Unleashing Your Power: A Guide to Resisting the EIA

    The ⁤Biden Administration has ramped up its scrutiny of the U.S. bitcoin mining industry by implementing‍ an emergency survey through the Energy Information Agency‍ (EIA). The survey​ aims ​to gather data on electricity⁢ usage by miners, citing concerns about potential ⁢threats to the stability of the national grid. This move, reminiscent of actions taken in Venezuela that resulted in⁣ mining confiscations, raises‍ concerns about a potential‍ trend towards a complete registry of ‌mining activities. This article urges the bitcoin mining community to unite against this​ overreach, highlighting the positive impact‌ miners have on grid stability through demand response programs. It also critiques the EIA’s legal and procedural justifications, emphasizing the need for industry solidarity to protect mining autonomy⁤ from regulatory interference.

    • The⁣ EIA’s⁣ emergency⁤ authorization for the mining⁢ survey is inadequate and‍ does not meet the minimum requirements set by the enabling ⁤statutes.
    • There are technical flaws in the EIA’s authorization regarding the collection of Personally ⁤Identifiable Information. Additionally, the agency has not clearly defined who the required respondents‍ are.
    • While an affected miner ⁤or​ industry group can file a lawsuit to block​ this action, there is​ a strong argument that a sovereign‍ state, particularly‍ Texas due to ERCOT, could also have​ standing to sue as the EIA’s action directly infringes on state sovereignty concerns.
    • A lawsuit should easily meet the requirements for a preliminary injunction and, if successful, a permanent injunction against the⁤ use of the emergency claim in this case.
    • Time is of the essence as the timeframe for this survey is extremely short.

    Part 1:​ Introduction

    The EIA‍ has found itself at the center of a contentious debate due to its rushed and mandatory survey of cryptocurrency mining operations. The main issue is the agency’s use of emergency powers to collect‍ data from cryptocurrency miners, ‌citing concerns about energy consumption and system reliability in light of rising Bitcoin prices and environmental concerns.

    This article delves into the ⁤legal,⁤ procedural, and practical aspects of the EIA’s actions, examining the ⁣agency’s reasoning ‍and its implications for‌ public ⁣engagement in regulatory processes. By analyzing the ‍legal ‌frameworks that govern emergency rulemakings, including the Administrative Procedure Act (APA) and the nuances of “good cause” exemptions, as well⁣ as the Paperwork Reduction Act ​(PRA), this piece exposes the EIA’s flawed process in pushing ⁤forward ⁢with this action. It also outlines potential legal⁤ arguments that could be used ⁢to challenge the survey​ and identifies who can‍ bring forth such a challenge.

    For more information on the EIA and the survey itself, refer to this article by Charlie ​Spears and Storm Rund, as well as this piece by Marty Bent.

    At its‍ core, the ⁤Energy Information Agency‍ does have the power under statute ⁢to collect the data they are seeking in this​ survey. However, I will not argue here whether or not that power​ is⁢ legitimate,⁣ as ⁤there are valid arguments that ‌it may not be.​ Instead, I⁣ focus on the process used by the EIA to demonstrate a⁢ viable route to block the current ‍action.

    Data collection ⁢of this nature⁢ should‍ only be done through a traditional notice-and-comment ⁤process, where ​the⁤ public is given sufficient ‍notice of⁤ the‍ agency’s ‌intention to take‌ action, and both the public and the agency have adequate time ​to⁢ respond. Recall the⁢ FinCEN rulemaking ‌that ended a few weeks ago. The public ‌was given three months to ‌review and comment, resulting in an excellent response drafted ⁤by ‍Samourai Wallet and⁢ signed by 25⁣ other Bitcoin companies.

    The APA requires agencies to follow procedures such as⁢ notice-and-comment to allow the public, including those with “highly relevant expertise in the subject,” to participate ⁣in‍ rulemaking by submitting comments.

    Desirée LeClercq, Judicial Review of Emergency Administration, 72 Am. U. L. Rev. 143, 165 (2022-2023) (emphasis added)

    As evident, ​the EIA is not operating with‌ access to ​”highly relevant expertise”:

    Several cryptocurrencies, particularly Bitcoin, use a proof of work approach that requires miners to validate ​blocks⁣ of transactions by⁤ solving complex cryptographic puzzles that require ‌significant computational power.

