A bitcoin mining power plant secretly set up shop in Alberta. Now it's being forced to shut down

When residents of an affluent estate community in Alberta started hearing noise from a nearby power plant, they didn't expect their complaints of sleepless nights would lead to a months-long investigationthat would find a bitcoin mining operationhad set up shop without approval.

Now, Link Global, the company behind the site, is being ordered by the province's utility commission to shut down two plants until it can prove it's allowed to operate a move the company says will cost jobs and cause the oil and gas infrastructure in which it operates to sit dormant.

Jeff Kocuipchyk first started hearing the noise last fall. He's president oftheGreystone Manor Community Association, a small neighbourhood located in Sturgeon County, about10 kilometres from thenorthwest outskirts of Edmonton.

"It differs every time the wind changes direction. It's just like a wave but it's 10 times louder and 100 times more annoying," Kocuipchyk said. "It's almost like a plane engine warming up on the tarmac it's such a racket that none of my family could sleep."

Larry Haashad been hearing it, too.

"We have a hot tub in the back. We'd go sit and go, 'Hey, what is that airplane landing in our field?'" Haas said. "It's peaceful. That's part of why you move here. There's a premium you pay for this kind of place. And then the noise startsand it's not quiet and peaceful anymore."

Kocuipchyk said the sound quickly became a topic of discussion among neighbours. Some thought it might be farm equipment. The worst of the noise was heard along a strip of homes that hadempty agricultural land to the west, home to what they believed was a defunct natural gas facility.

SoKocuipchyk decided to investigate.

"I went over there and said, 'What's this noise?' I had no idea what a bitcoin mining operation looked like."

Vancouver-based Link Global had set up four 1.25 MW gas generators at the site, pulling power from a dormant natural gas well owned by Calgary-based company MAGA Energy.

The natural gaspowers thousands of computer servers thatrun programs to "mine" digital currency, which involves solving complex computational mathematical equations and is oftenenergy intensive.

Work on the plant began in August 2020, and by fall whenneighbours started to get annoyed it was operating at full capacity.

There was just one problem:The company hadn't notifiedneighbours 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'sown useand proving the planthasno adverse effects on people or the environment.

"Nobody gave us a phone call saying, 'Hey, we're going to do this,'" said Haas. "The lack of respect for being a good neighbour also added to the frustration of it all."

Ten households fromGreystone Manor, all located along the west side of the community, with backyards facingthe plant,complained about the noise to the Alberta Utilities Commission (AUC). Eight complainants rated the impact on their quality of life assix out of 10 or higher. Three rated the severity as10 out of 10.

Some said it made it hard to sleep and even harder to be outside or havewindows open.

Riley Georgsen, with the AUC, said it's notcommon for enforcement to be required, but when complaints like this arise, they are taken seriously.

"We have a lot of different expertise at the AUC, whether it's from engineering or environmental consultation there can be a variety of different things that need to be looked at to get a full picture of what's happening," he said.

Georgsen said once each complaint is investigated, the AUC's enforcement team puts together a case, which is reviewed by the AUC commission panel.

The AUC's enforcement team argued in an application filed in March that the "seriousness and the potential for ongoing harm" meant theLink Global plant should be temporarily shut down while the commission considered how to respond to the situation.

AUCinvestigators wrote that Link Global initially claimed it had an "extensive history" of consultation with the AUC, Sturgeon County and neighbouring residents butprovided no evidence to back that up.

A month later, in June, the company finallyacknowledged it didn't notify or consult local stakeholders, as it said it was "unaware of the statutory and regulatory requirements."

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Link Global had told the AUC in a January letter that it had done a noise impact assessment that found no change between the plant being turned on and off.

But it didn't provide a copy of that noise assessment.Instead, it just gave a link to a non-functioning online folder followed by the note "(SORRY LINK IS NOT WORKING)." It also provided a sheet stating the company meets U.S. emission standards, but initially provided no evidence as to whether it met Alberta standards.

