C-Falls will restrict 'cryptocurrency' operations to heavy industrial zones

The Columbia Falls city council Monday voted to recommend an amendment of zoning regulations to allow cryptocurrency businesses, but only in areas zoned for heavy industry and only under a conditional use permit.

The council decision came after the planning board examined the matter earlier in the week.

Cryptocurrencies, digital currency that only exists online, is not regulated by any government or administrative entity, but maintained through a communal digital ledger that records all transactions. Server farms are used to monitor and verify these transactions through a process called “mining.” The mining operations can use thousands of servers, which need to be powered and cooled, leading to noise and excessive power usage.

“We are not proposing to outlaw these facilities, but to essentially put them in a category in the heavy industrial zones, as opposed to leaving it silent having them be able to come into any of our industrial zones. We feel that a heavy industrial zone would be the appropriate location for that type of use,” city planner Eric Mulcahy said. “We would put it in the conditional use category so we could maybe come in and look at the orientation of these facilities before they become operational. With a conditional use permit, we would have the opportunity to request information from Flathead Electric to determine how facilities would impact other electricity users around it. We are not necessarily discouraging those kinds of businesses, we are just trying to address the impacts they might have.”

The planning board voted to add a new definition of the facilities to the current zoning regulations, stating that “‘Cryptocurrency facility’ means any digital mining facility, server farm or data center whose purpose is to support digital mining of Bitcoin and other cryptocurrencies (digital value currencies or their derivatives). These facilities are typically comprised of high-powered computers running 24-hours per day, 365 days per year; may or may not have on-site staffing.”

There is currently one facility already in operation in the Columbia Heights area, Jeff Russell and Don Kinser’s Columbia Mountain Holdings, which uses its servers to mine for Bitcoin. According to a report given to the board, that facility is located away from residential areas and has not been the source of any complaints, but that has not been the case at a similar facility located near Missoula in the town of Bonner.

The Bonner facility, which is much larger than the Columbia Mountain Holdings facility, occupies an old saw mill and has received numerous noise complaints from neighbors who never complained while the sawmill was in operation. The problem is the high-pitched whine and constant hum of the cooling fans used to keep the servers from overheating.

The planning board was also told that Flathead Electric is hesitant to connect any additional mining operations to the power grid due to the tremendous energy drain. The Columbia Mountain facility uses about 3.8 megawatts of electricity when operating at full capacity.

That’s the same amount of electricity used by all three of the cities in the county, city manager Susan Nicosia told council.

There is also the concern that such facilities, which employ just a few people, could draw power away from much larger potential employers looking to move into the area.

While there are no additional mining operations looking to move into the area at this time, Nicosia said there was a lot of interest in putting such a facility in the area before Flathead Electric put a moratorium on additional cryptocurrency mining operations.

“The phone at Montana West Economic Development was ringing off the hook until the moratorium was put in place,” she said. “They saw cheap power available here and CFAC’s phone was ringing as well with these companies interested in that site.”

Councilman Mike Shepard agreed that there is power available in the area, but voiced his concerns about the noise issue.

“You realize that the one thing we are sitting on is the power. People are going to look into putting those businesses here because electricity is what drives that industry,” he said at the planning board meeting. “I would be very concerned about having one of these facilities in an area where people would live within earshot, though.”