Sorry, Bitcoin Mining Won’t Save Your Town
09.05.2018

The inhabitants of Ocean Falls, British Columbia, have been given a second chance. The small Canadian town has seen its industry dwindle for decades, and with it, population has fallen from a peak of 5,000 in the 1970s down to less than 100 today. Buildings like the old paper mill, which once provided jobs for many workers in the local area, are now empty shells—until recently, anyway. As Bloomberg reports in a detailed feature, with the days of turning pulp to paper long gone, the mill has been repurposed as a home for banks of mining rigs that will convert cheap electricity into bitcoins.

It’s an unexpected success story for a remote community in which employment opportunities had all but dried up. The tiny settlement, described in the article as a “ghost town” with one bar but no grocery store, has been given a new lease on life, and a revenue stream that will provide at least a handful of local jobs, while attracting moneyed outsiders to the area.

But before residents of other ailing towns start ordering their Antminers, they’d do well to recognize that the Ocean Falls story is the product of a unique set of circumstances. It may not represent a model for other down-on-their-luck places to follow. Because of the paper mill, Ocean Fall happened to have a 13 megawatt dam in the vicinity, which was operating at less than one-third output capacity even under maximum demand. When presented with a regular buyer for all that surplus power, the private company that owned the dam jumped at the chance, and cut a deal to supply the newly formed mining operation at extremely cheap rates—less than five Canadian cents (less than four US cents) per kilowatt hour of energy.

Even in energy-rich Canada, the relationship between power-hungry mining companies and small communities has often not been straightforward. In the eastern province of Quebec, utility Hydro-Québec has imposed an effective ban on any new mining operations by steeply raising the price of power for miners (it received connection requests that far exceeded its capacity). Meeting all the demand would mean constructing new dams, as a representative of Hydro-Québec told me earlier this year, which would result in costs passed on to consumers—a situation the utility company was keen to avoid.

South of the border, some domestic consumers have ended up bearing just such additional costs. In March, Plattsburgh, New York, became the first US municipality to ban bitcoin mining altogether—a move popular with local residents, who had seen their electricity bills jump by hundreds of dollars in some cases after a raft of mining operations set up in the vicinity, depleting the city’s power production capacity and triggering surplus power to be bought in at higher rates. Certain parts of Washington state, also known for cheap electricity, have faced similar problems, as site developers with huge budgets and even bigger power demands have flooded the area with fast money and less-than-courteous attitudes.

Unfortunately, all of this means that if you’re living in a small, post-industrial town with a declining population, a pivot to bitcoin mining is unlikely to turn things around. There are exceptions, of course, most of which revolve around circumstances that create a power surplus with no other viable buyer. But for every Ocean Falls there are a dozen other towns that don’t fit the bill, and which will have to be content with a slow, stumbling economy and a single, empty bar.