The company later told AUCit wouldcontact Alberta Environment and Parks to either seek approvalthat its operations don't have serious environmental impacts or to obtain confirmation that approval is not required.

'If it's not gonna work we'll just shut it down'

Stephen Jenkins, Link Global's CEO, is the first to admit the company's debut in the county didn't go as smoothly as hoped."It's my fault. I take full blame for it. We did not consult with residents," Jenkins said.

Jenkins said as soon as he learned of the noise complaints, the company sent out teams to measure decibel levels in the area.

The company temporarily shut downoperations following the AUCorder and beganoperating only during daytime hours, though it took a few days to wind things downanother item of contention in AUC enforcement filings. Italsoimplemented noise abatement measures, such as a wall of straw bales and exhaust baffles.

If there's more Link Globalcan do to make residents happy, it will, said Jenkins.Even if it means packing up and going elsewhere.

"If it's not gonna work there, we'll just shut it down;close the plant off, and it will sit there again."

That might come as a surprise, but Jenkins said it's no trouble to relocate;that fits with how he sees Link Global operating within Alberta's energy ecosystem.

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Instead of coal and pickaxes, bitcoin mining involves mathematical equations and softwarebutcritics argue the digital currency's massive power requirements make it environmentally destructive, like its namesake.

Sara Hastings-Simon, an assistant professor at the University of Calgary's School of Public Policy, said she questions the potential impacts of projects like this.

"There's definitely a lot of concern that I think is warranted around the environmental impact of bitcoin and what is the benefit of using all of this energy," she said."And in particular, the potential for bitcoin operations to end up extending the lifetime of older energy infrastructure that would otherwise be retired."

But Jenkins, who has a background in forestry and international clean energy development, argues the operation can provide an environmental benefit.

"You're using underutilized or unused poweror even retooling and retasking existing infrastructure. We wouldn't go in and put a new well in," he said.

Albertais littered with nearly 200,000 dormant or abandoned oil and gas wells, often because they'reno longer economically viable. It has raised the spectre that landowners and taxpayers could be on the hook for the cleanup costs, which the province estimates could be up to $30 billion, as well as prompted a push to find other uses for the facilities, such aspoweringcryptocurrency operations.

Some of that abandoned energy infrastructure, Jenkins said, is at risk of leaking methane a greenhouse gas more potent than carbon dioxide.

"We look at, OK, what can we do to use this in a beneficial way I don't want to say we're in the business of methane destruction, but we're in the business of beneficial use of that potential methane-generating source. You combust it properly. You don't flare it, and you control those emissions," Jenkins said.

The company is also playing around with the idea of using waste heat emitted from computer servers to power greenhouses, bolstering Alberta's agriculture industry during cold weather, Jenkins said.

Andthoughthe facility employs only four people, Jenkins said it's important to him to employ locallyand give former oil and gas workers a path into other careers.

The Sturgeon County plant's supervisor is a former pipefitter; he's now a bitcoin pro and an expert at keeping the plant online, Jenkins said.

"It's a perfect use of people's skills," he said.

A lucrative business

Of course, it's not all altruism.

The company has said for every 10 MW of power, it can generate about 1.2 bitcoins per day. Cryptocurrencies are a volatile market and bitcoin's price has ranged from $30,000 to $63,000 US in 2021.

"[I'm] coming at this and looking at it, and being obviously opportunistic from a business perspective, but being very conscious of the outcomes," Jenkins said.

"We want to be running as efficiently as we can, because every penny we save on gas and gas consumption, which is ultimately where the emissions come from, that helps us with respect to earning more money."

More miners across the province

Link Global isn't the first to test this business model in Alberta.Another company, Upstream Data, has been pairing flared natural gas with bitcoin mining data centres in the provincesince 2017.

And many more could be on the way.

Nevada-based Black Rock Petroleum Company has proposed bringing in up to a million bitcoin mining machines from China estimated to be about one-third of the world's capacity to natural gas sites in Alberta, following the country's ongoing crackdown on cryptocurrency.

