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How Montana stands to benefit if its pro-crypto mining bill is approved

The Montana Senate recently passed a bill designed to protect crypto miners operating within the state. The proposed law, which is currently making its way through the state’s House of Representatives, seeks to protect both individual and commercial miners in Montana against discriminatory laws by scrapping some of the rules that have the potential to undermine their operations.

Specifically, the bill seeks to protect miners against taxes on digital assets used as a means of payment. Additionally, it endeavors to permit home crypto miners who use less than 1 megawatt of energy annually to do so, except when in contravention of existing noise bylaws.

Furthermore, it seeks to do away with any energy rate classification that discriminates against home crypto mining and digital asset businesses.

The bill comes after years of concerted efforts by lobbyists and crypto companies to put more crypto-favorable laws on the books in the state.

Satoshi Action Fund CEO Dennis Porter spoke with Cointelegraph about the latest development earlier this week. His non-profit organization helps shape related policies by providing lawmakers and regulators with data that underscores the benefits of Bitcoin mining.

“Montana has very high wind energy potential. It is ranked fifth according to NREL. Remote wind projects struggle in states like Montana though due to the need for very long transmission lines which can get the power to market,” Porter told Cointelegraph. “Mining helps solve this issue because it can be an early buyer of that power. In general, Montana has a hard time exporting its power due to being remote. Now the state can bring customers [Bitcoin miners] to them instead.”

Porter said there are two “major factors” holding back the crypto-mining industry in the United States: “The first is the misconception that mining is bad for the grid or the environment. Mining is in fact a powerful tool for balancing the grid and cleaning up the environment.”

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The second factor hindering mining in the United States, according to the exec, is regulatory policies that apply to mining that fail to take into account some of its positive aspects. He highlighted the concept of grid balancing as an example.

“Mining thrives in states which have grid balancing programs,” he explained. “These programs pay participants to turn down their power consumption when power prices spike or there is a lack of supply. Miners are well suited for participating in these types of programs because mining can reduce its power consumption at the click of a button during any hour of the day.”

How Montana stands to benefit

The bill’s proponents believe that, with updated legislation, Montana will be able to attract mining companies to the state, which they believe will boost the region’s economy both directly and indirectly.

Speaking to Cointelegraph, Montana State Senator Daniel Zolnikov, who is the chief advocate of the bill, said that the region had a lot to gain by embracing the digital asset industry. He explained that, by permitting crypto mining operations to function without restrictions, Montana would potentially attract more businesses and investments from the wider cryptocurrency sector:

“I expect if my legislation passes into law, Montana will attract more digital asset miners who will invest in many of the rural communities in Montana, creating jobs where they are most needed.”

“I hope this will also signal to the larger digital asset industry that Montana welcomes their innovation as well as new innovative companies into our state,” he added.

Sustainability concerns about crypto mining

Not everyone shares Zolnikov’s optimism about the effect crypto mining could have on small towns and communities.

While the influx of crypto mining companies may result in a short-term spike in development, Colin Read, former mayor of Plattsburgh, New York, and SUNY economics professor, said that mining companies generally fail to deliver on their promises of creating jobs. In 2021, he told CNBC:

“Counties and cities are enticed by all these promises of job creation, which — when you look into it, and I have — they just don’t materialize.”

It is also likely to cause an influx of crypto mining companies, and this could lead to energy and sustainability challenges.

The state of New York, for example, has had to deal with related issues since 2018, when it experienced an increase in crypto mining firms lured by its affordable energy. The situation caused retail energy rates to skyrocket due to increased demand and compelled the New York Public Service Commission to introduce steeper energy tariffs for crypto miners to rein in the problem.

Sustainable power supply issues have also emerged in states like Texas, where a considerable number of crypto-mining businesses have set up operations.

Power grids usually experience overloading issues during periods of extreme weather conditions, such as heat waves and winter storms. This is due to the fact that the general public often cranks up their air conditioning during these times, resulting in an overtaxed grid. The situation has, on occasion, forced miners in Texas to pull the plug on their systems in order to ease the strain on the grid.

There are further examples from within Montana itself. Missoula County, responding to concerns over power consumption and pollution, has required crypto mining firms to either consume or generate enough renewable energy to cover 100% of their operations. 

Skyline of Missoula. Source: Ken Eckert.

Montana experiences power-demanding weather conditions. Summer heat in the state can sometimes rise to over 100 degrees Fahrenheit, and Arctic blasts in winter can cause sub-zero temperatures. The extreme temperatures have contributed to the state having one of the highest per capita energy consumption rates in the nation.

Due to mounting environmental concerns surrounding the ecological impact of cryptocurrency mining, several American states have implemented laws that place limits on such energy-intensive activities. The laws often put caps on energy usage or place restrictions on the type of energy sources that can be utilized.

Most recently, New York imposed a temporary ban on mining firms that use non-renewable energy sources. The decision was made with the aim to mitigate the state’s carbon footprint following increased pressure from environmental groups. Related problems are likely to crop up in Montana if its crypto mining bill is passed.

Zolnikov addressed some of the sustainability concerns, stating, “Montana already has an energy mix that makes it attractive to the digital asset mining industry, and my intention with introducing and hopefully passing this legislation is to grant legal certainty for digital asset miners to continue operating in the state for the long term.”

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Montana presently possesses an array of geothermal, wind, solar and hydro energy sources. The Missouri River, the United States’ longest river, flows from western Montana, and its tributaries are also used to generate hydroelectric energy.

A delicate balancing act

Montana’s pro-crypto mining bill is set to encourage more cryptocurrency mining businesses to set up their facilities in the state. While its approval is expected to bring some positive transformations to Montana, some initial teething problems are expected, especially related to eco-friendly and sustainable energy.

Presently, the state possesses a wide range of both renewable and non-renewable energy sources that can be harnessed for more energy. However, it will be interesting to see how the state attunes to emerging changes if the pro-cryptocurrency mining legislation is passed.