A professor, a lobbyist, an associate minister and a Bitcoin entrepreneur walk into a bar…

UNLOCKED! Previously for subscribers only: Behind-the-scenes on my recent Bitcoin mining story

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I’ve recently started contributing content to a not-for-profit news site known as The Energy Mix, based in Ottawa, Ontario. It’s an exciting time for Mitchel Beer, the publisher and the whole Energy Mix team as they’ve just joined forces with the UK-based Climate News Network, a volunteer effort run by four veteran journalists who’ve covered climate change for many years internationally.

The Energy Mix has also just confirmed initial backing for an investigative reporting fund, to begin producing original stories.

I’ve been enlisted to bring story ideas and occasional stories on climate change and energy from a uniquely Alberta perspective. My first story was published on September 26 on the topic of Bitcoin mining. During the course of researching this story, I collected quite a bit of interesting background that I’d like to share here.

The story was sparked by an excellent piece by CBC on a small Bitcoin plant near Edmonton. That was followed a couple of days later by emeritus professor of law Nigel Bankes’ thorough post on the University of Calgary’s Faculty of Law blog, ABlawg.ca. This is an excellent blog, by the way. Highly recommend.

The legal angle and a lack of due diligence

You can watch an interview by independent energy journalist Markham Hislop with Bankes as he explains for the layperson, all of the various acts and regulations involved in this case. He also offers his opinion on what went wrong here.

“This company doesn’t seem to have done the basic due diligence to figure out what the rules were,” Bankes says in the interview.

Bankes also says The Hydro and Electric Energy Act is the problem and specifically a rule allowing the company to determine whether there are any adverse impacts on stakeholders and/or the environment.

“The AUC (Alberta Utilities Commission) needs to look at that rule and put in an expedited process to review, (they) shouldn’t just leave it to the operator.”

The cryptocurrency landscape

Medicine Hat and Lethbridge are a hotbed for Bitcoin mining. In April of 2021, before Link Global’s operation was discovered to have set up without approval, Medicine Hat News ran a story about the Bitcoin mining industry’s plans for the province. It may have been a harbinger of the fate of the company’s Strathcona County power generator.

“In Alberta, utility regulations are lower for facilities with production capacity levels of 5 megawatts and less, especially for so-called behind-the-fence facilities that do not access the provincial grid to bring power in or sell off supply,” stated the Medicine Hat News.

Later that summer was when Jeff Kocuipchyk first started hearing a strange noise while enjoying his backyard hot tub. He's president of the Greystone Manor Community Association. Ten households from Greystone Manor, all located along the west side of the community, with backyards facing the Link Global plant, complained about the noise to the AUC, according to the CBC report.

The AUC began an investigation that eventually resulted in two of the company’s plants being shut down and penalties levied in the range of $50-75,000.

By the way, this is roughly comparable to the price of one Bitcoin, which can range from $30-63,000. It takes about 10 MW of power to generate about 1.2 Bitcoins per day.

The lobbyists and Texas

In late July of 2021, Kileya Karringten, co-founder and CEO of Absolute Combustion, as well as the executive director of the Canadian Blockchain Consortium, wrote an opinion piece for energynow.ca (a “news” site linked with all of the heavy hitters of the fossil fuel industry). In it, she talks about how Alberta should follow the lead of Texas, when it comes to Bitcoin mining.

“Without Governor Abbott’s strong support, Texas wouldn’t have become the next big Bitcoin mining hub, and Alberta needs the same public sector backing if we’re going to compete with other energy producing regions. And it’s also good for the energy concerns around crypto mining, because Alberta’s high regulatory standards will help improve the overall ESG profile of Bitcoin,” wrote Karringten.

Ironically, this piece was coming out just one month before the Link Global operation was discovered to have started up without any approvals or regulatory compliance.

Alberta may have at least one advantage over Texas, though, according to Hut 8 Mining CEO Jaime Leverton:

“But the challenge with Texas is the heat. It is so hot. It means you have to use a lot more power and capital to put towards cooling that equipment. Whereas, when I think about our operations in Alberta, we actually are able to take advantage of free air cooling because Alberta is just a perfect climate. It’s flat, it’s dry, it’s windy. The winters are long and cold and the summers aren’t too humid or hot, so it allows you to have a better environmental footprint because you’re spending less on the infrastructure and the energy required to cool the equipment.”

The politics and the strategy

The lobbyists may be trying to get the Alberta government’s attention but there’s little evidence they’re taking much notice.

Bitcoin mining may have the potential to help natural gas producers find another use for their “stranded” gas or even to capture methane for powering generators needed for Bitcoin mining. It’s relatively inexpensive when scaled down, requiring little maintenance or monitoring, for example.

