The Alberta Utilities Commission (AUC) decision to shut down a rogue bitcoin mining operation near Edmonton may reveal shortcomings in the province’s regulatory regime for small power producers and the greenhouse gas emissions they generate.
Link Global Technologies Inc. of Vancouver began operating a five-megawatt power plant in Sturgeon County, about 10 kilometres northwest of Edmonton, in late August, 2020. Two months earlier, the company also started up 3.5-MW operation near Kirkwall, in southern Alberta, according to the AUC
The operation at Sturgeon County or “Campbell,” as Link Global refers to the plant, used natural gas from a dormant well owned by a Calgary company, to power generators used to “mine” or generate bitcoins.
“There was just one problem: The company hadn’t notified neighbours of its plans. Or the county. Or the provincial utilities commission—which allows power plants to be set up without approval if they meet several conditions, including only generating power for the company’s own use and proving the plant has no adverse effects on people or the environment,” reports the CBC.
Under the current rules, the company may have been subject to a regulatory regime for small, self-supplying power generators that relies mainly on an honour system.
“It’s a strange world where a self-interested applicant is the guardian of the public interest even if it has read the rules,” wrote Nigel Bankes, emeritus professor of law at the University of Calgary, in the Faculty of Law blog.
The AUC decision states Link Global was “unaware of the statutory and regulatory requirements.”
Alberta’s Hydro and Electric Energy Act requires prior approval for the construction and operation of a power plant, but there are certain exemptions. Section 1.4.3, Rule 7, states facilities generating less than 10 MW (which applies to both Link Global operations) may proceed without filing an application if there are no adverse effects for any person or the environment.
But that determination is left up to the company.
“There is something very odd about this provision,” Bankes wrote. “It is designed to determine when it is unnecessary for a party to even file an application with the AUC, and thus each of these conditions effectively requires an applicant to stand in the shoes of the AUC and make its own determination of public interest matters.”
The Hydro and Electric Energy Act saw some minor changes in late 2019, when the Red Tape Reduction Implementation Act repealed some requirements for hydropower plants. The act was last amended in 2017 and has remained largely unchanged since.
There may be some confusion about the rules, so the decision on the Link Global case may serve as a reminder to other companies to consult with nearby stakeholders. At least one company selling bitcoin mining equipment to oil and gas companies claimed incorrectly in a presentation to the Edmonton Bitcoin Association in late 2018 that operators required “no landowner notifications.”
Link Global has now shut down both plants and is planning to move the Campbell operation to another location, according to an August news release. The company continues to operate a 10-MW bitcoin mining power plant near Westlock, north of Edmonton.
“Although not stated explicitly (in the legislation), the Link decision suggests that prudent operators should notify the AUC of a proposed operation regardless of whether or not it is eligible for an exemption,” states a new blog post by Lawson Lundell LLP.
The AUC recently updated its website with information about the approval requirements and any exemptions.
The commission has also been considering some changes to the rules governing self-supply and issues around selling surplus energy back to the grid. That consultation with industry was held between December 2020 and January 2021 but there is no decision yet.
Although bitcoin mining is poised to possibly become a bigger part of Alberta’s fossil energy landscape, the Alberta government has not made a single mention of it in the recent Natural Gas Vision and Strategy. “Alberta needs a plan to decarbonize the production of natural gas in line with Canada’s commitment to be carbon neutral by 2050, starting with deeper methane emissions reductions in the natural gas sector,” the Pembina Institute said at the time.
Bitcoin mining can be and is already being powered in some cases by redirecting “waste gas” or methane that would have otherwise been vented from oil and gas facilities. The climate change damage from methane is 84 times greater than CO2 over a 20-year span, and Alberta announced a little over a year ago it is trying to reduce methane emissions by 45% by 2025.
Creating more direct connections between bitcoin mining and the province’s emissions reduction plan could provide incentive for operators to choose an energy source that also limits climate change damage. But the Link Global incident illustrates that companies need clear direction and an approval process from government to guide them.