State legislators propose propose new taxes, closing loopholes on cryptomining

ALBANY, N.Y. (NEXSTAR) — Two bills in the New York State Legislature would increase regulations and costs for mining cryptocurrency, particularly for companies that use the energy-intensive Proof-of-Work (POW) method. Advocates and Democratic lawmakers held a virtual press conference on Friday to rally support for the new cryptomining proposals.

The legislation addresses concerns that continuous, high-intensity consumption at these facilities strain the power grid, contribute to high utility bills for residents, and undermine the state’s climate goals outlined in the Climate Leadership and Community Protection Act. The bill’s sponsors said cryptomining provides few benefits, disrupting communities without creating enough jobs, all while paying below-market rates for power.

They raised several issues:

• A draft state environmental impact statement estimated that emissions from facilities currently operating in New York could impose $10.6 in damage by 2050.
• Cryptomining can lock in carbon emissions by repurposing or extending the life of old fossil-fuel plants, like the Greenidge Generation plant in the Finger Lakes and Digihost/Fortistar in North Tonawanda.
• Cryptominers introduce constant noise pollution, waste lots of fresh water to keep the electronics from overheating and create electronic waste from the fast turnover of equipment.
• Out of 11 known POW cryptominers in New York, eight are in disadvantaged communities—areas with a disproportionate concentration of public health concerns, pollution, damage from climate change, poverty, unemployment, or historical discrimination.

Signed in 2019, the CLCPA requires the state to reduce its greenhouse gas emissions by 40% by 2030 and 85% by 2050, relative to 1990 levels. The CLCPA also set a goal for the statewide electrical demand system to be zero emissions by 2040.

On October 1, Democratic State Senator Liz Krueger introduced S8518/A9138, which would apply an excise tax—a kind of targeted sales tax—on electricity consumed by digital asset mining operations using POW. Democratic Assemblymember Dr. Anna Kelles sponsors the Assembly version of the bill.

Digital assets like digital currencies, coins, or non-fungible tokens are issued or transferred using distributed ledgers or blockchain technology. The POW method uses computers to solve specialized and complex math puzzles to validate blockchain transactions or record data, absorbing lots of energy from the power grid.

The tax would apply to any electricity purchased, produced, or acquired and used for digital asset mining within the state. The proposal uses a sliding scale based on annual consumption, tiered like so:

• Under 2.25 million kilowatt-hours per year, no excise tax
• Between 2.25 million and 5 million kWh per year, $0.02 cents per kWh
• 5 million to 10 million kWh, $0.03 cents per kWh
• 10 to 20 million kWh, $0.04 cents per kWh
• Over 20 million kWh, $0.05 cents per kWh

Facilities powered by renewables, unconnected to the grid, and operating outside of an electric company’s transmission or distribution system would be exempt. And the collected revenues would apply to New Yorkers enrolled in energy affordability programs, helping them pay their utility bills.

The sponsors say cryptomining facilities drive up electric bills, potentially adding about $79 million in annual costs for individuals and $165 million for small businesses. The tax would make those energy-hungry multinational corporations internalize those costs so the state stops subsidizing their profits.

At the press conference, Krueger, the Senate Finance Chair, argued that environmental and financial concerns are closely connected. She said the bill targets an industry that is “creating so much damage, using up so much of our energy, sucking out of the affordability or the lack of affordability of our energy system, and translating to subsidies for these companies.”

Kelles said the bill addresses electricity infrastructure instability, which she called a fabricated problem driven by a “massive explosion of data centers” that consume energy at unprecedented rates. She said the tax would force corporations to pay their fair share. She explained that infrastructure projects like large substations or high-voltage power lines for data centers are included in the utility’s rates, so “the cost of that infrastructure is passed on to all ratepayers.”

Meanwhile, cryptocurrency miners pay disproportionately lower rates, sometimes “as little as one tenth of what New York residents pay for electricity,” effectively subsidizing the corporations. In 2023, New Yorkers paid about $0.2225 per kWh, commercial ratepayers paid about $0.1801 cents per kWh, and industrial ratepayers paid about $0.0687 cents per kWh—over three times the lowest rate paid by cryptominers.

Special contracts let some large-scale corporate crypto operators pay as little as $0.02 to $0.05 per kWh. Specifically, Digihost in North Tonawanda pays the equivalent of $0.03 cents per kWh, and miners in Plattsburgh previously paid about $0.02 cents per kWh before a municipal rate took effect.

The other bill requires the state to review old air pollution permits without expiration dates. State Senator Pete Harckham, the bill’s sponsor and Senate Environmental Conservation Chair, called it necessary because companies “jeopardize public health by exploiting loopholes or regulatory gaps.” He said the state should strengthen oversight and enforce its environmental laws by holding corporations accountable.