    EIA⁣ Supplemental Materials (emphasis ⁣added)

    An agency may bypass the‌ normal notice-and-comment process “when the agency for good cause finds‌ (and incorporates the finding and a brief statement of reasons for ⁢it in the rules issued) that​ notice and public procedure are impracticable, unnecessary, ‍or contrary to the public interest.”⁢ 5 USC​ §553(b)(4)(B).​ Similarly, under the PRA, an agency may expedite⁣ certain ⁢procedures‍ when ‌”the agency cannot reasonably comply with ​the provisions​ of this subchapter ⁣because…public harm is reasonably likely to result if normal clearance ​procedures are followed.” 44 USC §3507(j)(1)(B)(i).

    However, and this is a significant “however,” the⁣ emergency procedure being used by the EIA is extremely tenuous.

    Agencies have a history of invoking the “good‌ cause” exception of the Administrative Procedure Act (APA) to bypass public involvement, but the courts have become increasingly wary of ​such loose use ⁤of emergency rules. “The need for public participation⁢ in administrative rulemaking is ‘axiomatic.'” Ernest Gellhorn, Public ‍Participation in ‍Administrative ‌Proceedings, 81​ YALE⁢ L.J. 359, 369 (1972).

    Several cases during the COVID era have shown judicial impatience with agencies using ‍emergency powers in situations where ‌there is no ‌legitimate justification to do so.

    The‌ EIA’s justifications‌ for their emergency data⁢ collection can be summarized⁤ as:

    1. The price of ‍Bitcoin has increased.
    2. Higher prices⁤ incentivize more mining.
    3. It is currently cold outside.
    4. Something bad happened five years ago.
    5. We are not entirely sure if it is that bad.
    6. But we feel a ​sense​ of ⁢urgency to collect⁣ data NOW NOW NOW.

    As evidence, the price of Bitcoin has ⁢risen by approximately 50% in the last three months, and higher prices incentivize more cryptocurrency⁤ mining activity, which, in turn, increases ‌electricity consumption.​ At the time of writing, ‍much of the‍ central United⁣ States is experiencing a major cold snap, resulting in high electricity‌ demand. The combined effects of increased mining and stressed electricity systems create heightened uncertainty in electric power markets, which could lead to demand peaks that affect system operations and consumer prices, as⁣ seen in Plattsburgh, ⁢New York⁢ in 2018. Such conditions ‍can arise and dissipate rapidly. Given the emerging and‌ rapidly changing nature of this issue and because we cannot accurately assess the ​likelihood of public‌ harm, the EIA feels a sense of urgency ‍ to gather⁣ credible data that ⁢would provide ⁤insight into ⁢this developing issue.”

    The OMB’s Statement of the EIA’s Justification for emergency ⁢action (Emphasis Added)

    This⁤ justification is incredibly weak for‍ the extraordinary power of an emergency⁢ action,⁤ and courts‌ have blocked agencies for​ not having sufficient “good cause” when they⁢ had much stronger justifications ‌than​ the EIA does ⁣here.⁢ See, for example, Chamber of Commerce of ‍the United States ⁣v. U.S. Department of Homeland Security, ⁣ 504⁤ F. Supp. 3d 1077⁣ (N.D. Cal. 2020).

    If challenged, a court ⁢should block the EIA’s data ⁢collection action (i.e., grant an injunction preventing the EIA from enforcing ‍it). Below, we delve into more detail on how such a challenge could be made⁤ and who can bring⁢ it.

    Part 2: Standing

    The first aspect of‍ any case analysis is determining who can file a lawsuit.‍ The basic requirements for standing are that a plaintiff must have⁤ personally:

    1. suffered actual or threatened harm;
    2. the harm can be traced back to the ‌defendant’s actions; and
    3. the harm is likely to be resolved by a favorable decision.

    See Lujan v. Defs.⁣ of⁢ Wildlife, 504 U.S. 555, 560–61 (1992).

    Clearly, any miner who has received a letter from the EIA ⁢falls under this category.‍ According to their OMB statement, ​the EIA has identified 82 miners who⁤ they intend to request information from, and any of these ‍82 miners could‌ file a lawsuit.

