MISSISSIPPI LEGISLATURE
2023 Regular Session
To: Energy
By: Representative Powell
AN ACT TO CREATE THE ORPHANED WELL CRYPTOCURRENCY MINING PARTNERSHIP PROGRAM FOR THE PURPOSE OF AUTHORIZING CRYPTOCURRENCY MINERS TO ASSUME LIABILITY OF PLUGGING, REMEDIATING, OR RECLAIMING ORPHANED WELLS, IN RETURN FOR TEMPORARY CONTROL OF THE ENERGY FROM THE WELL; TO REQUIRE THE MISSISSIPPI DEPARTMENT OF ENVIRONMENTAL QUALITY TO ADMINISTER THE PROGRAM; TO DEFINE CERTAIN TERMS RELATING TO ORPHANED WELLS AND CRYPTOCURRENCY MINING; TO CREATE THE ORPHANED WELL CRYPTOCURRENCY MINING PARTNERSHIP PROGRAM FUND; TO PROVIDE FOR A BIDDING PROCESS FOR CRYPTOCURRENCY MINERS IN THE PROGRAM; TO REQUIRE THAT THE COST OF PLUGGING, REMEDIATING, OR RECLAIMING AN ORPHANED WELL BE CAPPED AT THREE TIMES THE INITIAL ESTIMATE BY THE DEPARTMENT, UNLESS IT IS DEMONSTRATED THAT THE WINNING BIDDER CAUSED ADDITIONAL COSTS TO THE SITE; TO REQUIRE CRYPTOCURRENCY MINERS IN THE PROGRAM TO PROVIDE A YEARLY UPDATE TO THE DEPARTMENT; TO AUTHORIZE CRYPTOCURRENCY MINERS TO TAKE LEGAL OWNERSHIP OF THE WELL AT THE END OF THE AGREED UPON MINING PERIOD; AND FOR RELATED PURPOSES.
WHEREAS, uncapped, orphaned oil and natural gas wells require cleanup, or such wells would otherwise continue to emit methane and other gasses; and
WHEREAS, the federal government is allocating at least Twenty Five Million Dollars ($25,000,000.00) to the State of Mississippi, with additional grant money available to states that address the management and containment of orphaned wells; and
WHEREAS, Mississippi has many orphaned wells that are in need of containment; and
WHEREAS, in Mississippi, significant funding would be needed to contain existing orphaned wells in a timely manner; and
WHEREAS, Cryptocurrency mining operations can use orphaned oil and natural gas wells to secure the Cryptocurrency network in a profitable manner, while generating economic activity and helping mitigate the environmental challenge of orphaned wells; NOW, THEREFORE,
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known and may be cited as the "Orphaned Well Cryptocurrency Mining Program".
SECTION 2. As used in this act, the following words have the meanings as defined in this section, unless the context clearly requires otherwise:
(a) "Orphaned well" means an oil or natural gas well on public or private lands which has not been properly plugged according to the requirements of the statutes where the leasehold owner or welibore operator cannot be located and there is no other party which can be forced to plug the well.
(b) "Cryptocurrency mining" means using electricity to power a computer for the purpose of securing the cryptocurrency network.
(c) "Department" means the Mississippi Department of Environmental Quality.
SECTION 3. (1) There is created within the Mississippi Department of Environmental Quality the Orphaned Well Cryptocurrency Mining Partnership Program, to be administered by the department. The purpose of the program is to authorize cryptocurrency miners to assume liability of plugging, remediating, or reclaiming orphaned wells, in return for temporary control of the energy from the well.
(2) There is created in the State Treasury a special fund to be known as the Orphaned Well Cryptocurrency Mining Partnership Program Fund, which shall be administered by the department. The fund shall consist of monies from the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, legislative appropriations, federal funds, contributions, donations, gifts and monies from any other source that are made available for deposit into the fund. Monies in the fund shall be expended by the department upon appropriation of the Legislature for the sole purpose of providing funds to cryptocurrency miners for the Orphaned Well Cryptocurrency Mining Partnership Program under the provisions of this act. Monies remaining in the fund at the end of a fiscal year shall not lapse into the State General Fund, and any interest earned from the investment of monies in the fund shall be deposited to the credit of the fund.
(3) The department shall be responsible for documenting all known orphaned wells in the state. The department shall make the reporting information that is required by the Infrastructure Investment and Jobs Act, and other relevant information, accessible on a publicly accessible website that contains information on orphaned wells in the state as well as the following information, to the extent that it is reasonably possible to provide such information:
(a) How much methane or any other natural gas can reasonably be expected to be produced from the orphaned well;
(b) The location of the well;
(c) How long the well has been abandoned;
(d) An estimate of the cost of plugging, remediating, or reclaiming each orphaned well to environmental standards;
(e) Whether the well is on state or private land;
(f) Information on the last known operator of the well;
(g) Information regarding the integrity of the well and/or the casing of the well; and
(h) Any other information the department deems relevant for the program.
(4) Once such information has been collected and provided, the department shall, on such publicly accessible website, solicit bids from cryptocurrency miners to take temporary ownership of the orphaned well, and take legal responsibility for plugging, remediating, or reclaiming such orphaned well.
