Bitcoin miners align with fossil fuel firms, alarming environmentalists

“When people don’t see pollution, they don’t think it’s there,” one expert said.

Four years ago, the Scrubgrass power plant in Venango County, Pennsylvania, was on the brink of financial ruin as energy customers preferred to buy cheap natural gas or renewables. Then Scrubgrass pivoted to Bitcoin.

Today, through a holding company based in Kennerdell, Pennsylvania, called Stronghold Digital Mining that bought the plant, Scrubgrass burns enough coal waste to power about 1,800 cryptocurrency mining computers. These computers, known as miners, are packed into shipping containers next to the power plant, the company stated in documents filed with the U.S. Securities and Exchange Commission ahead of its initial public offering. Coal waste is a byproduct from decades of mining in the region, left behind in enormous black piles. Stronghold estimated that it’s currently burning about 600,000 tons of it per year at Scrubgrass.

According to the SEC filings, Stronghold plans to operate 57,000 miners by the end of 2022 — an expansion that requires buying up two additional coal waste power plants in the region.

What happened at Scrubgrass highlights a growing trend within the crypto world that alarms some environmentalists. Bitcoin mining is breathing new life into America’s aging fossil fuel power plants, creating a demand environmentalists say discourages investment in renewable energy sources at a time when shifting away from carbon-emitting sources of energy is essential.

Bitcoin and other cryptocurrencies use blockchain technology, essentially a shared database of transactions, where entries must be confirmed and encrypted. The network is secured by “miners” who use powerful computers to compete in an enormous guessing game that ultimately verifies the transactions. If a computer “wins” the game, it’s rewarded with a newly created bitcoin, currently worth about $40,000. The process consumes a lot of electricity, and the computers generate a lot of heat, which means they require industrial cooling systems that need even more energy.

Because of this, the Bitcoin network currently consumes more electricity than many small countries, including the Philippines, according to the Cambridge Bitcoin Electricity Consumption Index.

“Bitcoin mining is essentially waste by design,” said Alex de Vries, a Dutch economist, researcher and founder of Digiconomist, a site that tracks the environmental impact of cryptocurrencies. “It’s a system where participants are forced to waste resources to provide some level of security on the network. The more value bitcoin has, the more money it’s worth, the more we spend on resources.”

The trend has accelerated in recent months after the Chinese government cracked down on bitcoin mining, which until May was home to about two-thirds of global bitcoin mining capacity, according to research firm Rystad Energy. On Friday, China went so far to announce that all cryptocurrency transactions were illegal, which delivered another blow to the industry. But the mining crackdown already led to an influx of bitcoin mining operations into the United States, with several states, including Texas and Kentucky, welcoming them with open arms, cheap electricity and tax incentives.

“These miners don’t just need cheap energy, but a stable source of power because their machines need to run 24/7, and fossil fuel sources are best suited for it,” de Vries said. “Miners are reviving gas plants and idle coal mines in places like New York and Montana.”

Stronghold officials declined to comment because the company is currently in an SEC-mandated quiet period ahead of its initial public offering. But in a recent filing, it described its operations as “environmentally-beneficial,” pointing to Pennsylvania’s classification of waste coal power generation as a “Tier II alternative energy source.” This classification allows Stronghold to benefit from state subsidies.

Waste coal piles are an environmental hazard filled with contaminants that leach into waterways, killing fish and other wildlife, and they sometimes spontaneously catch fire, according to the U.S. Environmental Protection Agency. Burning it as fuel in a power plant like Scrubgrass helps clean up the waste piles, but it emits carbon dioxide into the atmosphere as well as other dangerous greenhouse gases.

“Simply put, we employ 21st century crypto mining techniques to remediate the impacts of 19th and 20th century coal mining in some of the most environmentally neglected regions of the United States,” the company stated in the filing.


According to public filings, Stronghold works closely with the Pennsylvania Department of Environmental Protection to prioritize higher-risk coal waste piles, including those already burning or contaminating waterways, to burn as fuel for its power plants, removing harmful particulates that would be released into the atmosphere from piles that ignite spontaneously.

Rob Altenburg, senior director for energy and climate at PennFuture, a nonprofit organization focused on clean energy, said he believes the state is taking the wrong approach to handling the enormous piles of waste coal and that burning it in power plants just makes a visible problem invisible.

“When it burns, they don’t see big towers of black soot,” he said. “And when people don’t see pollution, they don’t think it’s there.”

The Department of Environmental Protection did not respond to requests for comment.

