Cryptocurrency mining is giving some rural Texas counties an economic boost

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Jacob Rodriguez was driving a John Deere tractor in a West Texas cotton field when he got a phone call that would change his life.

“I was pulling a 59-foot aerial seeder … and at the same time I was on the phone doing my interview,” Rodriguez, 29, said.

On the other end of the phone early this year were representatives from a new business coming to Dickens County, a community of about 2,000 people an hour east of Lubbock.

By March, Rodriguez had quit growing cotton — which he called “just another job” — and began training to work in a cryptocurrency mine.

The county had exactly what London-based Argo Blockchain was looking for: lots of open land and easy access to affordable power, thanks to a large wind farm built there more than a decade ago.

Texas political leaders have promoted the state as a destination for companies that produce bitcoin and other digital currencies, touting the state’s reputation for low taxes and cheap power. About 30 have arrived in the past decade, and dozens more have expressed interest in moving to Texas.

But instead of moving to the state’s large urban areas — which have the extensive infrastructure and large workforces that attract most businesses that move — cryptocurrency companies have largely done the opposite and located in rural areas, according to Lee Bratcher, president of Texas Blockchain Council. a group that promotes crypto growth and innovation.

Crypto companies have been welcomed by many small towns hungry for an economic boost. Argo Blockchain opened its 125,000-square-foot Helios facility in Dickens County in May and hired a couple of dozen locals, including Rodriguez. It also added $17 million to the local tax base, according to Kevin Brendle, the county judge. The county’s total assessed property tax value is $283 million, he said.

The financial infusion has allowed Dickens County to cut county property taxes by about 1.5%, give small raises to county employees and buy new equipment for the sheriff’s office and for road and bridge improvements.

“The end result is improved services to the community,” Brendle said. “We’re going to be able to do a better job of serving them, and we’re going to be able to be competitive in our pay.”

In Milam County, northeast of Austin, a large crypto facility owned by Riot Blockchain that opened in 2020 has added hundreds of new jobs and millions of dollars to the local tax base, according to County Judge Steve Young. He said the tax increase has enabled the county to pay for basic services such as road improvements. When the crypto company needed to hire contractors for various projects, it was hired locally, he added.

Crypto mining involves using powerful computers to produce digital currencies, called tokens, which can be used like traditional money to make online purchases. The crypto transactions go through computers rather than through a centralized entity like a bank, with the goal of giving people the opportunity to achieve wealth outside of the traditional financial system.

Computers require large amounts of electricity. The numbers of crypto companies requesting permission to connect to the power grid will use almost as much electricity as the city of Houston, according to Texas’ power grid operator, the Electric Reliability Council of Texas.

It has raised questions about whether the state’s power grid — which infamously crashed in February 2021 during a powerful winter storm, plunging millions of Texans into darkness for days and killing hundreds — can handle that much extra demand. But energy experts said ERCOT and the state’s transmission companies won’t allow any large electricity users to connect to the grid unless there is enough power supply.

Like some other industries, crypto companies can shut down operations when high demand puts stress on the web. This summer, when the grid operator asked Texans to conserve electricity due to tight grid conditions, Bratcher said crypto companies quickly shut down.

Navigating rural Texas

Cryptocurrency is still a relatively new industry – bitcoin, the first and best-known digital currency, launched in 2009 – and has seen its fortunes rise and fall dramatically this year just as virtual currencies have seemed to explode in popularity among both professional and individual investors .

The price of bitcoin plunged more than 50% in value in the first half of this year from its peak in November 2021, and the dive continues. Major companies such as Coinbase, a major cryptocurrency exchange, have declined in value and firms have lost billions. The fall in cryptocurrencies is part of a larger economic downturn, spurred by inflation, high interest rates and economic disruption caused by Russia’s war in Ukraine.

Meanwhile, a decision by China’s government last year to ban cryptocurrency production has had ripple effects all the way to Texas.

“After the 2021 crypto crash in China, many crypto miners came to Texas,” said Alexander Hernández Romanowski, a crypto research analyst at Tribal.credit and a crypto researcher at Rice University’s Baker Institute.

The new crypto companies have faced resistance in some communities. A grassroots group in Navarro County, northeast of Waco, has rallied some residents to oppose a bitcoin facility proposed by Riot Blockchain, claiming it would create pollution by using large amounts of electricity.

But so far, there hasn’t been widespread, organized opposition to cryptocurrency operations in Texas, according to energy analysts.

“I don’t know anyone who’s actually making a case against it or has done any research,” said Virginia Palacios, executive director of Commission Shift, an organization that seeks to hold the state’s oil and gas regulator accountable.

Many rural counties offer crypto companies tax breaks to lure them to their communities. Milam County, which lost its largest employer — an Alcoa aluminum plant that employed nearly 1,000 people at its peak and closed in 2008 — offered Riot Blockchain a 45% discount on local taxes for 10 years, said Young, the county judge.

“Businesses typically won’t come to your county unless you’re willing to give them a tax break,” Young said.

Crypto companies still add millions of dollars to the local tax base, Young said, and in Milam County, Riot Blockchain also helped rebuild the local animal shelter and installed new lights on local sports fields.

On the other side of the state, Brendle said Argo Blockchain has committed to refurbishing the county-owned public pool, which closed more than a decade ago.

Brendle and Young both said local residents were not opposed to the new businesses, but had many questions about cryptocurrency and whether outsiders would flock to rural counties.

“When they first got here, people had no idea what it was — neither did I,” Young said. “As it has progressed, the county as a whole has started to get a handle on what is going on and clearly appreciates the fact that they are out there providing jobs, improving county services, employing local contractors for the most part and using lots of money here. It is a great advantage for the county.”

A new workforce

In Dickens County, Argo Blockchain has hired more than half of its roughly 50 employees from the community. The rest of the workers are bused in from Lubbock every day, Argo Blockchain CEO Peter Wall said.

They are full-time employees such as site managers, security personnel and technicians who repair, install and monitor the computers.

Rodriguez said he is part of the “dunk team” at the Helios facility. Rodriguez and his colleagues immerse the computers in a liquid that improves efficiency, keeps them cool and reduces the noise of the machines.

“It sounds counterintuitive,” said Lane Kingsbery, data center manager at the Helios facility. “But it’s a great tool that actually extends their life and improves their efficiency.”

Some communities with new crypto mining facilities have complained about the constant noise.

But in Dickens County, Rodriguez said most people appreciate what Argo Blockchain’s Helios facility has brought to the community. And for him, life has dramatically improved.

“I’m better emotionally, financially,” said Rodriguez, who is married with four children. “I have more money and more time with my family.”

Kate Harris, who was working as a freelance audio engineer in Dickens County, decided to apply for a job at the crypto facility after she saw an announcement in the local paper that Argo Blockchain was coming to town. Harris, who is 42 and has a son, said her family needed a reliable and stable source of income and she thought this could be it.

After applying for and getting a job as a technician, Harris said she has been promoted twice. She said she makes better money than she did freelancing and now has health benefits.

“Our team wasn’t really hired based on being crypto experts,” Harris said. “We were all hired based on our attitudes and work ethic. We have diverse workers, and we’re better for it.”

“We’ll figure it out as we go along,” Harris added. “For some people, it’s a bit scary. For me, it’s super exciting.”

Disclosure: Rice University, Rice University’s Baker Institute for Public Policy and the Texas Blockchain Council have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization funded in part by donations from members, foundations and corporate sponsors. Financial backers play no role in the Tribune’s journalism. Find a complete list of them here.