CASUAL LEGAL: Municipal Considerations of Cryptocurrency Mining

Municipal Considerations of Cryptocurrency Mining

By Tamara Korassa

Reynolds Mirth Richards Farmer LLP

AMSC Casual Legal Service Provider

 

While Alberta's abandoned well sites are considered problematic, they may be lucrative for a burgeoning industry – cryptocurrency.

Residents in a rural municipality recently experienced cryptocurrency first-hand when noise from a cryptocurrency mine (the "Mine") caused a nuisance. Cryptocurrency mines are groups of computers which confirm cryptocurrency transactions by solving complex mathematical equations ("Blockchains") before other miners. Once a miner verifies 1MB of transactions they are rewarded with a quantity of cryptocurrency.

The Mine was subject to an enforcement action by the Alberta Utilities Commission ("AUC")1 as it was operating a five-MW power plant without approval. An operator of a power plant must apply for approval under Section 11 of the Hydro and Electric Energy Act, or demonstrate an exemption applies under Section 13 of the Hydro and Electric Energy Act and Rule 007: Applications for Power Plans, Substations, Transmission Lines, Industrial System Designations and Hydro Developments.

To qualify for an exemption, the power must be generated for a person's own use and meet other criteria: (i) the capacity of the plant is less than 10 MW, (ii) no person is adversely affected, (iii) the plant complies with Rule 012: Noise Control, and (iv) there is no adverse effect on the environment. The AUC determined the Mine generated power for its own use. However, it required the Mine to stop operations due to failing to meet the requirements that there be no adverse effect on any person or the environment.

Cryptocurrency mines are likely to present a number of considerations for municipalities including:

  • Land use and development – applications for development permits or land use from cryptocurrency mines may require different and specific conditions than would typically be considered for industrial developments including noise requirements, utility servicing, greenhouse gas emissions, and compliance with other regulations.
  • Environmental issues – a municipality may need to balance their role in the regulation of climate change matters with the approval of cryptocurrency mines which require significant power - although some mines would argue that they contribute to the movement to clean energy and solve the problem of declassification and reclamation in the case of use of abandoned oil sites.
  • Taxation and assessment – a municipality will need to determine the classification of the cryptocurrency mine for the purposes of taxation.
  • Nuisance – Cryptocurrency mines may not be supported by neighboring residents due to the noise produced and may result in increased nuisance complaints and need for enforcement of noise control regulation by the municipality.
  • Employment – cryptocurrency mines are a draw for skilled employees and in some cases are retraining unemployed oil and gas workers.

To access AMSC’s Casual Legal Helpline, AUMA members can call toll-free to 1-800-661-7673 or email casuallegal [at] amsc.ca and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] auma.ca, or call 310-AUMA (2862) to speak to AUMA’s Risk Management staff. Any Regular or Associate member of the AUMA can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.


1 AUC Decision 26379-D02-2021.