Podcast featuring Buster Nicholson, manager of Public Sector Outreach and
Roland Barrera, Councilman, Corpus Christi, Texas
In this episode of In Public Safety Matters, AMU’s Senior Manager of Public Sector Outreach, Buster Nicholson, speaks to Corpus Christi Councilman Roland Barrera about Bitcoin mining and other energy matters affecting his city and the state of Texas.
Listen to the Episode:
Read the Transcript:
Buster Nicholson: Well, welcome everybody. I’d like to welcome up to the show Corpus Christi Councilman Roland Barrera. Councilman Barrera serves on the Corpus Christi City Council in District III. Roland has been actively involved in Texas politics for many years. It has been a strong advocate for small business, insurance issues, children’s issues, public transportation, and immigration reform. The Councilman currently provides consulting and risk management services to individuals, business owners and public agencies. Roland also serves as board member for the National Association of Health Underwriters‘ political action committee, and as board vice-chair of the Texas Bridge Credit Union. Roland, welcome to the show.
Roland Barerra: All right, thank you for having me, Buster. I really appreciate the opportunity.
Buster Nicholson: Absolutely. There’s been a bit of a buzz in the media about Corpus Christi lately with Bitcoin mining. That’s how I found you and found out what was going on down there. I’d like for you to just take a moment and tell me about the project, the Corpus Christi Energy Park.
Roland Barerra: There’s a developer, obviously, that brought this opportunity to us, or actually, they went to the economic development corporation here, the Corpus Christi Regional Economic Development Corporation, and they obviously had this opportunity simply because of the infrastructure that was available with regard to power, to electricity.
Corpus Christi is a region where, I guess, the labor market is competitive with regard to other markets. The infrastructure was there. It was in not necessarily a rural area, but it was an area basically used for farming, which was not very productive because of the proximity to industry, so that basically came to us here.
It was more so that these individuals from Corpus Christi Energy Park were looking for the right fit and they actually contacted us. As Bitcoin mining is relatively new, or not necessarily relatively new as I’m finding out, there’s just not a whole lot of information out there that the general public understands, and so these individuals just had a hard time getting through the bureaucracy at city hall, and they contacted me, of which we just got up to speed on the opportunity, how basically it works because I was really, hadn’t really paid much attention to it had just heard about it, much as a large part of our community, and so the developer had actually put together this vision with the Economic Development Corporation, and we just looked at it as a great opportunity to bring in some obviously revenue for the city and bring in some jobs. We’ve got a couple of council members that are younger that obviously say that Corpus Christi needs to break into the technology sector and we just thought this was a great opportunity.
Buster Nicholson: That sounds great. You go out to the public and you say, “Hey, we’re going to start Bitcoin mining here,” and you probably get a mixed reaction from the public, so how have they reacted to the idea?
Roland Barerra: Well, there was a lot of uncertainty from the beginning simply because the same thing basically they were going to require two, 500-megawatt substations, and we had some refineries that don’t use that much power, and so the naysayers basically came out of the woodwork and indicated that the consumption of energy is very cumbersome on the environment. There’s an issue there that we need to be conscientious that we’re having all this energy and that we’re not really producing a product.
The other challenge that came about was Bitcoin, or cryptocurrency is not regulated, and therefore can be used for nefarious activity. Those two big issues were coming about. Then plus, you had the individuals that the arrangement that we made with the developer was to put together an industrial district agreement, which in my opinion was fantastic for a number of reasons because of laws here in Texas, but basically, an industrial district agreement is usually a discounted rate for normal ad valorem taxes.
Those were the three issues. Number one, the consumption electricity’s bad for the environment, number two is there might be corruption involved with cryptocurrency, and then number three is that we’re going to give this group a set of tax breaks and they’re not really producing anything, so yeah, there were some challenges and there were a few of my colleagues that had a hard time getting their arms around it to understand it. However, the argument that I was able to make as well as others is that the consumption of energy is a global problem, and in our case, a Texas problem, so what we basically said is that if we refuse to enter into this arrangement with this developer, then that doesn’t prohibit them from consuming energy in the panhandle of Texas, or in Central Texas and Austin, which is considered the tech center for the state, or in the Permian Basin, where they have a lot of rural land. That was the argument, that it’s still going to affect us one way or the other from a consumption standpoint.
With regard to the regulatory issues, my argument was, well, once again, that’s a federal issue. If we basically tell them, “You’re not welcome in Corpus Christi,” well, then that doesn’t prohibit them from going to the Permian Basin, the same situation. Then we still have the regulatory problem, which I know the federal government has been more conscientious to try and figure, okay, how can we recognize now that this currency is something that the public is going to use, and so therefore that was the other thing.
The other item was in Texas, the state legislature, in their infinite wisdom, has basically set together a revenue cap of 3.5%, so even if you have an appreciation in values for property that you would tax from an ad valorem standpoint, you still cannot increase your budget by overall at 3.5%, so even if somebody came out and built a thousand homes, we basically have to reduce the effective tax rate that we can’t grow our budget by more than 3.5%. With this industrial disagreement, we had a payment in lieu of taxes, so payment in lieu of taxes, meaning that it wouldn’t count against the revenue cap.
In the city’s case, the anticipated revenue with all the development when the project is completed and up and running is probably about $4.5 million a year, and for the neighboring school district about $8.5 million a year, of which it doesn’t affect their revenue cap, and therefore, us as a community are able to capitalize on those funds. I joked around that it was political artistry that we could work through that so that way we could provide an enticing package with the developer so that way we could bring this around. Then you’re looking at 70 to a hundred jobs that will definitely exceed the median income value here in Corpus Christi. There was definitely cause for individuals that didn’t understand it. It’s a complex issue, and in this day and age in digital media or social media, it’s hard to explain in 100 characters, or whatever the standard is.
