Several Arkansas counties are moving quickly to pass emergency ordinances allowing them to regulate noise and other issues in advance of a new state law that will take effect Aug. 1 limiting the kinds of regulation local governments can implement on cryptocurrency mining facilities.
While the facilities actively seek out remote locations for their server farms used to generate cryptocurrencies, noise from cooling fans, electricity consumption and other issues are causing concerns.
"I don't have any issues with mining crypto, but just the noise level, the lack of care for our neighbors," Kris Kendrick, a justice of the peace on Faulkner County's Quorum Court, said during its July meeting. "I think there's a continual disregard for being a good neighbor and this is not acceptable."
The legislation, Act 851 of 2023, passed with near unanimity in April. According to its text, the law was intended to "recognize that data centers create jobs, pay taxes, and provide general economic value," and "clarify the guidelines needed to protect the data asset miners from discriminatory industry specific regulations and taxes."
What is driving the dash by counties to pass ordinances now are looming limits on local governments' power to enact certain noise restrictions and other regulatory requirements on cryptocurrency mining operations, in part by mandating that local governments can't impose different requirements on crypto mines than they do on data centers.
"No one spoke against this bill in committees, or on the legislative floors," the legislation's author, state Rep. Rick McClure, a Republican from Malvern, said in a written statement. "In the weeks following [the passage of the bill] there have been several reported situations of problems with noise generated by digital asset miners. Large digital asset mining operations can be a problem. They can be loud and annoying."
Despite McClure's acknowledgement of the noise issue, he also said that the bill was "not intended" to address "industry-specific" noise issues.
While the act doesn't outright ban local regulations on so-called "digital asset mining" facilities, it does limit the kinds of action localities can take. Specifically, the bill prohibits local governments from discriminating against digital asset mining facilities, or from taking actions that limit decibel levels "from home digital asset mining other than the limits set for sound pollution generally."
It also disallows local governments from imposing different requirements on digital asset mining businesses than ones applied to data centers more generally, and from rezoning areas "with the intent or effect of discriminating against" digital mining operations.
The law also requires digital asset mining businesses to "operate in a manner that causes no stress on an electric public utility's generation capabilities or transmission network."
The computer equipment necessary for digital asset mining requires massive amounts of energy in order to solve complex equations, which, once solved, generate cryptocurrency. Because of the amount of electricity required, digital asset mining operations need to be close to electric substations and require massive cooling systems to prevent the computers from overheating -- which can also generate massive amounts of noise.
While the bill passed the state Legislature quietly, it wasn't long before counties began to notice the bill and its implications. Once the alarm was raised, many began to race against the clock to enact noise ordinances before the law goes into effect on Aug. 1.
When it heard about the law in May, the Association of Arkansas Counties began working on a model ordinance that counties could consider prior to the law going into effect, the association's chief legal counsel, Mike Whitmore, said. That model was distributed to counties in June. In the time since, at least a dozen counties have passed noise ordinances targeting data centers.
"In May we started realizing, obviously, the way that the act was drafted, that greatly curtailed the ability and mechanics to exercise local control and home rule after it becomes effective," Whitmore said.
This model legislation is what Faulkner County based its original proposed ordinance on, Civil Attorney Phil Murphy said prior to Faulkner County's Quorum Court meeting on Tuesday. Residents in Faulkner County have already experienced the disruption created by digital asset mining operations firsthand -- one resident who spoke up during the meeting said she could hear the sound of the mine inside her home, four miles away.
But, as with many aspects of crypto mining, which has weathered criticism for its health and environmental impacts, debate about the ordinance became tense as some members of the Quorum Court -- some of whom were open supporters of crypto -- said they weren't fans of imposing "industry-specific" regulations.
"I'm not a big fan of piecemeal ordinances that call out specific industries," said Jason Lyon, another Faulkner County justice of the peace.
Kendrick said he visited an operational digital asset mining operation in unincorporated Faulkner County with his children and Arkansas state Rep. Matthew Brown. When they arrived, he said, a security guard got out of his car, pulled an AR-15 out of his trunk, and filmed them. Kendrick said this was just one example of bad neighbor-like conduct by crypto operations. Despite that, Kendrick said he still had his reservations about the ordinance.
Kendrick introduced an amendment to the original proposed noise ordinance sponsored by Justice of the Peace Maree Coats, which removed crypto-specific language present in the original and noise study and permitting requirements, saying that it was important to address the root of the problem.
"There is no doubt -- anybody that's been out to Bono, you know there's an issue. I would not want to live there when you can't sit up on your front porch," Kendrick said. "I'm worried about the crypto-specific language in there."
Coats, who spoke forcefully about the impacts of the noise that crypto operations were generating on Faulkner County residents, was against Kendrick's amendment, saying that his substantial changes to the original ordinance could jeopardize its ability to stand up in court in the event of a legal challenge.
"I also want to make the point that it's not these people stepping out on the front porch and [not] being able to enjoy a glass of tea sitting on the back porch. These people can hear this sound 24/7 from their bedrooms," Coats said. "So it's not something where you ... can just stay inside your home and not be bothered."
Kendrick's amendment, and another proposed by Justice of the Peace John Allison III that changed the times the noise limits change throughout the day, both passed. One justice of the peace, Justin Knight, abstained from the vote due to having business with data centers. Nine voted in favor of passing the amended ordinance while two voted present.
As the justices of the peace debated the merits of the different amendments and differing philosophies on regulations, eyes from beyond Faulkner County watched from the benches of the small courtroom. In the front row was Van Buren County's county judge, Dale James, who had come to observe the outcome as he prepared for Van Buren County's Quorum Court meeting on Thursday, where justices will vote on their own crypto noise ordinance.
Directly behind him were two lawyers, whispering to each other throughout as they flipped through marked-up copies of Act 851. The lawyers, William Ogles and Steve Giles of the Wright Lindsey Jennings law firm, represent "several digital asset mining companies interested in bringing cutting-edge business ventures to Arkansas." Ogles declined a live interview, citing their firm's media policy, and did not name the firms they are representing.
"We look forward to working together with our community partners all across the state. Unfortunately, some recent local regulations appear to have been rushed and may be in violation of the law. At this time, all [legal] options are on the table," Ogles and Giles wrote, adding later that local ordinances, even if passed before the law goes into effect, would be unenforceable if they conflict with the law according to the state constitution.
As for Van Buren County, James, the county judge, disagreed that the law would retroactively affect ordinances passed prior to the law's going into effect. He added that attending Faulkner County's Quorum Court meeting was eye-opening, and said there will likely be some minor tweaks to Van Buren County's proposed ordinance due to his observations.
Van Buren County's ordinance passed in a vote by its Quorum Court on Thursday.
Faulkner County's county judge, Allen Dodson, commended the Faulkner County Quorum Court for its work on the noise ordinance.
"This is not a new issue," Dodson said. "This has been discussed in virtually every county in Arkansas. ... It's a broad issue, it's not easy to address. You here in attendance are seeing the legislative body of this county wrestle with how we approach things in America. They don't take this lightly."