been reached between the parties discontinuing the EIA’s emergency data collection, according to court documents.

“We are pleased that the Court granted the requested TRO and that the EIA has now agreed to halt the ‘emergency’ survey,” said attorney Chris Davis from the Gray Reed law firm. “It is unfortunate that our clients had to pursue legal action to make the federal government simply follow the law, but we are grateful for the Court’s thoughtful analysis that led to this result.”

In a letter Monday, EIA Administrator Joseph DeCarolis said the agency intends to continue a process it had already begun under the Paperwork Reduction Act’s notice-and-comment procedure whether to request the Office of Management and Budget to approve data collection of the type described in the emergency data collection.

“If EIA decides to go forward with proposing an information collection covering data of [that] type, ... EIA will publish a notice in the Federal Register setting forth the proposed information collection. ... That would trigger a public comment period of at least 30 days, after which the Director of OMB could make a decision whether or not to approve the information collection,” DeCarolis’ letter states.

That process could take up to a year to complete, according to Thomas Cmar, a senior attorney for Earthjustice, a nonprofit environmental law organization. Cmar said the Feb. 22 lawsuit by the Texas Blockchain Council and Riot Platforms “was about the timing and the process that the government followed to put out a survey.”

“The EIA collects this type information from every energy user in the U.S., so there is no question that they have the authority to collect this information,” Cmar said. “It’s just a question of whether this industry is willing to cooperate by making this information publicly available to the extent it should be publicly available.”

In an email Wednesday, Lee Bratcher, president and founder of the Texas Blockchain Council, shared Electric Reliability Council of Texas data showing what he called “how helpful bitcoin miners are when demand for power increases.”

Bratcher said bitcoin miners in Texas make up over 95% of what ERCOT calls “large flexible loads.”

“There is about 2,450 [megawatts] of bitcoin mining in Texas, but this load isn’t adding to peak demand since, as the data shows, miners curtail their consumption during peak demand,” Bratcher said in his email.

During those times of curtailing consumption, bitcoin miners such as Riot Platforms can sell their prepurchased power back to the grid for millions. As The Texas Tribune reported in January, Riot made $32 million by reducing its energy use last August.

Cmar called it a loophole in Texas law and another reason — along with lack of regulations — that crypto miners are coming to Texas.

“More and more, the price that Texans will pay for power will be controlled by the big bitcoin mining facilities [due to] the massive percentage they use from the grid,” Cmar said.

Texas has been called a bitcoin boom state with nearly 30 crypto mining facilities, including Core Scientific in Denton and another unnamed one on the way after the Denton City Council directed staff to move forward with the project last week.

“These crypto mining facilities stress electric grids, threaten to raise electric bills wherever they operate, and increase emissions from fossil-burning power plants that pollute our air and water and contribute to climate change,” Cmar said in a statement Tuesday responding to the Texas Blockchain Council and Riot Platforms’ lawsuit.

Last summer, ERCOT reported it had seen an unprecedented amount of larger loads — more demand — interconnecting and weren’t able to identify the larger load facilities — bitcoin miners — tapping into the grid.

They also experienced a significant amount of large loads unexpectedly disconnecting from the grid and inconsistent behavior of large loads during resource scarcity events, according to an Aug. 16 ERCOT presentation.

The EIA is primarily a research organization that takes data from energy users and puts out reports. Those reports show how much energy different industries use, where it is sourced from and how much they are paying for it. It’s a well-established process, year after year, that Cmar said state regulators around the country rely on to do their energy planning.

By the EIA initiating the emergency data collection, Cmar said, they were trying to “level the playing field” by requiring crypto mining companies to start reporting their energy usage.

“The lawsuit in Waco seems to be trying to push it as long as possible,” Cmar said.

Core Scientific already reports its usage to Denton Municipal Electric — and so will the new smaller crypto mining facility, once it’s up and running at the airport industrial park — because it’s purchasing electricity. But Stuart Birdseye, a DME spokesperson, said the mining usage will remain a mystery to the public.

“Per Texas Law, DME is not permitted to discuss actual customer energy consumption or their bills,” Birdseye wrote in Sept. 28 email to the Denton Record-Chronicle. “However, when the Core Scientific project was discussed with the Denton City Council in late 2021, DME provided estimates of their power usage and the associated revenues that the City of Denton might realize when the project was fully developed.

“It is estimated to double the overall City of Denton’s annual energy consumption when the project is fully developed but will not impact the energy used by other DME customers.”

In a Feb. 22 email, Mayor Pro Tem Brian Beck said that facilities consuming power from DME’s 100% renewable energy market is different from tapping into Oncor or Reliant Energy, which he said uses an ERCOT energy mix of 69% fossil fuels to 31% renewables.

“Because DME only sources power and power credits from wind and solar sources, we are actually promoting more renewables in Texas and reducing the carbon produced relative to if they located in Flower Mound or Decatur,” Beck said.

On Sunday, more than 80% of electricity on the Texas grid came from wind and solar power — a new record for ERCOT.

Denton council members also created what Beck called a new zoning class for mining data centers and included requirements that set noise limits at “about the same sound level as having a loud conversation.”

But Cmar said you have to look at the whole impact on the grid and the stress inflicted by running computer-filled data centers 24/7 to mine bitcoin, which peaked at a price of $63,000 on Wednesday for the first time since November 2021.

The U.S. Department of Energy found that the electricity used to mine cryptocurrency is roughly equivalent to all electricity used by homes in Colorado or California depending on usage and “likely higher in Texas,” according to a Feb. 28 report by Texas Monthly.

In September, Earthjustice reported that in one day, Texas’ top five bitcoin miners used a total of 1,212 megawatts, which is as much energy as 242,400 Texas homes. Those top five miners included Riot Platforms in Rockdale at 450 megawatts at No. 1, followed by Cipher Mining in Odessa at 207 megawatts and US Bitcoin in Upton County at 200 megawatts.

Core Scientific in Denton could take the No. 2 spot once it reaches full capacity. Core Scientific CEO Adam Sullivan told the Record-Chronicle that the Denton facility is expected to reach 297 megawatts at full capacity.

In a Feb. 20 presentation to the City Council, DME claimed that both the city and the electric utility stand to make millions off the deal with the new bitcoin miner.

Beck pointed out that 17% to 33% of the revenue from data centers is allocated directly to the city’s sustainability fund, one that Beck said is now more than doubling the rebates for energy-reducing technologies such as electric vehicles, e-bikes, new energy-efficient appliances and smart thermostats.

“We don’t incentivize crypto mining in any way,” Beck wrote in his Feb. 22 email. “We don’t give them grants or cheaper rates or invest in their companies. We just sell them renewable power. And we demand through our contracts that when there are periods of low reserves that they shut down, thereby making more electricity available to hospitals and residents.”

Denton’s new crypto deal comes at a time when crypto miners in Texas may have already raised electricity costs for Texans by $1.8 billion per year, based on calculations from the “blue sky” hours (when prices are low) by Wood Mackenzie, a global data and analytics business.

“Bitcoin mining is likely to have stronger impacts on the grid over time as the number of larger and more power-hungry mining facilities is likely to grow,” Wood Mackenzie said in its Sept. 27 report.

Bratcher, from the Texas Blockchain Council, disagreed with Wood Mackenzie’s estimates and said they were inaccurate because they “don’t take into effect the downward price pressure that miners have because we curtail during the highest-price times.

“They also don’t take into account how bitcoin miners lower the price that ERCOT pays to procure demand response services.”