This Texas Town Was Deep In Debt From A Devastating Winter Storm. Then A Crypto Miner Came Knocking.

A 2021 winter storm overwhelmed Denton's power grid, pushing the city into crushing debt. Then a faceless company arrived with a promise to refill its coffers — and double its energy use.

Last February, a disastrous winter storm pummeled Texas with ice and snow, threatening to topple the Texan energy grid. In the city of Denton, neighborhoods blinked off and on as the local power provider tried to conserve electricity. Places like assisted living facilities were momentarily excluded from the blackouts, but those eventually went dark too. Then the gas pipelines froze, and the power plant stopped working. Over the next four days, the city bled more than $200 million purchasing energy on the open market. It would later sue the Electric Reliability Council of Texas, the grid operator also known as ERCOT, for saddling Denton with inflated energy prices that caused it to accrue $140 million in debt.

“While we were in an emergency, ERCOT allowed prices to go off the scale,” Denton City Council Member Paul Meltzer told BuzzFeed News. “We were forced to pay. We were approached Tony Soprano–like to empty our reserves.”

So when a faceless company appeared three months later, auspiciously proposing to solve Denton’s money problems, the city listened. A deal was offered. In exchange for millions of dollars in annual city revenue, enough to balance its ledgers and then some, Denton would host a cryptocurrency mine at its natural gas power plant. And not just any mine — a massive data center that would double Denton’s energy footprint so that rows upon rows of sophisticated computers could mint stockpiles of bitcoin, ether, and other virtual currencies. To officials who had simply tried to keep the lights on when conditions became deadly, the unexpected infusion seemed a relief.

But the thought of becoming a crypto town was a bitter pill for some to swallow.

“It was super shady just the way it all came about because none of the elected officials around here have ever talked about crypto, and suddenly we’re renting out space near the power plant that’s gonna use as much energy as the whole city consumes,” said Denton resident Kendall Tschacher, who told BuzzFeed News that by the time he learned about the crypto project, it was all but a done deal.

During preliminary discussions with Denton, the crypto miner was simply referred to as the “client,” its name conditionally withheld from the public on the order of Tenaska Energy, a natural gas marketer that negotiated the multimillion-dollar deal. Its name was finally disclosed in local government meetings in August: The miner moving into Denton was Core Scientific, a company cofounded in 2017 by one of the lesser known creators of Myspace, Aber Whitcomb. Headquartered in Austin, the company went public in January through an estimated $4.3 billion SPAC merger.

“The very existence of crypto seems totally stupid to me.”

A bitcoin farm on a natural gas plant is a fitting metaphor for Texas. From Austin to Abilene, crypto prospectors are staking claim to the electrical grid, hungry for cheap power and unique incentives that can effectively pay them to be there. Republican lawmakers have declared the state “open for crypto business,” gambling the industry will in turn buttress a failing fossil fuel economy and meet demands for more clean energy production. Crypto enterprises are now amassing vast amounts of energy that, they claim, can be redistributed to the grid when power reserves are needed most. Companies with valuations 100 times greater than the revenue of local cities are funding schools, sustainability projects, and discretionary spending coffers. And at the smallest levels of government, crypto operations are somehow charming communities who don’t really seem to want them there.

In Denton, the deal’s secretive nature and concerns about the mine’s colossal energy requirements inspired some council members to openly oppose the facility — at least at first.

“The very existence of crypto seems totally stupid to me,” Meltzer said.

Yet after months of deliberation in open and closed-door meetings, the deal was near-unanimously approved. Officials like Meltzer, who’d previously challenged the project’s environmental commitments, began assuring residents that it was the right choice for Denton.

Denton’s story is a tale of how a small town government embraced something to which it first seemed ideologically opposed. It’s a schematic for how the burgeoning crypto industry — which promises to solve climate change, repair crumbling infrastructure, and fix all manner of societal issues by putting them on the blockchain — is literally remaking communities, hedging their futures on its own unforeseeable success.

When put to a vote last August, Denton’s city council approved the mine, which quietly came online last month. Only one council member, Deb Armintor, voted against it. Denton Mayor Gerard Hudspeth said in an October press release that the city is “honored to have been selected as the site of Core Scientific’s first blockchain data center in Texas.” He did not respond to a request for comment; ​​Core Scientific declined to answer a detailed list of questions.

