State lawmakers file several bills addressing crypto mining concerns | The Arkansas Democrat-Gazette

Lawmakers filed a flurry of bills Wednesday aimed at addressing concerns regarding crypto mining on the first day of the fiscal session, looking for different approaches to regulating the burgeoning, and sometimes loud, industry that has frustrated many in rural Arkansas.

Crypto mines have become a nuisance for some rural Arkansas communities with many residents complaining of loud noise and high water and electricity usage from the digital assets ventures.

Last year, the state Legislature overwhelmingly approved the Arkansas Data Centers Act of 2023, or Act 851, which prevents local governments from passing noise and zoning ordinances specifically aimed at crypto mines. Since then, many state lawmakers have expressed regret about voting for the law, which they said was hastily passed toward the end of last year’s regular session.

Crypto mining is an energy-intense process, with large banks of computers running 24-hours a day mining for digital assets by solving complex equations. Often the computers are cooled by fans, which creates a loud buzzing noise that disturbs nearby residents. Many of the mines use an inordinate amount of electricity and water to power and cool the computers, causing a strain on utilities.

Three groups of lawmakers are trying to address the issue during the fiscal session, which started Wednesday, but it won’t be easy. During a fiscal session, which occurs in even-numbered years, legislation that isn’t related to appropriations can be taken up only if two-thirds of lawmakers in both chambers vote for a resolution to do so.

A number of resolutions that would regulate crypto mining have been filed.

Sen. Joshua Bryant, R-Rogers, was the first to file a resolution to tackle crypto, filing Senate Resolution 5 on Tuesday. Bryant, who was the Senate sponsor of the Arkansas Data Centers Act, has expressed regret over the law, saying his aim was to stop local officials from “capriciously” shutting down crypto mines that he said were acting in good faith.

Bryant said now that bad actors have become more prevalent he wants to establish state standards he said would greatly reduce noise and limit ownership of the mines by citizens from places such as China and Russia.

Bryant said his bill would establish standards requiring crypto mines to adopt “sound mitigation” practices such as using liquid or submerged cooling, requiring loud equipment to be enclosed in an noise-insulated structure, requiring that the mines be at least 2,000 feet from the closest residential or commercial building, or moving them to an area zoned for industrial use.

Bryant’s proposal also gives back local control to counties by repealing part of the Arkansas Data Centers Act.

“It gives all the tools back to local [governments],” Bryant said. “The counties that want to pass ordinances can, but there’s numerous counties that don’t want to pass regulations but they want the state to address it.”

The bill would restrict “prohibited foreign parties” — which are defined as a person, party or government subject to the International Traffic in Arms Regulations, federal rules meant to restrict the sale of arms to and from certain foreign governments — from ownership of a crypto mining business in the state.

Bryant’s proposal also would bar localities from banning at-home crypto mining or require a resident to apply for a permit to mine for crypto at home.

A proposal from Sen. Missy Irvin, R-Mountain View, would place a 60-decibels limit on crypto mines and a 40-decibels limit on business that utilize a blockchain network.

Through Senate Resolution 17, Irvin said she wants to provide a state-level standard that would make regulation of crypto mines a state issue rather than a local one. Irvin said the decibel limits are based off of recommendations from the Centers of Disease Control and Prevention.

“I think the main thing we’re trying to address is to provide for a state regulatory framework because one currently does not exist for this industry,” she said.

Irvin said a state standard is preferable to allowing local governments to set their own noise ordinances, which would drain time and money from local law enforcement.

Faulkner County has been one of the flash points regarding concerns about crypto mining as local officials have complained about the noise and water usage of a facility near Greenbrier. Twenty-three Faulkner County residents sued NewRays One LLC, the company behind a crypto mine, claiming noise from the facility has hurt their quality of life.

“These are rural counties — [the] majority of them — they don’t have ability or capability of regulating noise. That’s not what they do,” Irvin said.

The proposed legislation would require owners of crypto mines to be licensed by the Arkansas Department of Energy and Environment. The bill also would ban the use of water cooling for future crypto mines but would not apply to crypto mines currently in use.

Irvin’s bill would prevent citizens of countries subject to International Traffic in Arms Regulations from owning a crypto mine in Arkansas, with many lawmakers concerned that some crypto operations have ties to China.

In December, Secretary of Agriculture Wes Ward asked Attorney General Tim Griffin to investigate whether Jones Digital LLC, which owns a crypto mine in DeWitt, has connections to the Chinese government that would violate the law that prohibits certain foreign governments from owning agricultural land in Arkansas.

Sen. Bryan King, R-Green Forrest, filed six resolutions on crypto mining addressing everything from excessive power usage to applying for a license under the Uniform Money Services Act. He said crypto mines have been a drain on local resources without creating new jobs in Arkansas.

“This is creating jobs in China while we’re supplying cheap electricity, and they’re using our natural resources and exploiting us,” King said.

King said he opposes a state noise standard for crypto mines, preferring to let local governments pass their own ordinances on sound.

“Local regulations will address the sound issue. That’s where this is going to get solved,” he said.

Other resolutions include:

Senate Resolution 11, which would impose a fee on crypto mines for “extraordinary electrical energy usage fee.” Crypto mines that use 1 to 2.49 megawatts of electricity in a month will be fined $25,000. For power usage in excess of 10 megawatts a month, crypto mines will be fined $100,000.

Senate Resolution 12, which would ban the use of computers or software manufactured in Russia, China or any country on the U.S. Department of Commerce’s consolidated screening list.

Senate Resolution 13, which would require crypto mines to be licensed under the Uniform Money Services Act.

Senate Resolution 14, which calls for the Arkansas Natural Resources Commission to monitor the impact of crypto mines on water usage and to halt a crypto mining operation if it “threatens the critical groundwater supplies of this state through an excessive use of water.” The bill also calls for the Arkansas Public Service Commission to monitor electric usage by crypto mines and may order a local utility to cut power if the crypto mine “threatens the reliability of the electric grid.”

Senate Resolution 15 would require businesses to file a notice with the Arkansas Public Service Commission and local government before purchasing or leasing land for a crypto mine.

Senate Resolution 16 would repeal the part of the the Arkansas Data Centers Act that bans local governments from imposing specific noise and zoning ordinances on crypto mines. The legislation also would prohibit ownership of crypto mines by citizens or businesses from countries subject to the International Traffic in Arms Regulations.