(5) The department shall solicit bids at least once a year for this program, but it may hold additional bidding periods at its discretion. To be eligible to submit bids, cryptocurrency miners shall provide the following information to the department:
(a) Legal documents showing the structure of the cryptocurrency mining company, and a demonstrated ability to mine cryptocurrency successfully;
(b) A reasonable estimate of when the cryptocurrency mining company would begin mining on the site, and a reasonable estimate of how long the cryptocurrency mining company would mine cryptocurrency at the orphaned well site;
(c) A reasonable estimate of monies needed, including the amount in funds from the Orphaned Well Cryptocurrency Mining Partnership Program Fund that the company would require to quickly deploy mining equipment;
(d) A reasonable estimate of how many cryptocurrencies would be mined at the orphaned well over the life of the agreement;
(e) A reasonable estimate of the breakeven price for cryptocurrency mining in order to be profitable at the orphaned well;
(f) Proof of financial responsibility for the cryptocurrency mining company's ability to ensure cleanup of the site of the orphaned well, regardless of the success of the mining operation at such location;
(g) An estimate of the funds the company shall deposit back to the fund over the life of its agreement in the form of cryptocurrency; and
(h) Any other information the department deems relevant.
The information provided in such bid is confidential to the department. The department may provide summary statistics regarding information received in the bids.
(6) The department shall determine the bidding period, and after such period ends, the bidding winners shall be selected, taking into account the following criteria:
(a) The ability of the cryptocurrency mining company to successfully and safely mine on the orphaned well;
(b) The time frame over which the company will mine on the well; and
(c) The initial cost and return on investment for the program.
(7) Once the bid is won, and if the mineral rights are still held by a third party, the miner who assumes control over the well shall enter into private negotiations to determine the royalty on a per thousand cubic feet basis.
(8) The department shall announce the winning bidders on a publicly accessible website, along with a shortened version of the proposals submitted, removing all confidential information of the cryptocurrency mining company.
(9) Before the winning bidder may begin mining on an orphaned well, the bidder shall use a third party organization to report to the department the amount of natural gas emissions currently being emitted from the well.
(10) The winning bidder may begin mining on the orphaned well after posting a bond to the state, in an amount to be determined by the department, to ensure that the site is plugged, remediated, or reclaimed to environmental standards.
SECTION 4. (1) Before beginning the process of mining on a previously orphaned well that was won through the bidding process, the winning bidder shall have sixty (60) days from being informed that he or she is the winning bidder to perform due diligence on the well. Such due diligence shall include the ability to do the following:
(a) Run logs for mechanical integrity;
(b) Run logs for surface integrity; and
(c) Determine the amount of natural gas and or oil the well can produce.
Such data shall be reported to the department no more than sixty (60) days after the due diligence period ends.
(2) After such sixty (60) days, the winning bidder shall report his or her decision of whether he or she intends to mine at the well and assume all liability of plugging, remediating, or reclaiming the orphaned well. If he or she does not report his or her decision to the department, he or she shall be fully responsible for plugging, remediating, or reclaiming the orphaned well.
(3) If, after such sixty (60) days ends, the winning bidder chooses to not mine off the orphaned well, he or she shall:
(a) Report his or her decision to the department;
(b) Report the reasoning for such decision to the department; and
(c) Report any and all logs to the department.
(4) Before the due diligence period ends, the winning bidder may apply to the department for an additional sixty (60) days to perform such necessary due diligence.
(5) After the winning bidder assumes control over the orphaned well, he or she is fully responsible for plugging, remediating, or reclaiming the orphaned well.
(6) If applicable, the department shall remove the wells secured by cryptocurrency miners through the bidding process from any required plugging schedule.
SECTION 5. (1) The cost of plugging, remediating, or reclaiming an orphaned well shall be capped at three (3) times the initial estimate by the department, unless it is demonstrated that the winning bidder caused additional costs to the site.
(2) In order to qualify for the cost to be capped on plugging, remediating, or reclaiming the orphaned well, the cryptocurrency miner shall use a third party to:
(a) Provide all information regarding the well integrity to the department;
(b) Record all data on natural gas emissions of the well, and submit such data to the department;
(c) Record any potential groundwater contamination of the well, and submit such information to the department; and
(d) Submit evidence to the department that indicates that cryptocurrency mining on the well did not significantly cause the cost of plugging, remediating, or reclaiming the well to increase.
(3) A cryptocurrency miner participating in the program shall not incur any liabilities other than the duty to plug, remediate, or reclaim an orphaned well that he or she has taken control of through such program. Any additional costs shall be paid for by the Orphaned Well Cryptocurrency Mining Partnership Program Fund.
(4) The cryptocurrency mining company may pay any monies owed to the Orphaned Well Cryptocurrency Mining Partnership Program Fund in cryptocurrency. The Legislature may determine whether the fund shall hold cryptocurrency or immediately transfer the cryptocurrency into American dollars or a stable coin or some combination thereof.
(5) A cryptocurrency miner that pays into the fund shall have those payments exempt from state income tax for his or her cryptocurrency paid into the fund or any other cryptocurrency generated through the program.
(6) A cryptocurrency miner in the program shall provide a yearly update to the department that documents his or her ability to plug, remediate, or reclaim the well as outlined in his or her bid.
(7) After the agreed upon period of time as set forth in the bid, the cryptocurrency miner shall plug, remediate, or reclaim the well using a company that has been approved by the department.
(8) Nothing in this act shall prohibit a cryptocurrency miner from creating an agreement with a third party to facilitate the transfer of oil from an orphaned well to market.
(9) At the end of the agreed upon mining period, the cryptocurrency miner may take legal ownership of the well, as provided for in Mississippi law. However, if a cryptocurrency miner takes legal ownership of the well after such mining period, the responsibility of the cryptocurrency miner to plug, remediate, or reclaim the orphaned well is not removed. A cryptocurrency miner shall provide notice to the department of such plans to take legal ownership of the well no less than twelve (12) months before the orphaned well is slated to be plugged, remediate, or reclaimed.
SECTION 6. This act shall take effect and be in force from and after July 1, 2023.