    WhatPart 3: General Background on “Good Cause”⁤ Emergency Rulemaking

    The Administrative Procedure Act (APA)​ governs the process by which federal agencies develop and issue regulations, including a ​critical mechanism known as “emergency‍ rulemaking.” This process​ allows agencies to implement rules ⁣without adhering to the typical ⁣notice-and-comment requirements ⁣under ⁣certain circumstances, notably when there⁤ is “good cause.” However, ‍the invocation of‍ this exception ⁤has been a contentious issue, particularly when⁤ agencies’ justifications are deemed insufficient.

    Understanding APA’s Emergency Rulemaking and the‍ “Good ​Cause” Exception

    The APA aims to ensure public participation, transparency,⁤ and accountability ⁢in federal rulemaking. Under 5 USC §553, agencies are generally ‌required to provide⁤ notice ‍of proposed‌ rulemaking ‍and allow the public to comment. However, §553(b)(4)(B) articulates a “good cause” exception, ⁢permitting ⁣agencies to bypass these procedures if⁣ they find that notice and comment are “impracticable,⁤ unnecessary, or contrary to the public interest.”

    “Good ‌cause” is based on the necessity for swift action by the​ agency under emergency ⁤circumstances or when the rule’s immediate implementation ​is critical to the public good. The exception is meant to⁤ be ⁤applied narrowly, reflecting Congress’s intention to maintain the participatory nature of rulemaking while acknowledging the need for flexibility in genuine⁤ emergencies.

    Legal Standards for “Good Cause”

    The APA’s requirement of notice and comment is‌ “designed to ​ensure ⁢due deliberation‍ of ‌agency regulations” ⁣and “foster the fairness and deliberation of a pronouncement of such force.” (E. Bay Sanctuary Covenant v. Trump, 932​ F.3d 742, 745⁤ (9th Cir. 2018)). The good cause exception, in turn, “is‌ essentially ⁢an emergency procedure.” (United States v. Valverde, 628 ⁢F.3d 1159,⁣ 1165 (9th Cir. 2010)). The​ exception is also “narrowly construed” and “reluctantly countenanced.” (California v. Azar, 911 F.3d 558, 568 (9th Cir. 2018)).

    In order to invoke the “good cause” exception, an agency must demonstrate that it would be impracticable,⁤ unnecessary, or contrary to the public interest ⁢to follow the ⁤standard notice-and-comment procedures. This requires a showing of urgency ​and a lack of feasible alternatives. (See,⁣ e.g., United‌ States v. Valverde, 628 F.3d 1159, 1165 (9th Cir. 2010)).

    Additionally, the agency must provide a reasoned explanation ‌for why the emergency action is necessary and why the usual procedures would ​be impracticable or contrary to the public interest. (See, e.g., California v. Azar, 911 F.3d 558, 568 (9th Cir. 2018)).

    Potential ​Standing for​ Litigants in Emergency Rulemaking Cases

    In order to​ challenge an agency’s use of the “good cause” exception,⁣ a ⁣litigant must have ‍standing, ⁣which requires a ‌showing of injury-in-fact, causation, and redressability. (See,⁤ e.g., Lujan v. Defenders‌ of Wildlife, 504 U.S. 555, 560-61 (1992)).

    Individual miners‌ who are not ⁣part⁢ of the 82⁤ target miners may have a harder time ⁣establishing standing, as the list of 82 ‌miners ​has not‍ been ​made available and it ⁣is not clear if⁢ they are required to‌ respond. However,⁣ an industry group representing ⁤miners may have standing‌ if​ its mission is directly impacted by the agency action.​ (See, e.g., PETA v. USDA, 797 F.3d 1087 (D.C. Cir. 2015)).

    Alternatively, a state may‍ have ​standing under the doctrine of parens patriae, which ⁣allows a ‌state to maintain a lawsuit on behalf⁤ of its citizens if it can meet additional burdens.⁢ (See, e.g., Alfred L. Snapp & Son, Inc.​ v. Puerto Rico ​ex rel. Barez, 458 U.S. 592, 607 (1982)). In Massachusetts v. EPA, the Supreme Court ⁤extended this ‌doctrine to allow a⁢ state to sue ​based on its quasi-sovereign interest in protecting ​its environment. (549 U.S. 497, ‌518 (2007)).

