Cryptocurrency Miners Almost Too Much of a Good Thing for Quebec

Help for Hurting Economies

At the same time, some local governments see in crypto mining operations an opportunity to reverse declining economic fortunes. Medicine Hat, in the Canadian province of Alberta,  agreed in March to lease land and provide energy from a city-run, natural gas-powered electrical plant to Hut 8 Mining Corp., one of Canada’s largest mining operations.

“We were hit very, very hard by the oil and gas decline,” Mayor Ted Clugston told the CBC. “Really, we’re just turning gas into electricity, and they’re taking that electricity and turning it into blockchain.”

In the U.S. the small town of Murphysboro, Ill., offered mining operation Solar Alliance a 165,000-square-foot former label-making factory, vacant since 2004, as a base of operations for a massive solar array. Along with using the sun’s energy for mining, Solar Alliance is tapping a different kind of star power: “Star Trek” actor William Shatner is the company’s spokesperson. But town officials are more focused on economic development than the allure of Hollywood.

“We, like a lot of Middle America, have seen job losses because of a change in the worldwide economy,” Mayor Will Stephens told the Chicago Tribune. “From my perspective, we’re going to have someone who will occupy a previously derelict property, and whatever development comes out of it will just make it more marketable [even] if the project is not successful.”

Balancing Costs and Benefits

As with all economic development ventures, governments must weigh the costs and benefits of bitcoin mining operations. That’s particularly true because of mining’s massive energy consumption and carbon footprint. Morgan Stanley analysts estimate that miners’ electricity consumption this year could exceed the anticipated power demand from electric vehicles in 2025.

For most governments, however, job creation is the factor that matters most, and mining operations may offer mixed results. In two research studies, KMPG found that job creation from mining lags other energy-intensive sectors. For example, data centers create between five and 25 jobs per megawatt of energy they consume while mining operations create between 0.4 and 1.2 jobs per megawatt, depending on the size and scope of their operations.

One of the studies, which KPMG conducted for Hydro-Quebec, said economic benefits of crypto mining could increase if there were “spinoffs” such as the manufacture, assembly, repair and distribution of mining equipment; software development; research and development; and IT support.

“The level of economic value creation has the potential to increase if cryptocurrency mining is accompanied by additional activities,” the utility said in a statement.