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City utility must service businesses, even crypto miners

Updated: Dec 8, 2022

Abbie Clavijo / GNP contributor


People might have thought it unethical for Greenville Utilities to get involved with the crypto mining firm Compute North last year.


The truth is it had no choice.


“Data processing centers, including those associated with block chain and crypto mining, are legal businesses and to discriminate against them would be unethical,” Greenville Utilities spokesperson Steve Hawley told the Greenville News Project in an email.


Even so, its involvement with Compute North concerned people in the city, especially when came to the electricity-hungry crypto mining operation. They publicly questioned the impact on their own electricity use and power bills.


Despite the concerns and protests, a public utilities company refusing to provide energy to a legal business would be, as Hawley said, an unethical decision.


The Greenville News Project looked into the ethics side of the local utility’s involvement with Compute North. It found that the taxpayer-owned utility stuck to its ethics standards in dealing with a legal but widely unpopular business.


Know the ethics


Business decisions can be hard enough, and for Greenville Utilities and the case of Compute North, they went under public scrutiny perhaps as never before.


Ethics run through the decisions, utility leaders say. Though it is not something the state’s ethics act requires of the utility’s commissioners, they adopted a similar policy and undergo ethics training, Hawley says.


“Each commissioner is given training in ethics by our attorney during their orientation when they first become a commissioner,” he says.


In addition, Greenville Utilities commissioners are required to sign conflict of interest statements that outline what should be done if they think they may have a conflict of interest over a matter before the board, Hawley says.


Understanding ethics is an important part of a commissioner’s role, says Tommy Stoughton, a member of the Greenville Utilities Commission. “Without ethics we could not count on directors/commissioners to make the best decisions for the common good of our citizens,” he says.


Avoiding conflict of interest


One example is the case of utilities Commissioner Ferrell Blount III. Compute North was eyeing land Blount owns as a potential site for the data processing center that would be its crypto mining plant.


Blount recused himself from a closed meeting during which commissioners discussed lease agreements between Greenville Utilities and Compute North. By doing that, he avoided a situation that might have represented a conflict of interest.


In the conflict of interest statements submitted by the board members in 2021, Blount checked “yes” to conflict of interest regarding “various local business investments.” By standard ethics practice, that required him to exclude himself from the meeting.


As to why the meeting was closed, Hawley says it is common practice for the commission to privately discuss economic developments that have not yet been announced to the public.


Blount did not respond to the News Project’s requests for comment.


“The most common ethical lapses do not involve breaking laws or ordinances but acting or being perceived as acting on a matter that is a conflict of interest or placing a private benefit above the public interest,” ethics expert John P. Pelissero told the GNP.


Pelissero is a senior scholar at Markkula Center of Applied Ethics at Santa Clara University in California.


Risks with crypto mining


The term “crypto mining” held a negative connotation to for many people in Greenville. Not only did working with a crypto mining company seem unethical for a public utility, but people also were vocal about the potential risks of Greenville Utilities’ dealings with Compute North.


Crypto mining in generally carries risks of thefts, scams and frauds, the U.S. Department of Treasury warns. It estimates that there was $14 billion worth of crypto-asset-based crime globally in 2021, and that is a $7.8 billion increase over 2020.


There is no evidence of those risks with Compute North. But the crypto currency market took a hard turn for the worse in mid-2022, and it contributed to Compute North ending up filing for bankruptcy.


At the time, there were already lease agreements in place between Greenville Utilities and Compute North. One was for space in a lot owned by the utility, and the other was for space inside a former Greenville Utilities warehouse.


Hawley, the utility’s spokesperson, says that the lease agreements for the warehouse space and lot were terminated after Compute North’s bankruptcy. The company now owes Greenville Utilities over $5,000 on the leases.


Protesting Compute North


Compute North also had an impact on the community even though it never built its crypto mining plant. That it might struck a sour note with citizens who were concerned about the environmental impact of crypto mining.


Those concerns sparked protests outside Greenville City Hall, East Carolina University’s student center and other locations. Protesters urged city council members to “say no to crypto.”


Crypto mining is done by lots of computers working 24/7 to solve mathematical problems to unlock a crypto asset. Lots of computers need lots of electricity. And lots of electricity running through the wires creates a constant sort of “hum”, says ECU’s sustainability manager, Chad Carwein.


“They (the city of Greenville) proposed putting up pine trees around the perimeter (of the planned crypto mining plant), but they were going to buy these four-foot-tall trees. It’s going to take a decade for trees that size to create any kind of sound barrier,” says Carwein.


Citizens also were concerned about the amount of electricity and finite materials that would be used by the Compute North plant.


The amount of energy Greenville Utilities would provide to a data processing facility to mine a single bitcoin transaction would be equivalent to what a small household uses in a month, according the Digiconomist website,


During a public hearing on the city’s involvement with Compute North, Carwein emphasized his concerns about the firm’s impact on the environment.


“Across the globe, bitcoin mining consumes around 91 terawatt-hours of electricity annually,” he says. “That's more annual electricity use than all of Finland, which is a country of 5.5 million people. That's almost 0.5% of all electricity consumption worldwide.”


However, selling so much electricity was the reason Greenville Utilities welcomed the prospect of doing business with Compute North.


Ethics and the project


The goal Greenville Utilities had in working with Compute North was to attract an industry that would invest in and bring jobs to the community, said Amy Wade, of the utility’s management team.


Compute North promised to do just that. Hawley says the project was expected to create about 25 jobs, in addition to buying a lot of electricity.


The reason behind working with companies like Compute North comes from the fact that the cost of providing utilities is continuing to rise over time and there are only two ways to continue operations effectively, says Wade.


“The first would be to raise rates for our existing customers which we try not not to do,” she says. “The second would be to grow our customer base and have those new customers help cover the costs.”


Business with Compute North would fall into the latter. Having that large new customer would offset the cost of some major but necessary projects without placing that burden on the customers, Wade says.


Utilities Commissioner Peter Greiger says, “Our main focus is utilities stating the purpose of reliability for the community.”


Clavijo reported this story for the fall 2022 class, In-Depth Reporting.

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