Crypto is a polarizing subject, either the genesis of “world peace” or the thing that’s going to ruin the world, depending on who’s talking. But those prevailing narratives ultimately fell flat in Denton, where crypto is a means to various ends. Like the industries of yore that shaped countless small towns across the nation, crypto companies are hoping to secure their futures by fulfilling the needs of the communities they invade. What happened in Denton, a smallish city of nearly 140,000 people, remains one of the clearest examples of how those communities are sometimes compelled to answer when crypto comes knocking at their door.

Terry Naulty stood at a dais in Denton’s city hall during an August city council meeting. “Without approval, these funds will not be available,” he told Denton’s city council, public utilities board, and planning and zoning commission in an attempt to convince them that Denton would be better off taking the money the Core Scientific deal offered.

As the assistant general manager of Denton Municipal Electric (DME), the city’s owned and operated power utility, Naulty was part of an ad hoc project team advocating for the Core Scientific deal. By the first of these hearings in June, the team had already been in talks with Tenaska for a month about selling the mine to city officials.

Core Scientific pledged a capital investment of $200 million to the project, according to recordings of city council meetings. Dozens of modular mining containers, roughly the shape and size of a semitrailer truck, would connect to the gas plant’s existing power infrastructure, a driving factor in why the company chose Denton.

On a presentation slide, rows of six-figure numbers listed the revenue that Denton could reap should council members greenlight the project. At full buildout in 2023, DME stands to earn between $9 million and $11 million annually from taxes and fees. A portion of that revenue would be transferred to the city’s general fund to be used at council members’ discretion, allowing them to pursue sustainability initiatives currently out of reach.

For DME, said Naulty, this net income “would offset the cost of Winter Storm Uri,” offering Denton the opportunity to get back in the black after accumulating $140 million in debt.

“People have their power shut off just for being too poor to pay their bills.”

Last February, millions of Texans lost power for days after freezing temperatures brought on by the winter storm pushed the ERCOT grid within minutes of total collapse. At least 750 people died as a result, according to a BuzzFeed News analysis. Neglected energy infrastructure, a lack of power reserves, and the repercussions of a deregulated market were blamed in the aftermath. Republicans like Gov. Greg Abbott cried “green energy failure,” though in truth all production was curtailed, and natural gas suffered catastrophically. Since Texas’s grid is an island, unable to draw power from neighboring states, both customers and utilities were literally left in the dark.

That week, DME spent approximately $210 million purchasing electricity from ERCOT, almost as much as it had paid in the previous three years combined. Whereas energy rates in February 2020 were $23.73 per megawatt hour, they spiked as high as $9,000 during the storm. The city had no choice but to buy power at jaw-dropping wholesale rates.

The alternative to approving the Core Scientific deal, Naulty said, would be to raise rates for DME customers by 3%. Without the crypto mine to cover the blackout’s costs, the city’s residents would have to pay for ERCOT’s failures, amounting to an additional $3.75 per month on the average customer’s bill.

Armintor remarked that even a small rate increase can be a real burden for struggling locals. “People have their power shut off just for being too poor to pay their bills,” she said.


Denton is a green blip in a sea of red. Eight years ago, local activists mustered enough community support to ban fracking in the city, the first ordinance of its kind in a state that’s the country’s number one oil and gas producer. (Months later, fossil fuel lobbyists succeeded in overturning the rule.) In 2020, Denton began offsetting 100% of its electrical footprint through renewable energy contracts; it is the only city in Texas that currently does so.

In public meetings, Naulty assured Dentonites that for the Core Scientific crypto mine, the energy used would be “100% green.” One project document claimed that putting the mine in Denton “supports carbon emissions reduction on a global basis.” It approximated the mine’s carbon footprint in China would equal 2 million tons, and on the ERCOT grid, it would total 1.1 million tons. But because the project is in Denton, the document claims, the mine’s footprint factors to zero, owing to renewable energy offsets.

But how could such a large mine, one that will consume the same amount of electricity as the city itself, ever consider itself green? That question led some council members, such as Alison Maguire, to initially oppose the deal.

“I do want us to be cautious about the idea that we can use as much energy as we want as long as it’s renewable,” Maguire said during a June hearing.

Core Scientific’s claims are based on its plan to offset its emissions using renewable energy credits, or RECs. These are credits produced by clean energy projects such as wind farms and solar arrays. One REC equals one megawatt hour of renewable energy added to the ERCOT grid. Customers purchasing RECs aren’t acquiring that electricity directly, but rather the proof that the same amount of electricity had, somewhere and at some point, been created sustainably.

