From Coal To Crypto Mining: Are Small Towns Trading One Crisis For Another?
Many of America’s small towns and communities are in trouble.
The small Texas town of Sandbranch has long relied on generous donations of bottled water since running water has been absent for more than three decades.
Even if towns have adequate infrastructure, concerns are mounting about long-term economic security. As people leave smaller communities, utility rates, especially for electricity, rise since there are fewer people paying bills.
As power plants and other utilities shut down completely, job losses mount and small-town landscapes become dotted with abandoned infrastructure that can be hard to sell.
For smaller communities who have power plants that are abandoned or on the brink of shutting down, there is a new option. Selling to a cryptocurrency company.
Recently, the Federal Energy and Regulatory Commission approved a plan by Rocky Mountain Power in Montana to sell a troubled coal power plant. The buyer was Big Horn Datapower Holdings LLC, reputed to be one of the cryptocurrency businesses who were interested in the plant.
It was at risk of shutting down due to a lack of customers, but Montana’s largest utility declined to take over operations.
Rocky Mountain Power offered tours to crypto mining companies before making the same to Big Horn Datapower. Hardin Montana Mayor Joe Purcell said the crypto company could create 50-60 jobs in the area.
Cryptocurrency mining has taken a big nosedive due to falling prices since the start of 2018.
But small communities like Hardin still seem interested in attracting crypto companies in hopes of sparking an economic turnaround, even if things are risky.
Bitmain Enters the Picture
Some of these gambles might be hurting more than they can help. Mining giant Bitmain made headlines when it announced a mining operation in tiny Rockdale Texas.
The situation was very similar to the story up in Montana.
Bitmain swooped in during the summer of 2018, several months after a coal-fired power plant and mine in Rockdale was going to be shut down amid a period of unprofitability. The lack of jobs and deeply reduced tax revenue placed a strain on the community.
Optimism about the future soured in early January when Bitmain put the Rockdale plans on ice.
Milam County Judge Steve Young expressed disappointment in the news since
“This was huge, we need some positive news here. We need some jobs here. We need tax base here and this was a step in the right direction.”
Bitmain said the plans would actually continue with a less ambitious scale. The change was largely in response to Bitcoin’s big price slide.
Power plants in more rural parts of the United States have shown so far to be popular choices for industrious cryptocurrency companies.
Reasons include access to cheap power and basic infrastructure to support mining or other operations.
Many small towns made big promises to crypto companies and their residents. Having to explain why things did not work out as expected might prove be very difficult and potentially costly.
Questions remain about the various tax breaks extended to Bitmain when they decided to set up in Rockdale.
The agreements had certain deliverables that focused on jobs and investment numbers, but these figures might need to be “renegotiated or clawed back if the company misses targets.”
Bitmain’s decision to scale back probably means it will be time to go back to the drawing board.
Communities who were banking on crypto companies to spur on economic transformation might have a short-term boost once they were able to stave off short-term disaster by selling the local power plant.
But in regions that need some sort of stability, questions remain if crypto companies (and fickle markets) are the best solution.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.