Chelan County, Washington Extends Restriction of Cryptocurrency Mining Applications

In a highly-attended public hearing held on May 14, 2018, the Chelan County public utility district (PUD) approved a three-month extension of a moratorium on the approval of electric service for new cryptocurrency mining operations.  The low energy costs in the Mid-Columbia Basin have attracted cryptocurrency miners from as early as 2013.  However, when Bitcoin soared in value in late 2017, the region saw a large increase in inquiries and applications from cryptocurrency miners.   

The current moratorium in Chelan County was unanimously approved in March, with officials requesting time to review and assess the potential impacts of increased cryptocurrency mining and electricity demands within their communities.  Citing similar energy concerns, the City of Plattsburgh in New York became the first municipality to ban cryptocurrency mining in early March, enacting an 18-month moratorium on all cryptocurrency mining operations.

Chelan County is one of three rural Washington counties (Chelan, Douglas, and Grant) served by five hydroelectric dams operating in the Mid-Columbia Basin.  The dams generate approximately six times the amount of energy required by residents and businesses, allowing the PUDs to subsidize local energy cost by exporting the surplus energy at premium rates.  While cryptocurrency mining operations may bring economic value to the rural region of Chelan County and surrounding areas, residents are also concerned that the increased local demand for electricity will result in an increase in household energy costs.  

The availability of low-cost electricity has also attracted unauthorized mining operations to Chelan County and the Mid-Columbia Basin.  These operations are sometimes established in residential areas, where the infrastructure and equipment are not designed to support heavy loads of electricity.  Chelan County PUD cited the risks posed by these unauthorized operations in its initial announcement of the moratorium, emphasizing the health and safety risk to its staff and county residents.  Shortly after implementing the moratorium, the Chelan County PUD directed its staff to enforce compliance with the moratorium by imposing fees and fines, disconnecting service, and reporting the unauthorized use of energy to law enforcement as theft.  

While restrictions on cryptocurrency mining activity have primarily been implemented at a local level, governments could take steps to regulate mining activity at a larger scale.  In January, Bloomberg reported that China was discussing taking steps to regulate energy usage by cryptocurrency mining operations, a move that could have a large impact on the global mining industry.  Given the increased attention to the energy demands of proof-of-work cryptocurrencies like Bitcoin, it seems likely that energy regulation will play an important role in the increasingly complex regulatory environment for cryptocurrencies.

Danica Sergison

Danica is a Canadian lawyer, online community manager, and tech enthusiast. She writes about the law, privacy and the intersections between tech and social issues. Twitter: @DanicaSergison

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