New York faces a new legal fight over a proposed crypto-mining power plant

Environmental groups are pushing New York state to scrutinize a crypto mining company’s purchase of a gas-fired power plant, contending in a new lawsuit that turning the power plant into a crypto mine would go against the state’s climate goals and dump more pollution on nearby neighborhoods.

Sierra Club and the Clean Air Coalition of Western New York filed a suit on Friday that challenges the New York Public Service Commission’s (PSC) approval of the sale. Under state law, the commission has to give the green light before the transfer of ownership of a power plant can take place. Until now, the commission has mostly focused on whether such a sale would affect residents’ electricity rates or create a monopoly. The commission needs to start taking climate change and environmental injustice into consideration because of a sweeping climate law passed in 2019, the new lawsuit argues.

“The law says you can’t just ignore these really serious consequences,” says Dror Ladin, senior attorney at Earthjustice, the nonprofit environmental law group representing the plaintiffs. “Running the plant 24 hours a day to mine crypto is going to be very bad both for the climate and for and for people in the area.”

The power plant, called Fortistar, is in the small city of North Tonawanda, located between Buffalo and Niagara Falls. Typically, Fortistar is used as a so-called “peaker plant,” firing up infrequently to meet peak electricity demand during an energy crunch. The plant has only been in operation between 10 and 25 days a year since 2017, according to Environmental Protection Agency records cited in the complaint. That schedule is expected to change drastically if Canadian crypto mining company Digihost moves in, which is why some residents are worried about their potential new neighbor.

Digihost petitioned the PSC to approve the purchase of Fortistar back in April 2021. It planned to run the plant “24/7” to power its crypto mining rigs, according to an environmental assessment form the company filed to North Tonawanda later that year. Crypto companies burn through enormous amounts of electricity to mine Bitcoin, more than many small countries use in a single year. To validate new transactions on Bitcoin’s blockchain and earn new tokens in return, “miners” have to solve difficult computational puzzles using specialized hardware. The more hardware you have and energy you use, the better your chances of earning new tokens.

That happens to produce a lot of pollution in the process — especially for operations that get all their electricity from a gas-fired plant like Fortistar. So some nearby residents worry that if Fortistar starts running 24/7, that would increase its environmental footprint.

“My oldest son has asthma and I worry about how the pollution will affect him,” one resident who lives about a quarter mile from the gas plant writes in an affidavit accompanying the environmental groups’ complaint. “I have chronic obstructive pulmonary disease and I’m also worried that increased pollution will worsen my condition.”

New York also has its climate goals to consider. The state has committed to slashing its greenhouse gas emissions by at least 85 percent by 2050. To achieve that goal, the climate law it passed in 2019 mandates that state agencies consider whether its decisions would endanger those goals or disproportionately burden “disadvantaged communities.” While the state is still finalizing criteria for what makes a community “disadvantaged,” some census tracts near Fortistar have already been found to cope with more pollution than 90 percent of the state.

Nevertheless, New York’s Public Service Commission approved Digihost’s petition to purchase the plant in September 2022. “While numerous commenters raise significant environmental concerns … these matters are beyond the scope of the limited review undertaken in this proceeding,” the PSC wrote in its decision.

The suit filed Friday is the first to push the PSC to broaden the scope of its decision-making, citing New York’s climate law. If the environmental groups are successful, the commission would have to rethink its approval of Digihost’s planned takeover of the plant. At that point, Digihost could have a tough time convincing the state that its new crypto mine wouldn’t imperil climate goals.

In a similar fight over a crypto-mining power plant in New York called Greenidge, the state’s Department of Conservation denied air permits because its operations “would be inconsistent with the statewide greenhouse gas emission limits established in the Climate Act.” In November, Governor Kathy Hochul signed a two-year moratorium on new permits for fossil fuel power plants seeking to mine Bitcoin. That gives the state time to conduct an environmental impact review of crypto mining more broadly.

Both Greenidge and Fortisar are excluded from that moratorium because they had applied for air permits before the law was passed. Greenidge is still up and running as it appeals the state’s decision on its air permit. But environmental advocates are optimistic they might be able to keep a crypto mine at Fortistar from getting off the ground at all.

Neither Digihost nor Fortistar responded to a request for comment from The Verge, while the PSC said in an email that it doesn’t comment on pending litigation. Digihost, of course, still has to contend with the ongoing crypto winter that’s made it less profitable to mine Bitcoin. But in a January press release, the company touted a 60 percent year-on-year increase of its Bitcoin production in 2022. The announcement also says that Digihost has already installed “mining infrastructure” at North Tonawanda and “expects the acquisition to close” during the first quarter of 2023.