Georgetown Law
Technology Review

Introduction

On February 23, 2024, a federal district judge in Texas issued a temporary restraining order (TRO) against the U.S. Department of Energy (DOE), preventing it from enforcing an emergency information collection survey issued against the Texas Blockchain Council. The survey was requested by the DOE’s Energy Information Administration (EIA), which collects and analyzes data about energy and its impact on the economy and the environment. The court issued the TRO just under a month after the EIA had announced its plans to issue surveys to specific cryptocurrency mining operations across the country to understand their “energy implications.”

Over the past few years, researchers have warned lawmakers and industry of how resource and energy intensive the cryptocurrency (“crypto”) mining is. Crypto mining requires large amounts of energy—and thus large amounts of water for cooling—which causes high rates for electricity consumers, reduces air quality, and requires a significant amount of water that is later discharged into critical water bodies. Now that the DOE understands how the courts may view emergency requests for information from crypto mining operations, it should find new pathways to studying and regulating crypto mining operations and pay attention to state-level interventions that limit crypto mining’s water footprint and energy usage.

Defining Crypto Mining

Crypto mining is what “verifies and adds new cryptocurrency to the blockchain.” Essentially, it is the process of verifying a transaction. When a complex number sequence is processed and verified through computer systems, a new cryptocurrency token is launched into the blockchain. The miner who solves the complex equation first is rewarded in cryptocurrency. So, the best way to increase one’s odds of accruing a lot of currency is to have large mining operations. Crypto mining companies do so by operating large computer data centers where many computers can run algorithms quickly and solve data sequences. Like other data centers, the operations require significant power sources and negatively impact air and water quality.

Crypto Mining’s Adverse Energy and Environmental Impacts

Dutch researcher Alex de Vries has studied crypto mining’s—particularly Bitcoin’s—negative impact on energy consumers and the environment. Data centers require large amounts of water because the water is used in the computer systems to prevent the machines from overheating. In 2021—when Bitcoin reached its peak price at $65,000—crypto mining used approximately 1,600 gigaliters of water. On average, that means each transaction required the amount of water needed to fill a small swimming pool. De Vries’ research found that one Bitcoin transaction requires 6.2 million times more water than a traditional credit card transaction.

Crypto mining’s water usage is not just problematic because it uses a vast amount of water—it has literal negative downstream effects. Water for the cooling systems is first taken from surface water or groundwater sources. Then, after the water is used for the computer cooling systems, whatever water that does not evaporate in the cooling process is often discharged into local water bodies. In 2021, environmental activists sued crypto mining company Greenidge Generation under the Clean Water Act for discharging hot water in New York’s Seneca Lake, heating the lake “beyond state water-quality standards.”

In addition to detrimental effects to water quality, crypto mining negatively impacts air quality in communities surrounding these data centers. A 2021 study of a crypto miner Marathon Digital Holdings found that its mining operation in Hardin, Montana—which is powered by a local coal-fired power plant—produced 755,700 tons of carbon dioxide emissions. It also generated 304 tons of sulfur dioxide and 245 tons of nitrogen oxides. That same year Marathon began mining, its operation caused an 816% increase in the coal plant’s output. These outfits reduce air quality, emit hazardous pollutants that are dangerous to human health and wildlife, and exacerbate climate change.

Lastly, crypto mining’s devastating impact on the natural environment is only made worse by its effect on everyday energy consumers. The EIA estimates that crypto mining consumes up to 2.3% of all electricity in the U.S. and often relies on power from the grid—national and state interconnected energy systems used to produce and distribute energy to consumers. This is particularly concerning because crypto mining may cause brownouts and blackouts when energy demand peaks, like when areas face extreme hot or cold weather. Furthermore, non-crypto mining ratepayers suffer from electricity cost increases when crypto mining occurs nearby.

Recommendations for Federal Government in Light of Legal Setbacks

Because crypto mining has such problematic environmental impacts and causes grid instability, it is ripe for federal government regulation. However, other than the DOE’s attempts to study its energy outputs, there are no federal laws tailored to address crypto mining’s detrimental effects on the environment and the energy grid. Still, the DOE and other federal agencies are not without options to better understand crypto mining energy consumption.

First, even though the process may take longer, the DOE should continue to issue surveys to crypto mining companies through its regular survey request process. As the judge who issued the TRO alluded, the emergency data collection survey process was not proper because of its emergency nature. To conduct a new non-emergency survey, the EIA is required to allow a 60-day public comment period before collecting data from respondents, and should do so.

Second, in addition to issuing a new survey, the DOE can also rely on independent information already publicly available and the formal notice-and-comment rulemaking process to develop new regulations to prevent crypto mining from further disrupting ratepayers and harming the environment. As new information is revealed through the notice-and-comment period, the DOE should revise initial rulemaking to adapt to comments received.

Policymakers should advocate for less harmful alternatives to water-dependent and high-air emissions crypto mining. First, rather than using water to cool servers, some companies that operate data centers use fluorocarbon-based liquid to prevent overheating. Not only is water not needed but the liquid process is a closed-loop cooling system. Because a condenser is not needed post-cooling, the process does not require additional energy to move the liquid. Moreover, cyptocurrency can dramatically reduce greenhouse emissions by developing new processes to validate transactions like Ethereum did in 2022. With these alternatives and studies on crypto mining energy consumption already available, rather than relying on EIA data, the DOE should turn to the public to understand crypto mining’s impact on energy costs, grid stability, and the environment.

A third option for the DOE is to monitor developments at the state level and work with other federal agencies to inform future rulemaking. In 2022, New York passed a two-year moratorium on crypto mining companies that rely on fossil fuels to power their operations. The record such state laws create yields helpful information and can inform the policy choices the DOE chooses to make. Furthermore, the DOE can request data from other federal agencies like the U.S. Environmental Protection Agency (EPA) to develop regulations around crypto mining energy usage. Because future plaintiffs are required to provide notice of intent to sue before initiating a citizen suit against the EPA for failing to act or perform a duty under its enabling statutes, the EPA likely has useful data on the adverse environmental effects of crypto mining. Like research produced by non-governmental organizations, research institutions, and through state-level regulation and legislation, EPA data may be useful in informing how the DOE regulates crypto mining energy consumption.

Although the recent TRO is a setback, it presents an opportunity for creative lawmaking. The DOE can still accomplish its goal of better understanding crypto mining without relying on the EIA’s emergency survey process. As climate change exacerbates and the federal government works to fulfill its promises to the world to reduce greenhouse gas emissions, the DOE must continue to study and put pressure on crypto mining operations to reduce their harmful effect on communities and the environment.