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City becomes first in U.S. to ban new crypto mining

But local miners aren’t packing up just yet

Plattsburgh, N.Y.

The wild downtown of Plattsburgh, N.Y. (via Plattsburgh BTC)

As state regulators grapple with crypto mining’s energy drain, one upstate New York city is taking matters into its own hands by making it illegal for new miners to come to town.  

Plattsburgh’s city council unanimously voted late Thursday night for an 18-month moratorium on new cryptocurrency mining operations in the city. This makes them the first city in the U.S. to pass such an ordinance. Miners were first attracted to the small city near the Canadian border on the western bank of Lake Champlain for its relatively cheap electricity. But locals weren’t happy when their home electric bills shot up this winter.

The ban only halts on new operations but doesn’t affect those currently in place. David Bowman, who operates the Plattsburgh BTC mine, applauds the city’s decision .

The moratorium was a positive step for Plattsburgh and cryptocurrency miners, so our next step in the interim is to work together with the city to move forward. We will be discussing very shortly ways to make sure ratepayers aren’t affected,” he told Modern Consensus early this morning.

Plattsburgh BTC

Inside the crypto mining operations of Plattsburgh BTC.

Keeping the decentralized cryptocurrency markets running smoothly requires massive amount of computing power—and enormous amounts of electricity. Plattsburgh BTC began as small pool of hobbyist “miners” who lend their computing power to the network and are rewarded with payment in the form of cryptocurrency. For security, cooling, and power reasons, mines thrive in cold climate, hydro-powered towns like Plattsburgh where most other industries have disappeared.

Bowman runs his mining operation out of an old papermill warehouse in the city.

According to Mayor Colin Read, Plattsburgh has the “cheapest electricity in the world” thanks to a hydroelectric dam on the St. Lawrence river. Residents pay only 4.5 cents per kilowatt-hour;the US average is a little over 10 cents per kilowatt-hour. But industrial enterprises—including crypto mines—in Plattsburgh pay even less: just 2 cents per kilowatt-hour.

This mostly stems from a sweetheart deal made along the St. Lawrence River in the days of $3 per barrel oil when no one seemed too concerned about hydroelectricity. A New York Times article from 1981 noted that a home in White Plains, N.Y. would consume 700 kWh of electricity in a month for $77. That same home in Plattsburgh would pay $11.

Local politicians, setting their sights on startups like Plattsburgh Mining, wanted  an 18-month moratorium to give them time to set more permanent regulations. Mining operations make up an estimated 10 percent of their city’s usage.

David Bowman

David Bowman runs Plattsburgh BTC, mining bitcoin in upstate New York while studying medicine on the Caribbean island nation of Grenada.

Basically anything is on the table at this point,” Bowman said. “But the city is very willing to work with us on these matters and we are coming together to flesh out ideas with the the goal of making cryptocurrency mining safe and good for Plattsburgh. I think cryptocurrency will have a very bright future in Plattsburgh when we lay some ground rules.

Bowman offers his computing power for as little as $9.99 per month for a 250 gigahash plan. For what you currently spend on Spotify, you can become a miner without buying equipment or running up your electric bill.

This ordinance comes at an uncomfortable time for upstate New York miners. On the same day it was passed, New York State Department of Public Service (NYSDPS) Commission Chair John B. Rhodes announced that municipal power authorities will be allowed to charge higher electricity use for cryptocurrency mining businesses starting in March.

The markup is aimed squarely at Plattsburgh mining operations. In a statement, the NYSDPS said:

“While such a significant amount of electricity usage might go unnoticed in large metropolitan areas, the sheer amount of electricity being used is leading to higher costs for customers in small communities because of a limited supply of low-cost hydropower. In Plattsburgh, for example, monthly bills for average residential customers increased nearly $10 in January because of the two cryptocurrency companies operating there.“

Plattsburgh has a hard cap of 104 megawatt-hours of electricity per month at a reduced rate. In winter months, the city regularly exceeds that, meaning they have to buy an overages on the open market. NYSDPS is giving towns the go-ahead to hit miners to help cover the added costs.

“To mitigate the impact on existing customers, the Commission will allow municipal power authorities to create a new tariff focusing on high-density load customers that do not qualify for economic development assistance and have a maximum demand exceeding 300 kW and a load density that exceeds 250 kWh per square foot per year, a usage amount far higher than traditional commercial customers.”

The state decision alone should bring residential power bills back down to their previous levels. But it won’t do much to help crypto miners. “Had the new rates been in place in January, the two cryptocurrency companies in Plattsburgh would have seen a more than 60 percent increase in their monthly electricity costs,NYSDPS said.

While this might seem like overreach, it’s merely raising the rate from 2.0 cents to 3.2 cents per kilowatt hour.

Just 22 miles north of Plattsburgh in Quebec, Canada, cryptomining is seen as an exciting and growing new business that thrives in exactly the kind of towns and areas normally absent of good industry and 24-hour jobs.

Usually, towns in the Salt Belt are on the lookout for new industries to replace the mills that have left. Plattsburgh is a city roughly the size of the Maine mill town in Richard Russo’s novel Empire Falls, where locals talk about little else than when the factory will reopen.

But a survey by CNN Money found that many crypto mines are solo operations. Without mentioning how many people are involved in the Plattsburgh mining community, CNN found that they use about the same amount of energy as a local plastics manufacturer that employs 200 people. “The mining companies? They hire a security guard, and a guy who comes when something breaks,” Mayor Read told the New York Times.

Bombardier, Norsk Titanium, and a Volvo subsidiary all have factories in Plattsburgh. But the ability to earn extra money outside of these industries is low. According to the 2010 Census, the median household income is around $46,000 and 23 percent of the small city’s 20,000 residents live below the poverty line.

For now the operation is strictly a family affair. When we spoke to David Bowman’s father and business partner Rick Bowman, he was jolly and unshaken. The Bowmans have been Plattsburgh residents since 2004.

“It’s still a new industry,” the elder Bowman told us. “The way I look at it, people didn’t like the Wright brothers when they were flying airplanes at first, but they came around.”

On the West Coast in February, the city of Chelan, Washington, put an outright 6 month ban on mining in residential areas due to power and safety concerns. Eastern Washington also has famously cheap hydroelectric power.

Crypto mining is at a crossroads. The blockchain will require an increasing amount of computing power as cryptocurrencies grow in usage. As China and Russia crack down on mining operations, the industry will need to find low-cost renewable energy sources. Computing has always followed Moore’s law, the idea that processor power would double in speed every couple of years. But as of now, crypto is expanding at such a rate that processors and power grids can’t keep pace.

Brendan Sullivan is a writer, producer, and author of the memoir Rivington Was Ours: Lady Gaga, the Lower East Side, and the Prime of Our Lives. Disclosure: he owns cryptocurrencies. Follow him on Twitter.