Group Buys Pennsylvania Coal Refuse Plants to Power Bitcoin Mining

A digital mining company has an agreement to purchase a second power plant in Pennsylvania, as the group increases its coal refuse reclamation operations in the state to provide energy for its bitcoin mining operations.

Stronghold Digital Mining, a bitcoin (BTC) miner headquartered in Kennerdell, Pennsylvania, on Aug. 3 said its purchase of the Panther Creek Plant, located on 33 acres in Nesquehoning, in Carbon County, adds 80 MW of generation capacity to its portfolio, which also includes the 85-MW Scrubgrass plant. Scrubgrass is located on 650 acres in Scrubgrass Township, in Venango County.

Stronghold, founded earlier this year, uses the power plants to convert coal refuse into power that is used to mine bitcoin, an energy-intensive process. Coal refuse is classified by Pennsylvania as a Tier II alternative energy resource, akin to large-scale hydropower. Coal refuse over the years has been left in piles near coal operations; today, circulating fluidized bed technology allows for emissions-controlled conversion of coal refuse into energy.

A coal refuse energy operation is featured in POWER’s August issue as a Top Plant award winner.

$74 Million in Lease Financing

Stronghold on Tuesday said it has raised about $74 million in lease financing to support purchases of bitcoin miners and to scale the company’s plant and data center infrastructure, including $40 million from WhiteHawk Capital Partners, a private credit investment manager focused on asset-based financing solutions. The remaining $34 million is financed by Arctos Credit, LLC, an affiliate of New York Digital Investment Group, better known as NYDIG, a technology and financial services company dedicated to bitcoin.

The Panther Creek facility is an 80-MW coal-fired power plant. It’s the second power plant purchased by Stronghold Digital Mining to power the company’s bitcoin mining operations. Courtesy: Stronghold Digital Mining

“These financings will allow us to rapidly expand our vertically integrated model, allowing us to mine bitcoin at some of the lowest costs in the industry while making a transformational contribution to the environment,” said Greg Beard, CEO and co-chairman of Stronghold, in a news release. Beard formerly was an executive with Apollo Global Management, a New York-based alternative investment manager firm. “Coal refuse sites continue to wreak havoc across Pennsylvania. We very much welcome the bipartisan political support to continue remediating these vast sites and return the land to the local community. We also welcome the support from our financial partners without whom this exceptional progress would not be possible.”

Stronghold on Tuesday said it has “entered into definitive agreements with multiple suppliers to purchase over 27,300 additional miners with a total hash capacity equal to over 2,600 PH/s and is currently in negotiations to acquire a third environmentally beneficial facility in Pennsylvania.” A Stronghold spokesperson said additional miners refers to the computer equipment that is needed to mine each bitcoin. The term PH/s refers to petahash; a “hash” is a component of the calculation that bitcoin miners solve to verify a bitcoin transaction. A petahash is a quadrillion hashes per second. The spokesperson said that on average, it takes 2.7 petahashes to generate a bitcoin.

Investment Opportunity

WhiteHawk, launched in 2020, is led by a team of investors—many formerly with Great American Capital Partners—that saw an opportunity to finance projects when banks curtailed investments during the COVID-19 pandemic.  

“WhiteHawk provides financing solutions to companies of various sizes, situations, and industries,” said Bob Louzan, managing partner with WhiteHawk, which has a varied investment portfolio that includes numerous energy companies. “WhiteHawk has closed deals across traditional and non-traditional asset classes and this loan is a testament to our commitment to provide differentiated solutions to companies focused on growth and expansion.”

This coal refuse pile at the Panther Creek plant in Pennsylvania is a fuel source for the plant. Stronghold Digital Mining is reclaiming such piles in Pennsylvania as part of its environmental efforts, using coal refuse to power its bitcoin mining operations. Courtesy: Stronghold Digital Mining

Stronghold said it has about $179 in capital to date, including $105 million in equity funding the company announced in June. That money is earmarked to clean up water pollution in Pennsylvania, specifically acid mine drainage (AMD) caused by coal refuse. AMD is formed when precipitation—rain or snow—combines with the sulfur in coal refuse. The AMD can run off into nearby streams and rivers, threatening aquatic life and water quality.

The Pennsylvania Department of Environmental Protection and local environmental authorities have partnered with Stronghold to support the removal of coal refuse piles in an effort to eliminate the source of the AMD at the site. The reclaimed land is then donated back to local communities. Stronghold on Tuesday said it already has reclaimed 1,000 acres of land in Pennsylvania.

The Scrubgrass and Panther Creek power plants previously were owned and operated in part by Olympus Power, a New Jersey-based independent power company that owns and manages power plants, including both thermal and renewable energy facilities. Olympus sells electricity to utilities and industrial operations, and supports coal refuse reclamation projects to produce energy.

Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).

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