In mid-January, a massive winter storm swept across the United States, dropping temperatures in Central Texas into the low 20s and causing Texans to huddle indoors with their heaters running full blast. The Texas power grid creaks and groans when it’s put to the test during extreme weather events and sometimes it goes down leaving citizens out in the cold. However this time the power stayed on and it was in large part due to an unexpected recent phenomenon: Bitcoin Mining. Bitcoin miners turned their operations off to redirect power back to critical infrastructure & reduce stress on the Texas grid. (Lee Bratcher, President of the Texas Blockchain Council, recently wrote about how there is considerable evidence that miners in other ISOs similarly curtailed their operations, and benefitted grids across the country throughout the storm.)
Meanwhile, across the country in DC, the Administrator of the Energy Information Administration (EIA) was drafting a memo to the Office of Management and Budget calling for an emergency review of cryptocurrency mining operations out of concern for “stressed electricity systems” and “heightened uncertainty in electric power markets”. Now, the EIA is conducting an emergency data collection of mining operations and the Bitcoin mining industry is scrambling to respond.
The irony that the EIA launches the emergency data collection based upon grounds of grid instability at the very moment mining empirically demonstrates grid synergy is not lost upon us. Let’s dive into the context for this data collection, the industry response, and our thoughts on the overall situation as it stands.
EIA & Emergency Order Context
The EIA "collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment." If a federal agency wishes to collect information from the public, they must ask the Office of Management and Budget (OMB) for permission to use taxpayer money and submit an Information Collection Request (ICR).
Typically,, the procedure would look like this:
- The EIA internally develops the ICR and checks their own internal approval boxes.
- The ICR must be published in the Federal Register for 60 days to put the industry on notice of the proposed survey and afford the public an opportunity to comment. (Notice & Comment)
- The EIA reviews all public comments, summarizes them in a report, and makes any changes to the ICR as a result of the notice and comment period.
- The updated ICR goes back to the Federal Register for another 30 day notice and comment period, and is concurrently submitted to the OMB for final approval.
- OMB reviews the final documentation, all comments, and issues their final ruling on whether the survey will proceed.
Notice and comment is a critical aspect of the administrative law process. For agencies such as the EIA, it affords them an opportunity to consider innocuous questions from affected businesses such as: Is collecting this information necessary? Do the ends justify the means? How will you make sure the data the EIA collects is useful, high quality, and will be protected adequately?
The EIA has initially selected 82 operations to send this survey to, as identified in their in-depth analysis published Feb 1.
Under normal circumstances, ICRs like this are not unprecedented. The EIA has routinely conducted surveys on energy use for commercial buildings and manufacturers in the US (one survey on datacenter use had a 26% response rate among 50 surveyed), as well as energy producers and distributors. It appears the EIA has never singled datacenters out for their own survey beyond that pilot one, let alone Bitcoin miners specifically.
However, the EIA and the OMB have decided these are not normal circumstances. They have triggered the emergency provisions of the Paperwork Reduction Act to bypass the notice and comment period and go straight to the part where you hand over all of the information pertinent to your mining operations, or else. What is unprecedented is the EIA using these emergency provisions to target a specific industry with no discernment over size, location, or any other cognizable metric.
There is no 60 day period. There is no 30 day period. Survey starts now.
Pushing Back On The Emergency Order
Why should we, as an industry, be particularly critical about the omission of this seemingly arcane part of administrative agency procedure?
- The industry is deprived of at least 90 days to coordinate PR responses, conduct research, and plan legal challenges to the underlying validity of the survey.
- Timelines to develop a compliance plan, converse with attorneys, and coordinate with team members are significantly truncated.
- The industry is given zero opportunity to interface with regulators over the type of information requested, industry concerns, or any practical insights miners may be able to provide.
- Notice and comment periods provide transparency into the decision-making processes of administrative agencies and would allow industry participants to ask why these surveys are necessary, and influence their direction.
Therefore, under threat of criminal penalties and fines of up to $10,633 per day of noncompliance, miners are now required to report to the EIA coordinates of facilities, metrics on electricity consumption, identity of power providers, number and age of ASICs, total hashrate, and more.
This all begs the question…what constitutes an “emergency"? According to the statute, agencies are permitted to request emergency processing when “public harm is reasonably likely to result if normal clearance procedures (namely, notice and comment) are followed.”
By consequence, the stance of the OMB and the EIA is this: “If the standard 90 day notice and comment period is observed, then something could happen that is reasonably likely to cause public harm. If we circumvent the notice and comment period and start collecting data now, then public harm is less likely to occur.”
There are two potential takeaways from this:
- The EIA and OMB are really reaching for emergency justification, as little reasonable action could be taken in the next 90 days that would have any material effect on miners’ overall market demand for electricity. There may be reason to consider that utilities use off-peak season for future planning & expansion, so this emergency order would accelerate to account for 2024 on-peak planning.
- There may be intention to take action in the next 90 days based on the findings of the survey that would materially affect miners’ overall market demand for electricity.
