B.C.-based lumber company loses crypto mining court case

Key Takeaways:

• B.C. courts have upheld the government’s decision to pause power service to crypto-mining projects.
• Forestry products company Conifex sought to compel BC Hydro to provide power to several of its high-performance computing data centres it planned to use for mining.
• BC Hydro argued that the order should stand and Conifex’s mining centres would collectively use approximately 2,500,000 megawatt-hours of electrical energy per year.

The Whole Story:

A B.C. forestry company has been blocked by the courts in its quest to power a new cryptocurrency mining operation. 

Conifex Timber Inc. sought to compel BC Hydro to provide the massive amounts of electricity required for mining. The B.C. Supreme Court (BCSC) sided with BC Hydro, upholding the province’s ability to halt power for new crypto mining operations.  

“Conifex is disappointed by, and disagrees with, the BCSC’s decision,” said the company in a statement. “Conifex continues to believe that the provincial government is missing out on several opportunities available to it to improve energy affordability, accelerate technological innovation, strengthen the reliability and resiliency of the power distribution grid in British Columbia, and achieve more inclusive economic growth.” 

The company stated that it is considering its position in relation to the judgment, including potentially appealing the ruling, along with other legal avenues which it may pursue.

Crypto mining is the process of validating transactions on a blockchain network and adding them to the public ledger, known as the blockchain. The miners use powerful computers to solve complex mathematical problems that confirm and secure transactions. In proof-of-work-based cryptocurrencies like Bitcoin, the first miner to solve the problem gets the right to add the next block to the blockchain and is rewarded with newly minted cryptocurrency and transaction fees. This process requires significant computational power and energy consumption, making it a competitive and resource-intensive activity.

At issue in the case was the validity of a 2022 order in council issued by the lieutenant governor which directed the BC Utilities Commission (BCUC) to issue orders relieving the BC Hydro of its obligation to supply service to cryptocurrency mining projects for a period of 18 months.

Conifex continues to believe that the provincial government is missing out on several opportunities available to it to improve energy affordability, accelerate technological innovation, strengthen the reliability and resiliency of the power distribution grid in British Columbia, and achieve more inclusive economic growth.

Statement from Conifex

As a result of that decision, two of the Conifex’s data centre projects were removed from BC Hydro’s interconnection queue. At the time of the decision, those two projects were at the front of the queue.

Conifex argued that the order was an unreasonable exercise of the lieutenant governor’s authority and contravened the intent and purposes of the Utilities Commissions Act. Conifex also argued that the order is invalid because it does not comply with the government’s obligations under the Declaration on the Rights of Indigenous Peoples Act to consult with Indigenous peoples, in this case the Tsay Keh Dene Nation, with whom Conifex intended to collaborate with on its cryptocurrency mining projects.

Northern B.C.-based Conifex is a forestry company that had plans to diversify its operations by developing high-performance computing data centres for cryptocurrency mining. The first required step to secure sufficient electrical power for a mining operation is completing BC Hydro’s interconnection process. In early November 2021, Conifex’s first proposed centre completed that process, and is now moving forward. At the time the  order was issued, two of the Conifex’s other mining facilities were in the interconnection queue with BC Hydro, and were at the front of that queue.

The interconnection process requires the new customer to pay for any new system infrastructure requirements that are for that customer’s sole benefit, and to contribute to the cost of any system reinforcements or upgrades necessary to serve that customer.

BC Hydro made several comparisons to put the electricity usage of Conifex’s facilities in context, notably that projects would use almost half of the output of the Site C Project.

Christopher O’Riley, the CEO of BC Hydro, argued that Conifex’s mining centres would collectively use approximately 2,500,000 megawatt-hours of electrical energy per year. In fiscal year 2022, BC Hydro’s nine largest customer sites each required delivery of more than 500,000 megawatt-hours of electrical power, but none of the nine sites required more than 1,000,000 megawatt-hours.

BC Hydro noted that cryptocurrency mining is a comparatively new phenomenon. It has grown rapidly in the province over the past several years, and the interconnection requests for cryptocurrency miners have far exceeded projections forecast by BC Hydro in December 2020.

Justice Michael Tammen says in a ruling issued Friday that the government’s move in December 2022 to pause new connections for cryptocurrency mining for 18 months was “reasonable” and not “unduly discriminatory.”

Last summer, Conifex signed an agreement with 

The verdict comes less than a year after Greenidge, a cryptocurrency datacenter and power generation company, announced that it has executed a new hosting agreement with Conifex. Greenidge added that Tsay Keh Dene Nation, a First Nation with a traditional territory in north central B.C., would be collaborating with Conifex in supplying hosting services to Greenidge. Under the initial agreement, Conifex would host 750 miners on behalf of Greenidge with capacity of approximately 80 PH/s. 

The agreement included consideration for a potential expansion of 25MW of mining capacity using renewable energy.