    Using the State ⁢of Texas as an ⁤example, it is possible that Texas could achieve standing in ‍this specific ⁣situation under parens patriae and special solicitude. ERCOT, a Texas quasi-governmental agency, is tasked with regulating the energy sector within the ​state and has been recognized as having sovereign immunity. (CPS Energy v. Elec. Reliability Council of Tex., 671 S.W.3d 605, 628 (Tex. 2023)). The⁣ EIA’s emergency action deprives‍ Texas of the ability to engage with⁢ the agency‍ process and impacts the state’s ⁢ability to​ regulate its internal grid. This could⁣ potentially meet ⁢the requirements for ‌standing under ‍parens patriae. (See, e.g., Wyoming v. United ⁤States, 539 F.3d 1236, 1241-42 (10th Cir. 2008)).


    The “good⁢ cause” exception to the standard notice-and-comment procedures in the APA allows agencies to implement emergency rules ​without following the usual process.⁢ However, this exception is narrowly ⁣construed ⁣and must ‍be supported by ‍a reasoned explanation. Litigants may have standing to challenge an ​agency’s use‌ of this ⁤exception, including industry groups and states under the doctrine of‌ parens patriae.The interpretation of “good cause” by ⁣the courts has ⁣been inconsistent,‍ resulting in a constantly evolving legal landscape. The determination of good ​cause relies⁣ on the agency’s⁤ ability to convincingly demonstrate that the circumstances necessitating the rule ‍are urgent enough to⁢ justify bypassing⁢ the usual procedural requirements. This justification must be supported by substantial evidence, rather than mere assertions, ‍and must show that adhering⁣ to the normal rulemaking process ⁣would be impracticable, harmful, or contrary ⁢to public‍ interest.

    In the past, courts have given deferential ⁢review to agency claims of good⁤ cause. ​However, in recent ⁢years, and particularly in cases related ‍to the COVID⁢ pandemic, courts have ‍adopted a more stringent de novo review standard. This means that the agency’s justification must be thoroughly examined⁣ without deferring to their expertise or​ discretion. This shift in judicial scrutiny ​highlights the concern over emergency determinations being made without sufficient evidence or justification, leading to a situation where ⁣emergency administration becomes the norm.

    For example, ⁣in Chamber ⁤of Commerce of U.S. ⁤v. U.S. Dep’t of Homeland Sec., the court found that even in the extreme situation of the‍ COVID pandemic and its impact on ⁤domestic employment, the agency could not justify using an​ emergency rule ⁤to make changes to the⁣ H1-B visa⁢ program. Similarly, in Ass’n of Cmty. Cancer Ctrs. v.⁢ Azar, the court found that the agency’s justification⁤ for an emergency action ​to regulate drug prices during COVID was based on speculation rather ⁢than evidence, and therefore fell short of the requirements for good cause. And in ITServe All., Inc. v. Scalia, the court did​ not even need to apply the de novo standard ​because the ‌agency’s⁤ evidence and analysis were​ so deficient⁢ that⁤ there was no need to consider any standard.

    The EIA may try to argue that the Paperwork Reduction Act (PRA) is the only aspect that applies in this case, ⁣and attempt to frame the argument solely in⁢ that realm. However, the relevant standard under the ​PRA is similar to the good cause standard under the APA, and therefore the courts may‍ apply the de novo​ review ⁣to this emergency action. Even under a⁢ weaker arbitrary and capricious standard, the EIA’s ⁣evidence and delay do not meet the‌ requirements for⁣ good ⁤cause.

    The EIA⁤ may also argue ​that the PRA blocks judicial review of their information collection ‌action. However, this argument fails as the PRA only prohibits judicial review of an OMB decision to approve collections within an agency rule, and the emergency power of §3507(j) lies ⁤outside the scope of this⁤ provision.

    In summary, ​the⁢ EIA’s justifications for their emergency rulemaking ⁣are weak and do not meet ⁢the legal standards ⁣for​ good cause.​ The courts may apply a de novo review to this ⁤action and find that the EIA’s evidence and delay do not justify bypassing ⁤the ⁢normal rulemaking process.