The Sturgeon County facility also isn't the only one Link Global is operating in Alberta. It has plants near Kirkwallin Special Area 3, and Westlock, too. The Kirkwall plantwas also set up without the AUC's prior approval.

AUC enforcement investigators have argued Link Global stood to gain from breaking the rules.

"Since September 2020, Link Global has benefited and continues to benefit, by operating without the burden or limitations associated with ensuring that nearby residents are not adversely affected, that the power plant operates within specified noise levels, and that the power plant does not adversely affect the environment," the enforcement filing reads.

Jenkins disagreed, but said in June that the company and AUCwere collaborating to find a solution.

"The AUC we've been on very good terms with them, because they're learning as much as we're learning," he said.

If they can't work it out, Jenkins said he'll simply move the operation to another site in Alberta, Saskatchewanor B.C. Perhaps one with fewer or more distant neighbours.

'We don't need to cause them any more grief'

It's something Jenkins might have to do.

On Friday, the AUCruled that both the Sturgeon County and Kirkwall plants were in contravention of the rules.

They have to shut down operations immediately and can only resume once Link Global has proven it's either obtained permission under Alberta's environmental protection act or confirmation permission is not required.

The company will also have to pay penalties:a $50,000 to $75,000 fine, reduced by up to 50 per cent becauseLink Global admitted to breaking the rules.

"The commission does not take lightly that Link Global began operating multiple power plants in a jurisdiction with which it had no familiarity, and failed to conduct a basic level of due diligence to understand the regulatory regime in which it was operating," the commission ruled.

"However, the nature of the actual harm suffered (in the commission's view, primarily being the disturbance caused to the residents of Greystone Manor) was transitory and limited in its temporal scope."

Jenkins said he finds the AUC'sdecision fairand was glad it confirmed some parts of the company's operation,like the requirement that it generate power only for its own use,were in compliance. But hesaidthe rulinglikely means theSturgeon County natural gas facility will once again lie dormant and the jobs at the site will be lost.

The company plans to submit documentation to prove the Kirkwall plant meetsprovincial emissions requirements to keep it up and running.

"It's unfortunate [but] it's us listening to the community, andwe can move," he said. "The main complaints came froma gated community we heard it loud and clear. And I don't think, again, we don't need to cause them any more grief."

More penalties could be on the way. The AUC will now review whether specific sanctions should be imposed against Link Global for operating without approval a decision on that is expected this fall.

Kocuipchyk said the investigation shows the need for more regulation or oversight.

"I personally wish that they would have been penalized even more for blatantly not following an AUC order," he said.

Sturgeon County Coun. Kristin Tomshas mixed feelings about seeing the company potentially forced out of the region.

When she first learned the cause of residents' noise complaints,Toms said, "you could have knocked me over with a feather." She quickly dove into research to learn about bitcoin mining, an industry that was new to her.

Toms and the county are on the sidelines of the debate over how to regulate or enforce sanctions against the plant.

"One, it's on an agricultural parcel of land so the county is responsible for operating our bylaws.But when you get an oil and gas site, that falls under the purview of the province," she said. "We have bylaws set up within the county to deal with sort of our standard issues, you know, resident issues [or] agricultural issues. The two things just didn't meet."

But Toms is hoping for a solution going forward that will work for businessand residents alike. The county has seen challenges this past year, from higher unemployment to flooding fromextreme weather. The potential of more jobs is enticing.

"We want to be open for business, but we want those businesses located in a spot that works within the community," she said.

"It's really important to make sure that we're able to manage our businesses andour communities so that they're having a symbiotic relationship as opposed to, unfortunately, friction created between them due to the wrong locations and obviously lax notification."

But if you ask Kocuipchyk, the company has already burned its bridges.

"I would like to see them shut down permanently there are thousands of other abandoned gas wells in Alberta that they could quite easily just go and move to."

He's grateful Jenkins is offering to move whatever will give him and his family a good night's sleep.

"When I can look off my patio, into the distance and see those trailers moving out of there, that's when I'm going to [enjoy my glass of]wine."