Altenburg and other air quality advocates prefer alternative approaches to remediation, including planting sea grass on top of waste piles to secure the surface and mitigate leaching problems or moving the waste coal into a lined landfill that prevents any leaching into waterways — a move the coal refuse lobby ARIPPA estimated would cost about $30 per ton.

Altenburg said he believes if the state diverted generous subsidies being given to the coal waste plants and considered the social cost of carbon emissions, it could also pay for remediation. But that would be politically unpopular.

“It’s much easier for our Legislature to pass a tax cut for a business than a bill spending money on environmental cleanup, even if the latter is more cost effective,” he said.

This year, the Pennsylvania Environmental Council recommended that the state’s alternative energy standards, which currently permit subsidies to waste coal plants, be reformed to phase out fossil fuel energy sources like waste coal plants unless they use carbon capture technology.

Chinese migration

Since China kicked bitcoin miners out in the spring, the proportion of bitcoin being mined using renewable energy sources has fallen as miners have migrated to countries with more fossil fuel-reliant energy grids, said Pete Howson, bitcoin expert and senior lecturer in international development at Northumbria University in the United Kingdom.

Many miners turned to China’s neighbors, including Kazakhstan and Abkhazia, recognized by most countries as part of Georgia, both of which have energy grids powered almost entirely by fossil fuels.

Others sought larger, more stable energy markets.

“A lot ended up in North America because there was enough cheapish power, and they could do deals with fossil fuel companies,” said cryptocurrency expert David Gerard.

Until the crackdown, bitcoin mining company Poolin did the vast majority of its mining in China, using mostly fossil fuels in Inner Mongolia and hydroelectric power in Sichuan.

The day after China announced the ban, Poolin Vice President Alejandro De La Torre headed to Texas.

“A very important factor for mining is the cost of electricity, and in Texas it’s very cheap. There’s a lot of oil, as well as wind power and solar,” he said. “There’s also a friendly political environment for bitcoin mining.”

In June, Texas Gov. Greg Abbott tweeted his excitement that Texas would be the next “crypto leader” as cryptocurrency kiosks rolled out in grocery stores.

Cryptocurrency advocates in Houston host a monthly Bitcoin meetup, which in August saw about 200 representatives from oil and gas companies and bitcoin mining companies gather to discuss energy trading,CNBC reported.

De La Torre, who attended the meetup, said Poolin is particularly drawn to using natural gas, a byproduct of the oil industry, that is otherwise being burnt off in flares.

“The narrative is that bitcoin mining is destroying the Earth,” he said. “But we can set up a machine that captures flared gas and runs it through a generator to make electricity. It takes the pollutant away from the atmosphere to create power used for mining.”

Endless expansion

While Poolin has moved its headquarters from Hong Kong to Austin, Texas, its employees have been flying across the other states to see whether they can find cheap energy deals or incentives for setting up operations.

“Kentucky has very attractive incentives,” he said. “That’s where all the coal power plants were located, and many have shut down. This means there’s a lot of electrical infrastructure that’s not being used.”

In late March, Kentucky Gov. Andy Beshear signed a pair of bills offering tax breaks to cryptocurrency miners who set up shop in the state.

Signs of this type of alignment are happening across the United States.

In New York, a former coal power plant on the shores of Seneca Lake converted to natural gas and has started bitcoin mining. Greenidge Generation, the company behind the power plant, on its website described its mining operation as “more than twice as efficient” as the global standard and “100% carbon neutral” through offsets. However, local residents said the power plant is polluting the air and heating the lake, as previously reported by NBC News. A full thermal study won’t be produced until 2023.

The CEO of Greenidge told NBC News in July that the lakeshore facility was operating within its federal and state environmental permits and had created 31 jobs.

In Montana, near the border with North Dakota, a Colorado startup called Crusoe Energy Systems is using natural gas, a byproduct of oil production, as a fuel to generate electricity for bitcoin miners in on-site storage containers. The gas Crusoe is using, bought from the oil field’s owner, Kraken Oil & Gas, would otherwise be burnt off in flares, emitting CO2 and other pollutants. Selling the gas to crypto miners is a win-win for miners and energy companies, proponents say. The process still generates CO2, but it also creates something of value.

De Vries views the process — which is being replicated around the world, including by Gazprom in Siberia — differently.

“Turning a byproduct of fossil fuel extraction profitable can extend the longevity of the power source, potentially making it operate longer than it otherwise would,” he said.

Howson agreed.

“Instead of building renewable infrastructure to power clean energy,” he said, “bitcoin mining is creating an incentive for fossil fuel power plants to become more profitable and continue doing what they are doing.”

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