Arkansas Oil and Gas Commission Approves Rulemaking Process for Regulating Cryptocurrency Mines

The Arkansas Oil and Gas Commission voted to approve a request to begin the official rulemaking process for regulating cryptocurrency mines

The Arkansas Oil and Gas Commission voted Thursday to begin the official rulemaking process for regulating cryptocurrency mines, with the draft rules now headed for public comment.

The proposed rules are a result of legislation during the 2024 legislative fiscal session. After public backlash to a law passed in 2023 that stripped away local authority to regulate noise generated by cryptocurrency mines, the legislature passed new laws this year changing the 2023 law and mandating the AOGC create a regulatory program for the operations of cryptocurrency mines.

The rules, which will be known as General Rule K if finalized, "provides the regulatory structure for ensuring that digital asset mining businesses are managed in a manner that best protects the public interest," the executive summary of the proposed rules read.

The Arkansas Democrat-Gazette previously reported on a draft version of the rules, which it obtained via an Arkansas Freedom of Information Act request, prior to their approval by the governor's office in October. According to documentation included with the proposed rules, several changes were made to the cryptocurrency mining rules after the Democrat-Gazette published the initial draft, which was sent to Gov. Sarah Huckabee Sanders' office at the end of September.

The changes were made at the beginning of November. They included tweaks to language about foreign-owned or operated cryptocurrency mines, which were prohibited from operating in the state as part of the 2024 changes to the Arkansas Data Centers Act. Lines in the September draft prohibiting "foreign-owned" mines were changed to "foreign-party-controlled."

Additionally, the proposed rule includes a five-year permit limit, which would require cryptocurrency mine operators to renew their permits. Language stipulating how long a permit was effective was missing in the original draft.

Lastly, language in proposed Rule K-2 now says that an applicant for a permit must provide a copy of an agreement either with a public water utility or a private well owner that certifies that the mine's water use wouldn't negatively impact the local water supply or water rates. Private well owners were not included in that provision in the original version of the draft.

The changes to the proposed rules were sent to the governor's office on Nov. 4, according to documents on the AOGC's website, and were approved by the office on Nov. 12.

For the most part, the proposed rules mirror the legislation passed earlier this year. The legislation created a regulatory framework to be administered by the Arkansas Oil and Gas Commission, and also required crypto mines to obtain permits.

The proposal outlines the specific process for obtaining a permit. Enforcement mechanisms in the proposed rules state that mines in violation of their permit could be subject to $2,500 per day per violation for administrative violations, or $5,000 per day per violation for operating violations.

In addition to approving the start of the rulemaking process for cryptocurrency mine regulation, the AOGC voted in favor of multiple requests to extend the temporary abandonment of certain natural gas wells, as well as a request from commission staff to declare wells that had been out of production for years abandoned so that they could be properly plugged.