Think of it like this: Blake in Oakland dumps 10 gallons of trash into the ocean. He feels bad, and pays Sam in San Francisco because she removed 10 gallons of trash from her side of the bay last month. The net result is that zero gallons of garbage were added to the ocean, yet Blake’s old takeout is still floating somewhere across the Pacific, and Sam would have removed that trash from the ocean even without Blake’s compensation.

In a city council meeting, Tenaska said it would be supplying the RECs. It did not respond to repeated requests for comment.

In the June hearing, Maguire noted that purchasing RECs was “certainly a lot better than powering through fossil fuels,” but she appeared to be unconvinced by the deal’s merits. In a July Facebook post, Maguire urged her constituents to speak out against the mine. “We don’t need to allow an unidentified company to use our city’s infrastructure to increase greenhouse gas emissions for the sole purpose of turning a profit,” she wrote. (Ultimately, like most other council people who expressed fears about the project’s sustainability promises, Maguire voted in favor of the mine. She did not respond to repeated requests for comment.)

Maguire’s caution was not unfounded. RECs are a controversial accounting strategy used by large companies like Amazon and Google to “decarbonize” their facilities. While proponents say that greater demand for these credits will incentivize more clean energy production, climate policy regulators warn that offsets aren’t a replacement for directly contracting with renewable power projects or reducing energy use entirely.

Yet crypto companies, facing pressure externally and internally to address their environmental harms, are nevertheless turning to credits as a stopgap measure. In a January update, Core Scientific announced that 100% of its carbon emissions were offset through RECs.

In addition, DME general manager Tony Puente said that Core Scientific will be purchasing RECs already in existence for the Denton mine, which means the project will not be directly contributing to the creation of new renewable energy. Core Scientific declined to answer questions about its use of RECs.

“Crypto is increasing demand and we need to reduce demand,” said Luke Metzger, who leads the advocacy group Environment Texas. “If [Core Scientific] is just purchasing RECs, then no, they’re not in fact supporting the development of new renewables.”

But the calculus was enough to convince some council members that the project would in fact be green. “If you’re at all serious about climate impact and if you accept the fact that [the mine] is going to be built, you are doing massively better for the environment by having it in Denton,” Meltzer told BuzzFeed News.

Core Scientific’s use of RECs is different from how Denton supports renewables: The city has long-term agreements with solar and wind projects to bring new clean energy onto the grid.

“Crypto is increasing demand and we need to reduce demand.”

“It would be dirty 10 miles down the road, and you can argue it’s still dirty here, but all the electrons we buy are clean electrons,” Council Member Brian Beck told BuzzFeed News.

Even though he supported the deal, Beck echoed the concerns of environmental critics, saying that RECs are “not quite the market push as buying direct power agreements.” But regardless, Beck insisted the project will correct ERCOT’s “pee to pool water” ratio of renewables to fossil fuels. Meltzer and Beck confirmed that in the future, council members can choose to pursue a direct power agreement over RECs for the mine’s energy.

But RECs have their benefits too, because the crypto project’s unknown lifespan carries certain risks. Puente said he didn’t want Denton to enter a long-term contract to supply the mine with renewable energy “and then this company leaves tomorrow.” While Core Scientific has the option to extend its agreement with Denton for up to 21 years, even pitch documents asked, “What happens when it’s over”?

Metzer was also swayed to support the deal because he says up to $1.2 million of annual revenue could finance a sustainability fund, something Denton had never been able to do in previous fiscal years. During one city council meeting, a slide proposed that this money could be used for initiatives like creating a Denton climate action plan, installing air quality monitoring stations throughout the city, and weatherizing the homes of low-income residents.

Council members told BuzzFeed News that they were able to push for some changes to the 138-page power purchase agreement that governs the relationship between the city and Core Scientific. After reading a draft of the agreement, council members said they included a mandate that the mine be cooled by air chillers as opposed to water cooling systems, preventing the mine from accessing Denton’s water reserves (a resource that traditional data centers have guzzled in other towns).

Armintor, the only council member who voted against the deal, was dissatisfied with its terms and rebuked Core Scientific’s offer in a September Facebook post. “I would’ve thought we’d all have been totally averse to crypto in Denton, and I think that was people’s first response,” Armintor told BuzzFeed News. But she believes her fellow council members were persuaded to approve the project because of the “promise of money it might generate.”

Armintor suggested that funds for the sustainability initiatives could have been reappropriated from Denton’s police department or Chamber of Commerce. “My argument is that we’re legislators, we can do this by reallocating money we already have so that we don’t have to make a deal with the devil,” she said.


