Brian Chilson
REP. DAVID RAY (file photo)

The House today approved two proposals regarding crypto mines but rejected six others.

The flurry of resolutions came in response to backlash to Act 851 of 2023, which severely limits the ability of local communities to regulate bitcoin mining operations. Reportedly written by a crypto advocacy group, it was passed with little discussion during last year’s legislative session just eight days after it was introduced. A groundswell of complaints followed, with concerns raised about noise; health factors; environmental damage; negative impacts on livestock, birds and wildlife; harm to property values and quality of life; and overuse of energy and water. Critics have also raised questions about Chinese ownership of crypto mining operations.

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The six resolutions that fell short of the needed two-thirds approval, all of them co-sponsored by Sen. Bryan King (R-Green Forest) and Rep. Josh Miller (R-Heber Springs), took the most aggressive approach to regulating the industry.

The two that passed could well be good efforts to address concerns, but the commentary from Republicans in the House today suggested that lobbyists remain eager to chip away at them once they hit committee.

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The 2024 fiscal session, which began last week, is generally only for passing budget-related bills. For a bill to be filed on a non-budget matter during the fiscal session, both the Senate and the House must approve a resolution to consider it by a two-thirds majority. If that threshold is cleared, the bill itself can then be filed and go through the normal legislative process. (All eight bills had already received approval in the Senate.)

Given the shortened calendar for the fiscal session, the King proposals are likely now dead. The rejections came despite an explicit request from Rep. Stephen Meeks (R-Greenbrier) who chairs the Joint Committee on Advanced Communications and Information Technology, which will likely take them up once the bills are filed — that the House send all eight. Meeks said that he had been in communication with all of the lawmakers involved and was confident they could work together. He asked that the full slate be sent so that all options could be on the table. “Give us the flexibility so we can hash all that out in the committee process,” he said.

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Rep. David Ray (R-Maumelle), a right-wing go-to guy for corporate power, spoke vociferously against even considering King’s proposals.

Whether or not all of King’s measures were necessary for a legitimate reform effort, Ray pontificating against all six proposals — using boilerplate lobbyist talking points — gives a strong indication that the crypto industry was spooked by King’s proposals and working overtime to kill them before they had a chance to go up for discussion.

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Curiously, all but a handful of Democrats voted “Present,” which counts the same as a “No,” on the King proposals, effectively doing Ray’s bidding (Rep. David Whitaker of Fayetteville outright voted No on them). This despite the fact that the resolutions take what might normally be considered a progressive approach, using taxes and fees to regulate a corporation that harms the public and the environment.

Four of the six King proposals would have gotten over the top if Democrats had voted as a block to consider them. The added momentum could well have helped give more of a chance to the other two, as well. Instead, 15 of the 18 Democrats simply sat on their hands and let them die, bringing a smile to Ray and the crypto lobby. Unless I am missing someone, the only exceptions: Rep. Nicole Clowney (D-Fayetteville) and Rep. Stephen Magie (D-Conway) voted for all of them to advance. And after initially voting present, Rep. Vivian Flowers (D-Pine Bluff) told members she was changing course, and voted Yes on the remaining five, perhaps inspired to switch gears after listening to Ray.

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King said their defeat represented a major blow to citizens concerned about problems associated with crypto mines.

“This Legislature and the governor are pro-crypto miners,” King said after the votes. “While ordinary Arkansans pay taxes and fees, the crypto miners are using our cheap energy and natural resources and getting a free ride thanks to their friends in the Legislature.”

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Those suspicious of the crypto lobby’s influence on the process will likely have their hackles up after today’s proceedings. Ray’s attacks often seemed focused on specific details of King’s proposals, despite the fact that today’s vote was not an up or down vote on a bill but simply a question of whether to consider the measure at all. It’s difficult to determine what made two of the proposals worthy of an exception from the usual fiscal-session limitations but not the other six, which covered the same general issues.

House Speaker Matthew Shepherd told members that it wouldn’t necessarily be possible to combine bills given the constitutional requirement that a final bill substantially align with the resolution to consider it in the fiscal session. In other words, if there is a portion of one of King’s proposals that lawmakers want to add to one of the remaining proposals, that may prove impossible depending on the specific language. This is why Meeks wanted all of the proposals, even though he thought it was likely that the committee would pass just two or three — he wanted to have the leeway to cover all potential issues that might come up once discussion and debate unfolded in committee. But his argument couldn’t persuade enough members; the majority of House members did support the King proposals, but they fell short of the two-thirds threshold.

In contrast to his lengthy diatribes against the King proposals, Ray supported the other two resolutions, one of them co-sponsored by Rep. Rick McClure (R-Malvern) and Sen. Joshua Bryant (R-Rogers), who also co-sponsored the original Act 851.

As written, their proposal addresses at least some of the concerns raised by their original bill. The measure would impose noise mitigation requirements and require facilities to be located 2,000 feet from the nearest home or business, or in an area zoned for industrial use.

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It also adds language prohibiting 15% or more ownership interest in a crypto mine by the citizens or government of certain countries, including China. (I am skeptical that this will be easily enforceable given the opaque web of shell companies behind these operations, but the China issue seems to be particularly popular among lawmakers.)

Finally, in its current language, the McClure-Bryant proposal would restore the ability of cities or counties to regulate the crypto mines as they see fit, though it does create new prohibitions on local control regarding crypto mines operating in a home. Is this a loophole for the industry or a needed clarification? Will be interesting to track how this plays out in committee.

