North Dakota has a new sales pitch for out-of-state investors: a home for the “cleanest crypto on the planet.”
That was the mantra at the Bitcoin 2022 conference in Miami, where two state Department of Commerce representatives traveled last week to talk with prospective investors in the world of digital currencies. A $35,000 trip, the commerce department said it intended to yield a return of 20,000% or more from the Miami conference.
A combination of cold, dry weather and cheap electricity costs are attracting a growing number of data center operators to North Dakota. At the same time, government leaders have touted the state as an emerging hub for these energy-intensive server farms, some of which mine cryptocurrencies like Bitcoin, Ethereum and others.
Commerce Commissioner James Leiman said the state’s cryptocurrency pitch is part of a broader effort to diversify an economy largely dependent on commodity markets like oil and agriculture. While the state has so far announced around $3 billion of crypto investment, Leiman said his department is close to sealing investments from another $3 billion worth of projects, including several investors that state officials planned to meet with in Miami.
Data center projects have not received any state funding in North Dakota to this point, Leiman said, though Tax Commissioner Brian Kroshus said tax exemptions are available in some cases for technological equipment like servers, routing systems and computer software.
“These engagements, this branding and this awareness is paying off in dividends,” said Leiman, who added that North Dakota has the right resources, infrastructure and tax structure to "plant the flag" as producer of “the cleanest barrel of oil” and the world's “cleanest crypto."
But as North Dakota leaders put in a push to lure more cryptocurrency investment, one state energy official said he is wary of the trade-offs that more data centers could require, while some experts on digital currencies questioned the state's ability to marry its climate goals with crypto mining.
In January, Gov. Doug Burgum and two Montana companies unveiled a massive, $1.9 billion data center near Williston that developers billed as the largest of its kind in the world. Crypto companies are building data centers near Jamestown and Grand Forks . And Bismarck-based Rainbow Energy, which is in the process of buying North Dakota’s largest coal-fired power plant , has said it intends to deploy a data center as part of the purchase, though the company has not provided specifics on that plan.
The state's data center sector could also be expanding soon. The developer of the 700 megawatt data center near Williston, FX Solutions President Richard Tabish, said that project is one part of a mammoth 1.6 gigawatts of data centers that his company is pursuing in other parts of the state.
Leiman said his department is looking to double or triple the $3 billion of crypto mining investment in North Dakota. Among the assets pitched by state officials at the Miami Bitcoin conference, Leiman said, was the Cold War-era, pyramid-shaped missile silo complex in the northeastern North Dakota town of Nekoma. Commerce department officials want to see the decommissioned site retrofitted into a large-scale data center.
Mining crypto — a process in which specialized computers solve increasingly challenging mathematical puzzles to unlock currency — requires vast amounts of energy. Once it reaches full-tilt, the Williston facility, operated by Atlas Power, is expected to draw significantly more energy than any city in North Dakota. According to the analytic website Digiconomist , a single Bitcoin transaction requires 2,112 kilowatt hours of electricity, equivalent to the 72 days of power consumption in an average U.S. household.
Due in part to these high-powered operations, North Dakota Transmission Authority Director John Weeda said he has "mixed emotions" about the expanding data center sector in North Dakota.
Calls about crypto projects have dropped off as the volatile Bitcoin markets have fallen in recent months, Weeda said. He added that North Dakota has a limited supply of around-the-clock electricity generation, and data centers will be competing for energy with industrial projects that could provide more jobs and direct benefits to established industries. A slate of projects that have applied for or received state funding through a recently established energy fund are among the state's high priority developments with large energy demands of their own, Weeda said.
“I would hate to see us not be able to do those if we’re overcommitted to something we’re less sure about,” he said.
Dale Haugen, general manager at Mountrail-Williams Electric Cooperative, which will be supplying power to the Williston data center, said he’s not concerned about limited electric generation in his area. North Dakota exports more electricity than it uses, he noted, and there should be ample room on the grid for both data centers and other energy-intensive projects. Mountrail-William Electric recruited the 700 megawatt data center to Williston, and they are courting three more data center projects to the area, Haugen said.
Still, Tabish, developer of the Atlas Power data center, said he believes his company has already “tied up the lion’s share” of electric generation in several regions of North Dakota with its 1.6 gigawatts in data center projects.
And while Tabish stressed that FX Solutions relies on high-caliber equipment and plans to remain in North Dakota for the long term, he also warned of the "hit-and-run" strategies of some crypto miners. It's not uncommon for crypto mining "energy hunters" to swoop in to tap a cheap energy supply, before abandoning an area when the finances don't pan out, Tabish said.
'Cleanest crypto on the planet'?
Because of the vast amounts of energy required to create digital currencies, crypto mining has drawn criticism from environmentalists who see the process as feeding fossil fuel generation and unnecessarily driving planet-warming greenhouse gas emissions.
Some companies have looked for more environmentally sustainable ways to mine cryptocurrencies and have touted climate friendly goals. At the announcement of the Williston data center in January, Atlas Power President Kevin Washington said his company aims to become “the largest cryptocurrency company in the world with a carbon neutral footprint.”
North Dakota offers several advantages to companies looking to sustainably mine digital currencies, Leiman said. Data centers can locate near power plants in North Dakota, allowing for more efficient transmission of electricity, and some smaller crypto mining operations in the Bakken oil fields are running off excess natural gas that otherwise would have been burned directly into the atmosphere.
Ongoing efforts to capture the greenhouse gas emissions from fossil fuel-powered sources in North Dakota are also key to the state’s pathway to clean crypto mining, Leiman said. Those carbon capture ambitions are central to Burgum's target of achieving statewide carbon neutrality by 2030.
But carbon carbon capture technology has so far been sparsely used globally, and it remains untested at the scale needed to put a dent into North Dakota's emissions. Some experts on the energy consumption of cryptocurrencies said they are doubtful that North Dakota will be able to scale up crypto currency mining without increasing its output of planet-warming emissions.
Joshua Rhodes, a research associate at the University of Texas’ Webber Energy Group, said local tax revenues and a limited number of technical jobs are among the economic benefits that data centers can bring to an area. The higher demands on the power grid may also require utility companies to build new power generation facilities, spurring additional jobs and economic growth, he said.
Still, Rhodes, who has consulted for a Bitcoin company looking for cleaner ways to mine crypto, said powering data centers without increasing emissions requires a number of specific steps. Unless a data center is contracting for 100% renewable power, it will no doubt drive higher emissions, he said.
Haugen said Basin Electric would be serving the Atlas Power data center with a mix of generation types, which could vary between wind, coal and natural gas depending on the day.
Jonathan Koomey, formerly a researcher at Lawrence Berkeley National Laboratory who has spent several decades studying the electricity use of information technology, said that, if a data center is taking its power straight off the grid, without contracting for clean power or building out its own renewable generation, it's likely to drive higher emissions.
Koomey also warned against opaque actors in the crypto world who are liable to pick up and leave an area once conditions no longer fit their needs. Though data centers can provide some jobs and knock-on economic boosts, Koomey said the risks of volatile crypto markets and miners' large energy demands can come back to bite a community.
"Just because they have a big money flow and some private benefits that get people to support the project, doesn't mean that the project has benefits for all of North Dakota," he said.