Denton is a microcosm of global changes that are transforming the US into Eden for crypto miners. Miners infamously crept into states like Washington and New York as early as 2017, but it wasn’t until China declared a sweeping ban on bitcoin mining last year that America became a crypto superpower. The US now hosts 35% of bitcoin’s hashrate, more than any other country in the world, and half of the largest crypto companies.

As a result of “the Great China Unplugging, lots of big companies are redomiciling their operations here and are looking at Texas as a base,” John Belizaire, founder and CEO of crypto mining company Soluna Computing, told BuzzFeed News. Soluna has invested in a 50-megawatt mine currently under development in Silverton.

This momentum propelled Tenaska, like many other oil and gas companies, into the crypto landscape. The company revealed in negotiations with Denton that it is managing the energy needs of miners in other regions in Texas and Montana. In Texas, Tenaska has aligned itself with the Texas Blockchain Council, a powerful lobbying group that helped to pass two state blockchain bills last year. Both Tenaska and Core Scientific are listed as Texas Blockchain Council partners.

By the end of 2022, ERCOT is expected to provide power for 20% of the bitcoin network thanks in part to political support. Miners in Texas will require twice the power of Austin, a city of 1 million people. To a cluster of conservative lawmakers including Sen. Ted Cruz, crypto has become a convenient vector for US nationalism.

“Inheriting the hashrate from China is seen as a good thing because not only is America bringing a profitable industry over from China, but China is now also ‘anti-freedom’ for outlawing cryptocurrency,” said Zane Griffin Talley Cooper, a doctoral candidate at the University of Pennsylvania who studies crypto’s interaction with energy infrastructure.

These dynamics weren’t wasted on Denton’s officials. “What we have essentially is a runaway teen from Asia that we are fostering,” Beck said during an August hearing. “We have the opportunity here not just to foster that child, but to be an adult in the room.”

However, council members had to make a leap of faith when it came to crypto’s most ambitious claim. Across the nation, companies like Core Scientific are promising to strengthen local grids by devouring huge amounts of energy. It sounds contradictory, but to bitcoin evangelists like Belizaire, crypto’s energy demands are a “feature, not a bug.”

It’s a sales pitch that relies on two largely untested assumptions: One, that crypto’s energy requirements will stimulate new clean energy production. And two, that miners will respond to the grid’s larger needs, powering down when energy demands are at their highest.

“There are grains of truth in the things I’m hearing, but it sometimes gets overtaken by hyperbole and rhetoric,” energy analyst Doug Lewin told BuzzFeed News. Though Lewin doesn’t believe that bitcoin is a vehicle to a clean energy future, he theorized that mines could serve a beneficial purpose under a specific set of conditions.

“What we have essentially is a runaway teen from Asia that we are fostering.”

For example, wind and solar farms in West Texas can be forced to “curtail” their production due to a lack of adequate transmission infrastructure and battery storage capacity. Even on the windiest or sunniest of days, if power lines can’t carry those electrons across the ERCOT grid, operators have no choice but to reduce their energy output. A crypto mine built adjacent to these farms could conceivably power its operations on excess renewable energy alone. Such solutions have been endorsed by people like Square CEO Jack Dorsey. Last year, Square commissioned a whitepaper titled “Bitcoin Is Key to an Abundant, Clean Energy Future.” True believers in bitcoin’s utility have even adopted the phrase “bitcoin as a battery.”

“You’re not a battery, you don’t store energy,” Lewin said.

Core Scientific also pledged to modulate its power use, purchasing energy but also distributing it back onto the grid. For a city still recovering from last year’s outages, this was a crucial selling point. If the mine “is ready to produce two Dentons’ worth of power, and we start to have grid instability issues, you turn off the data center,” Beck explained.

“Interruptibility” isn’t new or unique to crypto. Austin semiconductor plants idled during the February 2021 winter storm, and ERCOT works with other large facilities during emergency events to reduce their demands. But miners believe they stand alone in being able to power down within seconds without harming their operations.

While ERCOT did not comment for this story, ERCOT chief Brad Jones has endorsed crypto as a grid partner and said he’s personally “pro bitcoin.”

Project documents claim that Core Scientific’s data center will shut down “during high price periods or scarcity of generation events or higher than forecasted load.” In practice, Core Scientific will base its daily operations — when to run, and at what capacity — on variable ERCOT market rates. If it feels that prices are too high to mine, it can choose to power down.