The current State Administrative Procedure Act lets an operating permit remain valid indefinitely if the licensee applies for renewal at least 180 days before the expiration date, even if the state hasn’t yet decided on the renewal. S6833A/A8553 relates to such permit modifications, suspensions, revocations, and renewals, particularly for air polluters subject to Title V of the federal Clean Air Act.

The proposed permit reform takes aim at delays for Title V air pollution sources. If the Department of Environmental Conservation doesn’t decide on a renewal application under Title V within two years, the permit holder must pay into a fund benefiting impacted communities. The permit would automatically be denied and suspended after three years.

But even that suspension could be delayed for up to two more years if a state agency or the utility operator themselves determine it would compromise energy reliability. Any permit the DEC denies would be automatically suspended two years from the denial date. And the DEC has to publish a list of these delayed permits yearly.

The legislation would set new rules for any permit required by the state air quality control program related to air pollution and contamination. If it passes both chambers of the legislature and gets signed by the governor, any permit that’s been in effect for over five years without a specific expiration date would be targeted. They’d have a new expiration date set for two years after the date the law takes effect.

Almost any renewal for such a permit would have to expire within five years of that new two-year deadline if the law were to pass. Either way, state law could set longer, specific expiration dates, but those must still be within 10 years.

These rules wouldn’t apply to a facility that has a registration instead of a permit if:

• Its annual emissions are under half of the level that requires a permit.
• It doesn’t require permit conditions to limit emissions below state or federal thresholds.
• Its high toxicity air contaminant emissions are below the applicable thresholds set in regulations.

The proposed permit reform drew “strong objections” from the Business Council of New York State. They argued against what they called drastic and unreasonable restrictions under the bill. Automatic suspensions or denials would punish businesses for administrative failures beyond their control. According to the Council, “A more reasonable approach would be to more fully assess the reasons for significant delays in permit reviews, and the advancement of targeted fixes, whether they be an increase in agency resources, clarification in administrative or substantive permit mandates or others.”

Advocates have targeted two specific POW facilities: the Greenidge plant on Seneca Lake and Digihost/Fortistar. Neither responded to requests for comment.

Greenidge, for example, has operated while contesting DEC’s denial of their Title V Air Permit. That denial dates back to June 2022—more than three years ago—after DEC found that the facility wasn’t operating consistently with state’s emissions limits under the CLCPA. That’s because SAPA allows operation during the appeal process, a loophole S6833A/A8553 would close.

Yvonne Taylor, Vice President of Seneca Lake Guardian, argued that Greenidge is exploiting SAPA. “These bills would finally hold them accountable and prevent huge polluters from operating on expired or denied permits indefinitely,” she said. “Our communities have suffered long enough.”

And Deb Gonda, a member of North Tonawanda Climate’s Smart Communities Task Force, said the Digihost/Fortistar operation in her city has been running on an expired air permit since 2021. She said their Bitcoin mining “generates emissions equivalent to powering 165,000 homes each year, which is more than ten times the number of households in our city of 30,000 residents.” Furthermore, she said they emitted 146,400 tons of carbon dioxide through September of this year alone, a 4,900% increase in greenhouse gas emissions since they stared operating 2021.

Environmental advocates have criticized Governor Kathy Hochul for delays and her apparent openness to ongoing, or even additional dirty fuels. “With Hochul willing to put our communities last, we’re no longer confident that the DEC will enforce our climate law and require Digihost, or any other cryptomining operations, to mitigate its emissions,” said Bridget Rauch, an environmental justice organizer. “These bills are commonsense checks on her favoritism toward corporate cryptominers, protecting people instead of profits.”

They say her administration perpetuated a false narrative about needing fossil fuel production by citing a New York Independent System Operator report, thus justifying delays to legal proceedings in these cases. Taylor argued that, by delaying hearings, Hochul communicated her willingness “to keep Greenidge and other gas fired power plants like it fully operational, without any checks.”

The proposed bills build on previous state moves like a two-year moratorium on new permits for POW cryptomining operations that use behind-the-meter electricity generated from carbon-based fuels. But that moratorium already expired in November 2024.

Another bill floated in the State Senate—S3347, introduced by Democratic Senator Kevin Parker in January, would see the New York State Energy Research and Development Authority conducting a study on powering cryptocurrency mining facilities with renewable energy. The proposed study would determine whether industry growth is compatible with the state’s climate law, the CLCPA, and analyze the economic and technical realities of transitioning to renewables.