    Delayed Action: A Closer Look

    Plaintiffs argue that Defendants have unreasonably delayed ‌taking ‌action‌ and‌ have forfeited their​ ability to rely on the⁢ good cause exception. According to the National Education Association, ⁢good cause cannot be claimed as a result of the agency’s own delay. This was also emphasized in⁢ the case of National​ Resource Defense Council v. National Highway Traffic‍ Safety Administration, where the court stated that an ​agency cannot use the good cause exception to avoid following proper procedures. Similarly, in ​the​ case of National Venture⁣ Association v.​ Duke, the court ⁤held that an agency cannot simply wait until‌ the ‌last minute and ‍then claim good⁣ cause to bypass‍ the required procedures. This not only undermines the purpose of the APA, but also deprives the public ⁢of the opportunity to‍ provide ​valuable input.

    In a recent case in Plattsburgh, New York in 2018, the EIA‍ cited an incident where mining activities resulted in demand peaks that affected system operations and consumer prices. However, ​the EIA failed to ⁣provide any specific details or evidence to⁣ support their claim. Furthermore, the fact that the agency has delayed for six years in ​addressing this issue shows‌ that there is no ‍urgency to bypass the notice-and-comment period ​and deny⁣ the public their right to provide input.

    Attack 2: Lack⁤ of Evidence

    The EIA’s justification for emergency action is based on the‌ assumption that the combined effects of higher bitcoin prices ​and increased mining intensity could result in demand peaks that affect system operations ‍and⁢ consumer prices. However, the EIA only “feels” a sense of urgency to generate credible data to support this claim. This lack of concrete evidence raises doubts about the⁤ necessity of bypassing​ proper procedures.

    In the case of Sorenson Communications Inc. v. Federal Communications Commission, the court rejected ‍a similar speculative harm and emphasized the need ‌for factual evidence to support emergency action. The agency’s⁣ failure to provide such evidence in this case further weakens their ​argument for emergency rulemaking.

    Disconnect Between Cause and ‌Effect

    The EIA has not ⁢provided ⁢any specific evidence⁣ to establish a ‌direct ⁢connection between higher bitcoin​ prices and increased ‍mining intensity. While it is acknowledged that such a connection exists, the short-term impact⁣ is much more complex than the EIA’s simplistic assumption of “Number Go Up therefore Mining Go Up!” As experienced bitcoin miners know, adding significant capacity involves a lengthy and⁢ complicated industrial‌ construction process, which includes obtaining permits, international shipping, ⁤supply chains, and ⁤local‌ electric workers. This process adds a significant‍ delay to the equation of “Number ‌Go Up” resulting in “Mining‍ Go Up.”

    Furthermore, the imminent halving of the block subsidy is likely to ‍cause a decrease in mining intensity, unless the ​”Number Go Up” factor ‌completely outweighs the halving. The EIA fails to⁤ mention⁣ this crucial ⁣aspect ‌and instead appears‍ to be rushing ​the review process to obtain skewed data before the halving takes place.

    Technical Defects

    The OMB’s announcement and the EIA’s justification for emergency rulemaking fail to address the issue of‌ personally identifiable information (PII). While the ⁣OMB Circular ‌No. A-130 defines PII as information⁤ that can be​ used to identify an individual, the EIA’s⁤ survey form asks ​for the name‌ and ⁢contact information of a survey contact and their supervisor. This raises concerns about ⁣the management of PII and highlights the agency’s rush to⁢ push this survey without proper vetting. Additionally, the lack of clarity on ‌who is⁢ required to respond to the survey further adds to the confusion and could have been avoided if proper notice-and-comment procedures were followed.

    Part 5:⁢ Standard ‍for an Injunction

    In‍ order to obtain a preliminary injunction, ​the ‌plaintiff must establish that they are likely to succeed on​ the merits, likely to suffer irreparable harm in‍ the absence of preliminary relief, that⁤ the balance of equities tips in their favor, and that an injunction is in the public interest.

    In the case of Winter v. Natural Resource Defense Council, Inc., the court emphasized the need for the plaintiff to establish all four elements to obtain a preliminary injunction.