According to Puente, Core Scientific has also entered a confidential agreement with ERCOT to curtail its energy use during peak demand. For example, during another extreme weather event, ERCOT may require the mine to stop running and, in return, will pay Core Scientific for the energy it frees up on the grid at a profit to the crypto company. In other words, Core Scientific is either saving money or making money if it powers down. Should it refuse to do so, “we will automatically open up their breaker to shut off power to them, if needed,” Puente said.

“You’re not a battery, you don’t store energy.”

Tenaska and ERCOT did not respond to numerous requests for comment about how this arrangement works. Core Scientific declined to comment on all aspects of its operations in Denton. So it’s unclear when, exactly, the mine can be mandated to power down, and whether ERCOT has legal recourse if Core Scientific does not comply. The city’s contract with Core Scientific states that DME “shall have the right, but not the obligation” to force compliance, and that DME is not liable for any penalties if Core Scientific fails to curtail its energy use. A portion of these terms is redacted.

Skeptics have also warned that the unpredictable price of cryptocurrency could be a more compelling factor than market force and community needs. In Chelan County, Washington, one of the first US communities to host a crypto diaspora, miners elected to run continuously and its local power utility “did not receive serious modulation offers.”

But things may have shifted now that crypto companies face increasing public accountability. When a cold front descended on Texas in February, large miners such as Riot Blockchain and Rhodium Enterprises curtailed their energy consumption by up to 99%, and a host of other miners also voluntarily powered down.

“We are proud to help stabilize the grid and help our fellow Texans stay warm,” Rhodium’s CEO tweeted.

Three hours off, one hour on. During the rolling blackouts of 2021’s deadly winter storm, people in Denton scrambled to heat their homes and charge their devices whenever power momentarily returned. Daniel Hogg, a Denton resident of 12 years, told BuzzFeed News that he was “piled up with my dogs and lots of blankets” before evacuating to a friend’s house in unaffected Lewisville.

On Facebook and Reddit, with the memory of that storm still fresh in their minds, some residents have accused the city of agreeing to a losing deal. Hogg is among the locals unconvinced by crypto’s claims, and believes the city council should have done more to involve residents in their decision-making process. Though citizens could attend public hearings, Hogg said they weren’t well publicized. He wasn’t aware the deal was even happening until after officials had already voted to approve it.

“It’s so weird the way everything was done so secretively,” Hogg said.

Beck and Meltzer disagreed with the assertion that council members didn’t solicit public input. “People are as involved as they want to be,” Meltzer said.

While the city council was made aware of Core Scientific’s identity in private, members were prohibited from saying its name out loud in early hearings. Last August, Armintor, who voted against the deal, told the project team that these nondisclosure terms, by which both council members and city employees were bound, “make me uncomfortable.”

“It’s so weird the way everything was done so secretively.”

Hogg first learned of the deal through a September Dallas Morning News Watchdog story by reporter Dave Lieber. The story was first to note that chunks of the city’s 138-page power purchase agreement were redacted to conceal ERCOT figures, construction deadlines, and infrastructure details. The contract also required that “neither Party shall issue any press or publicity release or otherwise release, distribute or disseminate any information,” though Core Scientific would eventually publish a joint statement on the deal last October. Core Scientific declined to provide BuzzFeed News with an unredacted agreement or comment on the deal’s secrecy.

Even now, after some project details have been released, the document remains redacted under Texas public information law. Puente and Beck told BuzzFeed News that the agreement was written by a team of city staffers, Denton lawyers, and Tenaska and Core Scientific representatives.

“I don’t think people understand enough to know what they would be protesting,” Denton resident Tschacher told BuzzFeed News. Despite being a crypto enthusiast himself, Tschacher also thinks Denton could have received more from the deal, such as a commitment to train and hire employees locally. The site is expected to support just 16 permanent jobs at completion.

“I guess I was mostly disappointed because we took the Texas approach and took the easy money,” he added.

Near the outskirts of town, machines have just begun mining at Denton’s power plant. Even though crypto projects are poised to pepper the Texas landscape, only a few mines the size of Core Scientific’s are currently operational. Denton has become a petri dish for this new era of cryptocurrency — not because its leaders believe in the transformational potential of the blockchain, but because it offered a service when the city needed it most.

This is just the beginning of Denton’s crypto experiment. Puente said the city is considering proposals from three other crypto miners, but because of nondisclosure agreements, wouldn’t reveal who they are. If these deals materialize, Denton’s energy needs would practically disappear beneath the hulking appetites of its new, power-hungry residents.

“Even though they’re our customer,” Meltzer said, “I do hope their industry goes under.” ●

Correction: Soluna Computing's mine is under development in Silverton. The location was misstated in a previous version of this post.