In Bulletin 2022-12, the Alberta Energy Regulator (AER) announced its awareness of cryptocurrency mining operations running alongside AER-regulated activities in Alberta. In an attempt to better understand the situation, work with regulated parties in order to manage potential risk, and ensure compliance and the overall safety of AER-regulated operations, the AER is asking that all regulated parties provide information related to current or future cryptocurrency mining operations associated with their sites.

Cryptocurrency is a type of digital asset that is secured using cryptography. It typically uses decentralized ledger technology employing blockchains to record and keep a history of transactions. Cryptocurrency mining is a process that uses computers or specialized hardware to confirm cryptocurrency transactions - ‘unlocking’ new cryptocurrency to add to the existing supply. Generally, to mine cryptocurrency, a large amount of processing power is required in order to power the computer systems and hardware which run the mining algorithms. Cryptocurrency mining computers and hardware have the potential to consume large amounts of energy and may require climate control in order to maintain operations.

The AER is looking for certain information regarding cryptocurrency mining operations, including surface location, license numbers, size in kilowatts per hour, status of the operation, as well as the type of energy source used by the operation:

• Shared Gas: A natural gas-consuming driver generates energy used by both the AER-regulated operation and the cryptocurrency mining operation;
• Individual Gas: A natural gas-consuming driver generates energy used exclusively by the cryptocurrency mining operation; and
• Grid Power: The cryptocurrency mining operation consumes electricity from the grid or other off-site generation.

Due to Alberta’s deregulated electricity system and its abundant supply of natural gas, Alberta’s potential for cryptocurrency mining is attractive to companies and investors. While this potential brings opportunity for innovation to the province, cryptocurrency focused companies should understand the regulatory scheme applying to cryptocurrency mining operations in order to adhere to all the necessary requirements. Cryptocurrency miners intending to build their own generation to operate in Alberta must first receive approval from the Alberta Utilities Commission (AUC), unless otherwise exempt. In order to operate a power plant which powers a cryptocurrency mining operation, a formal application under the AUC’s Rule 007 is required for all generation plants over 10 MW. The AUC’s regulatory approval process for new power plants between 1-10 megawatts has recently changed, as detailed in the AUC’s Bulletin 2022-04.

Bulletin 2022-02 also draws attention to the fact that: (i) the equipment spacing requirements for operators as set out in Directive 056: Energy Development Applications and Schedules must be adhered to by such operations; (ii) the requirement that activities being carried out near to or at the same location as an AER-regulated activity require public land dispositions; and (iii) cryptocurrency mining operations that consume gas produced by AER-regulated activities are considered consumers, even where the third-party operation is owned or operated by the same entity that produced the gas. As the regulatory landscape shifts, those interested in providing power for cryptocurrency mining operations must remain updated on the latest requirements.

The AER asked all regulated parties to provide information related to current or future cryptocurrency mining operations associated with their sites by May 20, 2022. Stakeholders are now awaiting further instructions from the AER as this information is processed. As further guidance is provided, companies considering the development of cryptocurrency mining operations in Alberta should stay up-to-date with changes to the regulatory scheme.

Dentons Canada’s Energy Innovation and Transition group will continue to track developments in the regulatory landscape involving cryptocurrency mining operations and provide additional updates when available.