    Prong 1: Likelihood of ‌Success on the Merits

    The EIA’s ‌attempt to employ an emergency process‍ in this case is clearly illegitimate and goes‌ against​ the purpose of the APA. As discussed in Part 3, the EIA is likely ‍to lose on the merits under the de novo standard or the arbitrary and capricious standard.

    Prong ‌2: Likelihood of Suffering Irreparable Harm

    The harm in this ⁢case is the agency’s avoidance of the required notice-and-comment ‍procedures. If the‌ agency⁤ is allowed ​to proceed with their data collection,⁢ there⁣ will be no way ‌to‌ remedy the​ situation. As seen in the case of Association of Community Cancer Centers v. Azar, a violation of the APA cannot⁣ be fully cured⁢ by later remedial action. Therefore, an injunction is necessary to prevent irreparable harm.

    Based on the above analysis, it is clear ⁢that an injunction is warranted in this​ case. The EIA’s actions not only ‍undermine the purpose of the APA, but also deprive the public of their‌ right to provide input. Proper notice-and-comment procedures should have been followed to avoid confusion and ensure the⁤ protection of personally ‌identifiable information.

    Prong 3⁤ & 4: The Injunction’s ​Justification and ‍Public Interest

    In this section, ‌we will examine the language used in the​ case of ⁢ Azar, which states that “Congress has⁢ determined,⁤ through the APA, ​that it is⁢ in the public interest to allow for public comment on proposed regulations before they are implemented. Additionally, considering the temporary nature of a restraining order, ⁢it would ⁢be more accurate to say that the court⁢ is delaying the implementation of the rule rather than preventing it. While the court acknowledges CMS’s desire‍ to lower⁣ drug prices for seniors, there is no evidence that any harm ⁣will result if the ‍seven-year test does‌ not begin on ‌January 1.” Azar, 509 F.Supp.⁢ 3d at ‌502 (internal citation omitted).

    Similarly, the EIA​ has already allowed for a ⁤ six-year delay, so there is no significant additional harm to them by​ delaying the data collection. However, there is significant harm to those affected by ⁢their⁢ actions. It‍ is in the public interest to ensure that the EIA follows proper APA procedures.

    Part 6: Conclusion

    We believe that a well-crafted lawsuit has a strong chance ‍of success in delaying the EIA’s survey and compelling them to⁢ follow a proper notice-and-comment process, resulting in ⁣a narrower and more​ carefully⁢ designed survey. This⁣ legal action ⁢is not only ⁢a means of⁣ recourse, but also a necessary step towards promoting a fair⁣ and transparent regulatory process. We provide these citations in the hope‌ that members of our industry will take⁤ swift‌ action to ⁣secure a preliminary injunction against the EIA.

    At this⁤ critical moment, it is⁣ crucial for‍ legal professionals, miners, and experts in the bitcoin industry to come together and oppose the EIA’s intrusive survey. This‍ collective effort is essential as we confront regulatory overreach and advocate for transparency and due process.⁣ Legal experts can analyze the foundations of the⁢ EIA’s emergency survey to ensure compliance with statutory ‌requirements,⁢ while miners can provide firsthand accounts of‍ the survey’s impact, highlighting the real-world implications of such ​regulatory measures.

    By standing together, our united response can⁢ champion the‍ cause of Bitcoin and protect⁤ our ⁢industry‍ from excessive regulatory burdens. Bitcoin professionals, with their⁢ deep ⁣understanding⁤ of the ecosystem, play a crucial role in shaping public discourse and influencing ⁣policy. Now ⁢is the time to leverage our collective expertise, influence, and passion ‌to‍ advocate for regulations that foster innovation and ‌growth. Our industry​ may be⁤ seen as an easy target, but others will be next. By ​showing that we are⁣ willing ⁢to fight and achieving a victory against regulatory misconduct, ⁣we not​ only benefit Bitcoin, but all Americans. By engaging with policymakers and contributing to public commentary, we can shape a future for our industry that is both ⁣prosperous and fair.

    The author would like to thank Storm Rund and several anonymous ​contributors who provided significant assistance in ‍editing and finalizing this article.

    This is a guest post by Colin Crossman. The opinions expressed‍ are ‌entirely their own and do not necessarily reflect those of BTC ​Inc or Bitcoin Magazine.

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