Western South Dakota's Only Ranch Station

Crypto mining company leases natural gas wells in Harding County, now state agency, legislators are asking questions

Bitcoin Magazine

BUFFALO, S.D. – Take abandoned gas wells in Harding County on land owned by South Dakota (as well as on private property) that have cost county and state taxpayers millions of dollars since around 2012. Then add the technology of bitcoin mining that requires massive amounts of energy to operate and can be located anywhere – even in the Short Pines of Harding County.

It would seem a recipe for getting abandoned gas wells repaired and/or back in production while gaining more revenue in providing the location and energy source to mine cryptocurrency.

Recently, a cryptocurrency maker has obtained natural gas leases in Harding County from the state’s School and Public Lands to produce electricity to power large computers that “mine” bitcoin. But now that agency says there are problems.

The first is that crypto coin values have decreased from what promoters expected. “Bitcoin has fallen on hard times,” said School and Public Lands land agent Mike Cornelison.

Second, according to officials, the leaseholder owes back taxes to Harding County.

Crypto mining centers come in all shapes and sizes.

And third, state law requires that if a well is not in production for five years, it must be plugged.  And there are inactive wells that need plugging.

It must feel like deja vu to some Harding County landowners and others who found the natural gas drilling in their area lucrative until it wasn’t with the collapse of natural gas prices. That’s when Spyglass Cedar Creek, a company out of Houston, Texas, pulled stakes and left the county and the state holding the bag for up to 40 abandoned natural gas wells.

Legislators who make up the Joint Appropriations Committee asked new School and Public Lands Commissioner Brock Greenfield who is ultimately responsible for the leases. Greenfield said he was. “It falls on me,” Greenfield, a former legislator, said. “We’ll get answers to you. It is our job to be stewards of our resources.”

While recent cryptocurrency price declines and bankruptcies have overshadowed the out-look for digital assets and blockchain technology, the top 100 cryptos are still up more than 2,000% on average since the end of 2016, and developer blockchain activity actually accelerated in 2022. Investors say the collapse of the crypto exchange FTX that led to massive sell-offs, is a function of fraud as opposed to an inherent problem with crypto.

But the market has stranded bitcoin miners as some governments are taking steps to make bitcoin mining illegal. However, the United States remains one of the more bitcoin friendly governments.  Miners who have previously set up shop in countries like China are now making their way stateside to places like Harding County.

Mining centers can be any size. But all need huge amounts of electricity to operate.  For example, a 40-foot data center container for crypto coin-type processing typically uses 1 megawatt of electricity – or 1,000 kilowatts, roughly enough electricity for the instantaneous demand of 750 homes at once.

Then there’s the water. Electric power generators are the largest source of U.S. water withdrawals and account for about 40% of total water withdrawals in the United States which is roughly 161 billion gallons per day.  It was estimated that Bitcoin used the equivalent of about 0.7% of the US’s energy supply during that time.

By this logic, it would mean that Bitcoin alone consumed just over 1 billion gallons of freshwater every day, or 411 billion gallons per year.

In addition, mining centers run very hot.  The cheapest way to cool them is water.  One in five mining centers draws from stressed water sheds, mostly in the West, according to research from Virginia Tech.

See more crypto mining and data centers in South Dakota, here.

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