If this is something the Alberta government would like to encourage, there’s little mention of it anywhere. A search of Alberta.ca and the Natural Gas Vision and Strategy document turned up no mention of Bitcoin mining, despite a lot of hype in the media from the industry.

While looking for Bitcoin mentions, I came across this jaw-dropping video. The President and CEO of the Canadian Energy Pipelines Association (CEPA), Chris Bloomer, talked to Dale Nally, Alberta’s Associate Minister of Natural Gas and Electricity in late 2020.

After slamming environmental activists as an icebreaker with his audience, Nally talked about the process he used to create the strategy. Nally explained it this way:

“I got the CEO’s of the biggest gas companies again, across the value chain, I got them into a meeting, and I said, here’s where we are. And they loved it. Ninety or 95% but they gave us some things they still wanted us to work on. So even when you know we were almost at the finish line, we went back and we did some revisions.”

“This was not our strategy. This was industry strategy,” said Nally in the interview.

Wait, what? Doesn’t Nally work for Albertans?

The players and the arguing

The industry is making moves to improve its environmental footprint but it seems like there are divisions in the ranks. I stumbled upon an interview on the Stephan Livera Podcast with Steve Barbour of Upstream Data, an Alberta-based company producing equipment for small Bitcoin mining ventures.

Stephan Livera describes his guests as being “high profile Bitcoin, Libertarian, Austrian economics and Macro.” He’s interviewed Twitter’s Jack Dorsey, former Libertarian US Presidential candidate and Texas congressman Ron Paul, disgraced British politician Godfrey Bloom and conservative historian and Trump fan Niall Ferguson.

Barbour was the industry representative who gave a presentation to the Edmonton Bitcoin Association in 2018 falsely claiming that Bitcoin operators required “no landowner notifications.” Read more about this in my piece for The Energy Mix.

Upstream Data’s website talks quite a bit about the environmental benefits of Bitcoin mining:

“In this new world where ESG and environmental considerations are big driving factors behind how producers plan and finance their drilling and completions programs, we expect to see more and more producers take a closer look at this technology.”

However, in a wide-ranging conversation with Livera on the podcast, Barbour argues that wind and solar as power sources are unreliable. He also takes issue with the industry’s efforts to rebrand themselves.

Barbour, returning for his second time to the podcast, seems to be a big fan of Livera’s and the two don’t waste time getting into their political views. Here’s Barbour’s opening salvo:

“The world’s going to everything’s going to go to hell no. I mean, and that time I was on your podcast was my first ever. So, yeah, you broke my podcast virginity. I’ve been on a few cents, so I’m a little less nervous now than I was for that first one. I was super nervous. Yeah. I don’t know, man, like everything is going, I mean, all walks of life seem to be going more socialist even America now. I think America 20, 30 years ago would look in America now and be like, what the hell has happened? You know what I mean? So they’re supposed to be the shining light of capitalism and call it free markets and it doesn’t seem to be going in that direction. So yeah.”

Livera wants to talk with Barbour because he’s been critical of the Bitcoin mining council. Barbour disagrees with the council’s claims that Bitcoin mining is going to be run on clean energy.

“I’m seeing increased interest from not just people on waste gas, but people on stranded gas. So that would be a carbon-increasing application because it’s just gas that was turned off and now it’s turned on. I’m seeing increased demand from these economically stranded coal fired power plants,” says Barbour.

“They’re going to be spun up. So, this whole concept that okay, justifying Bitcoin is okay. It’s okay that we’re using this energy because we’re on renewables and we’re on relatively clean energy. Now that’s a really — You’re setting yourself up to fail as that transitions towards a more carbon heavy energy. And I think it will, like, I think it really will because fundamentally carbon heavy energy is really, really cheap and that’s what Bitcoin miners need. It’s cheap and reliable.”

The scuttlebutt on the message boards

There’s an interesting thread on Slashdot.org about the costs of Bitcoin mining and the slack regulations that seem to favour the companies:

“So if I admit to speeding, will they half or quarter the ticket I'm going to get because I admitted to it? And that's JUST for speeding,” asked one anonymous user.

“Yet if I want to exploit natural resources for literally NO REASON and pollute the planet, and do all that illegal, piss off all the neighbors and everyone around, break numerous laws.... I can get $30 or $40,000 knocked off the fine if I "admit" it?”

Finally…

I hope to expand this to be a little more interactive in the future. I’m looking at a number of ways of doing this. There are so many new forums for opening up a discussion. Stay tuned for that.

In the meantime, feel free to reach out to me via email at lipstickproject@gmail.com to comment on anything or make story suggestions. I’d love to hear from you.

You can also see all my free posts on my blog, which admittedly has been around a lot longer than this newsletter. You can find me at www.jodymacpherson.com.