(Readers may find it interesting that the Bitcoin halving is almost exactly 90 days from the 1/26 emergency order)
The question remains…what exactly is the emergency here? Here is what we are given in the official approval of the survey published by the OMB:
“EIA has determined that… public harm is reasonably likely if normal clearance procedures are followed. As evidence, the price of Bitcoin has increased roughly 50% in the last three months, and higher prices incentivize more cryptomining activity, which in turn increases electricity consumption. At the time of this writing, much of the central United States is in the grip of a major cold snap that has resulted in high electricity demand. The combined effects of increased cryptomining and stressed electricity systems create heightened uncertainty in electric power markets, which could result in demand peaks that affect system operations and consumer prices, as happened in Plattsburgh, New York in 2018. Such conditions can materialize and dissipate rapidly. Given the emerging and rapidly changing nature of this issue and because we cannot quantitatively assess the likelihood of public harm, EIA feels a sense of urgency to generate credible data that would provide insight into this unfolding issue. “
The Bitcoin mining industry, no strangers to chaotic economic & regulatory environments, has begun responding.
Industry Response
The emergency ICR has been dispatched to approximately 82 miners, who presumably account for the bulk of the United States' hashrate. While this data will ultimately be gathered from all commercial miners, our direct conversations with several industry participants suggest that awareness of this ICR might not yet be widespread. However, several mining advocacy organizations have already issued formal responses.
The Texas Blockchain Council (TBC) has come out strongly against the emergency ICR:
“The EIA’s mandatory emergency survey of electricity consumption represents the latest in a politically-motivated campaign against Bitcoin mining, cryptocurrency, and US-led innovation. We believe this should cause concern for all industries that rely on data centers as part of their operations”.
The TBC calls this an “abuse of authority” and points to the abundance of voluntary data transparency already available for the young mining industry. It also points to exhibitions of miner’s synergy by offering “critical grid-stabilizing benefits” which were “on full display during recent periods of cold weather in Texas”.
Dennis Porter of the Satoshi Action Fund says “this is not the hill to die on” and that miners should lean into transparent data reporting as the most productive response. Porter says “bitcoin miners need to avoid putting yet another target on their back” and to avoid escalation. Satoshi Action’s Mandy Gunasekara says “Notably missing from the EIA letters is any information pertaining to Bitcoin mining’s record of curtailing operations at key moments to shore up grids when demand spikes” and encourages miners to participate in their voluntary curtailment survey.
Twitter has produced a range of responses, including observations of the specific peculiarities of the survey, such as geographical coordinates & punitive measures for non-response.
https://x.com/AB_Brammer/status/1753057141622014025?s=20
Issues & Mischaracterizations
EIA Administrator Joseph DeCarolis’s memo to the OMB specifically refers to an event 6 years ago where the presence of cryptocurrency mining allegedly contributed to adverse effects on grid pricing, however we see overwhelming empirical demonstration that mining activity is inversely proportional to grid energy prices. This is either a significant omission or deliberate mischaracterization.
Additionally, the memo claims miners are modular and “will flock to low cost electricity, which makes demand projections difficult to plan.” However, we have seen little evidence that Bitcoin miners are capable of such swift mobility at scale. A similar (and viable) criticism of the industry is the relatively short lifespan of some operations, leaving unused grid capacity after the mining rigs are gone.
Another glaring omission is that while the EIA may not have fully assessed the state of domestic Bitcoin mining, regional utilities have conducted these assessments. These utilities work closely with miners and grid operators to adopt sophisticated demand response contingency plans for the very emergency scenario used to justify the ICR.
Finally, the EIA only cites only two examples for their claim that there is any precedent for emergency ICRs such as this. EIA forms 878 and 888 were used in order to respond to challenges directly related to specific events of war or natural disaster (Hurricane Sandy in 2012 & the Iraq War in 1991) to monitor the availability and affordability of fuel reserves.
Those emergency ICRs were targeted in response to unfolding catastrophes like war and natural disaster. Here, we have a much broader survey being conducted in anticipation of an ill-defined, theoretical emergency.
Conclusion
Our friends and colleagues at the Texas Blockchain Council have stated: “Although Bitcoin is resilient and cannot be banned worldwide, the administration is seeking to make the lives of Bitcoin miners, their employees, and their communities too difficult to bear operating in the United States. This is deeply concerning.”
We agree. We find that both the decision to utilize the emergency provision and circumvent a dialogue with our industry and the purported rationale for the emergency to be at best misguided and potentially in bad faith.
Bitcoin mining is not a threat to the American power grid, public safety, or to residential power costs. Bitcoin mining will bring investment into our rural communities, help optimize electricity markets, capitalize on wasted resources, and can bring prosperity to many jurisdictions that embrace this industry. Let’s ensure America remains pro Bitcoin & pro Bitcoin Mining.
This is a guest post by Charlie Spears and Storm Rund, with advisory input from Micah Burdge and Colin Harper. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
via bitcoinmagazine.com