As pointed out in the House Rules committee, some of the language about local control appears incomplete (probably just due to a drafting oversight). This is one of the biggest issues I’ll be watching as the bill is filed and goes under revision. I found it noteworthy that Ray kept saying the only two areas of concern were Chinese ownership and noise. That glosses over a number of other issues, but he was particularly careful to avoid mentioning anything about local control.

Critics of Act 851 and crypto mines may be leery of McClure and Bryant given their apparent heavy involvement with crypto advocacy groups in writing the law to begin with. As King’s co-sponsor in the House, Miller, explained in the House Rules committee in response to why he didn’t simply defer to McClure and Bryant: “I don’t let the same man take me snipe hunting twice.”

Some of the comments from McClure and Bryant don’t exactly inspire confidence. During the debate on the Senate side, Bryant said the crypto miners weren’t trying to cause trouble. “They simply were looking for a preemptive approach to protect their investment,” he said, which just about the definition of crony capitalism. (Bryant voted against consideration for King’s proposals, while King voted for consideration of Bryant’s.)

For his part, during the House Rules meeting yesterday, McClure took offense to the notion that the shady Satoshi Group, a dark-money crypto advocacy group, had written the bill, saying that he had done the heavy lifting on the language. But he said he might have made a mistake by copy and pasting language from a Missouri bill that … had been sent to him by the Satoshi Group. So. There you go.

McClure also did not inspire confidence with his insistence that the problem all came down to “unintended consequences.” In fact, the law’s consequences were obviously intentional and clear as day. And they worked exactly as intended: Act 851 was the law that a crypto mine operation leaned on to sue the quorum court in Arkansas County after county officials made efforts to regulate it.

The McClure proposal passed easily and a bill will now be filed.

“The fix was in,” King said. “The same [lawmakers] that deceived the people are now the ones that brought another Trojan horse.”

King had the same critique of the other resolution that passed, co-sponsored by Rep. Jeremiah Moore (R-Clarendon) and Sen. Missy Irvin (R-Mountain View). The Moore-Irvin proposal would impose a new state-level regulatory system, as well as state-level noise restrictions and fees.

Like the McClure-Bryant proposal, it appears to positively address some issues with crypto mining and Act 851 as written.

King, however, believes that the final product on the two bills will wind up being lipstick on a pig, and that the measures potentially could make things worse by planting new loopholes or advantages for existing crypto mines or new entrants.

Commentary during discussion of the measure in the House yesterday certainly suggested the possibility that elements could be watered down. Suggestions floated included eliminating any fees imposed on crypto mines (can’t have that!) and nixing authority or enforcement power from the Arkansas Department of Environmental Quality (not a Republican fave) in favor of shifting more power to the attorney general’s office (where Ray’s old boss, Tim Griffin, is a highly partisan bruiser always happy to help out well-heeled allies). Moore said he was generally amenable to changes.

Today’s discussion was dominated by the ravenous Ray. His bumptious recitation of talking points is not worth documenting in full — most of his comments were pedantic, semantic, irrelevant, tendentious or flat-out wrong. All of the points he raised would obviously be suited to a debate on a bill itself, with any legitimate quibbles solvable by amendment.

Ray, feverishly motivated to block King’s proposals from even being considered, was dismissive of concerns about water usage and ignored environmental questions and fears about overuse of electricity. The only problems, he said, were China, noise and vicinity. He insisted that the King proposals had nothing to do with those issues, though some quite clearly did. Ray sometimes descended into pure gibberish, fretting that eight proposals would simply be too untidy to manage.

“I think that passing a law just because we don’t understand something is a bad way of rushing into passing a law and legislating,” he said, in a hilarious bit of lobbyist ju jitsu (that’s precisely what happened with Act 851 as a lobbyist-penned bill late in the session, and now Ray is running interference on fixing it a year later!).

Some of his comments revealed that his objections were ultimately rooted in a hatred of regulation of the industry. He was, naturally, appalled at the idea of crypto miners having to get liscensed, give public notice about opening a new facility, or otherwise face significant oversight from state or local governments. Was this an expression of his rigid right-wing ideology or the desires of the crypto organizations willing to spend big to get their way? Well, this is a “beer or tacos” question. The answer is: both, dummy.

Ray said that if the state imposed significant fees on the crypto miners for massive overuse of energy, relying on the same grid the public does, then crypto miners would no longer be able to turn a profit. Makes you think.

I will follow up in the coming days with more details on the McClure and Moore proposals. Here is a quick summary of the aims of the King proposals that were blocked from consideration today:

HR1014 would ban the use of computers or software manufactured in certain designation nations, including China and Russia, from being used in crypto mines.

HR1015 would repeal Act 851 altogether, restore local control for counties and cities to fully regulate crypto mines (including noise ordinances), ban ownership by certain foreign nationals (again, China clearly the main target), and fleshes out regulatory requirements for new or existing crypto mines operating in the state.

HR1016 would require businesses to file notice with the Arkansas Public Service Commission and local government six months before before purchasing or leasing land for a crypto mine.

HR1017 would task the Arkansas Natural Resources Commission with monitoring crypto mines’ impact on water usage and grants it authority to take action against a mine if the impact of overusage “threatens the critical groundwater supplies of the state.” The Arkansas Public Service Commission, meantime, would be tasked with monitoring electrictricty usage and may direct a utility to cut off power to the mine if it threatens the reliability of the grid.

HR1018 would require crypto mines to be licensed under the Uniform Money Services Act (it would repeal the section of Act 851 that stated that crypto mines “shall not be considered a money transmitter under the Uniform Money Services Act”).

HR1019 would impose fees on crypto mines for over-usage of electricity, with a fee schedule based on megawatts above certain thresholds. (For more on HR1019, see here).