Buster Nicholson: Exactly. One thing that is fascinating about the energy argument, that Bitcoin mining takes too much energy, it really boils down to does the individual saying that think that the expenditure of energy is worth it.
I just wanted to come up with just a couple of comparisons and get your take on that, Roland, about other things we use in our world that take similar amounts of energy as Bitcoin. One is a domestic tumbler dryer. The domestic tumbler dryers in the U.S. use 1.6 times the amount that is used for Bitcoin mining worldwide for a year. Copper production, 1.9 times the amount of energy. Zinc production, 2.8. Gold mining and production, 3.4 times the amount. Bank branches and ATMs, 4.7 times the amount of energy, and the US military, seven times the amount of energy. This factoid I find the most interesting, that the financial sector uses 27 times the amount of energy used to mine Bitcoin worldwide throughout the year. What are your thoughts? Because there is a lot of focus on energy consumption, but it’s clearly not an issue when you look at it in comparison to other energy usages that many in society would deem “good.”
Roland Barerra: Yeah, Buster, I would agree, I mean, you think of the energy, it takes to run an air conditioner, which is obviously huge here in the South Texas region, the amount of electricity that requires as a result of using air conditioning. It was particularly sensitive here a year ago, or I should say a year and almost four months ago that Texas encountered Winter Storm Uri, where it just, obviously, there was a huge power consumption on the grid, and individuals weren’t able to heat their homes, and there were several people without there were without power here in Texas, and there was some loss of life. That was really sensitive to a lot of people at that time.
Here, particularly in the Coastal Bend, typically, we’re a port community, so we’ve got a lot of petrochemical industry, and the governor basically had to tell some of these refineries is that you’re going to have to power down. Even though Texas hadn’t had a winter storm like this in excess of 100 years, there was a lot of sensitivity to it.
I think people as a whole don’t recognize. We take our lifestyles for granted, such as here in Texas, everybody’s got a big truck. We complain about $4 gallon of gas, whereas I know that I just recently came back from a Sister Cities Convention in France, and it’s $2 a liter, or two euros a liter, which roughly is two bucks a liter, so you’re looking at $8 [for on U.S. gallon], and the individuals have a much greater respect for that consumption of that energy in the sense that everybody’s driving small cars. I think that’s the thing. I think people will often pick the narrative that best helps to prove their argument. I think it’s something obviously that needs to be managed, but like I said, in this case, we’re still going to have the same challenge, nonetheless.
Buster Nicholson: Absolutely. I had heard that ERCOT struck a deal with the Texas state government that if there was a need as happened before during the ice storms back then for electrical power, that the Bitcoin mining operations would shut down. Is that correct?
Roland Barerra: Oh, yeah. Absolutely. The thing is that they’re obviously not going to operate at that time, and from talking to the developers, their technology is so advanced that they operate not at peak times, so when the demand is the lowest is when their operation is at the strongest.
Then here in Texas, also, there’s such an expansion of wind energy. In fact, if you’re on the roof of the building that I’m in, you can see windmills because of the fact that Corpus Christi is, I believe we’re windier than Chicago is what I’ve heard, so there’s a large degree of wind farms that are out here in the Coastal Bend region.
Buster Nicholson: Wow. That’s amazing. That is a big incentive for Bitcoin miners because why would you not want renewable energy if it’s cheaper? If the wind is there, why not use that instead of plugging into the grid? It’s incentivized through free markets to try to lower your power consumption costs and usage as much as possible when mining Bitcoin.
Roland Barerra: Once again, we go back to, it can be, as you indicated, the arrangement that was made with ERCOT and the arrangement that it is here is that it can be shut off, so in the event that they’re not going to continue, just like I said, the situation that we had with some of the petrochemical refineries, as well as a plant that produces a liquified natural gas, that basically, once again, the governor reached out to them and said, “Hey, you guys are going to have to shut down,” so it was a major operation for them to be able to take their equipment offline.
Buster Nicholson: Amazing. We’ve been talking about Bitcoin mining operation and how it’s going in Corpus Christi and I’d like to pivot a little bit, and maybe you could talk to me about some other projects going on in the city.
Well, as they were indicating, there’s basically a steel production plant that they’ve got a multi-billion dollar facility that was just opened up recently. They’ve provided about 700 jobs and their suppliers as well are moving into the area. The other thing is that we’ve got a plastics plant, which is called Gulf Coast Growth Ventures, and that is a combination of Exxon and SABIC, a company out of the Middle East. That in itself, another huge power consumption. At the time, was an issue, not as big as obviously we’re making it out of this Bitcoin mining farm.
But the biggest thing right now in Corpus Christi is access to water. I’m in my fourth year in the council and what I found out is that for any large-scale economic development project, you got to have access to power, access to water, access to transportation.
Obviously, we’ve got the port here, the port of Corpus Christi, we’re the largest exporter of oil here in the entire country, which is exciting. The other thing is, so we’ve got the port, which has the transportation, as we had been talking about the power, but the real big thing is water. Right now, we’re basically dependent here on surface water, and that’s the way we’ve been operating for, obviously, since Corpus Christi’s a regional water provider for about half a million residents in multi-county area, and right now, as it stands about 80% of our water goes to industry.
Now, the good thing is that they help to stabilize the cost for the residential ratepayer. The challenge is that now is that, how are we going to continue with the expansion of the area because of all this need for water? One of the things that industry has partnered along with the city, which is a water provider, is to explore desalination. Industry has agreed to an additional surcharge of 25 cents per thousand gallons so that way they could assist us in finance in this initiative, so it’s really exciting, it’s really long-term. It’s obviously something that’s been explored for decades. The community has really gotten serious of it. I should say the community leaders, because there were people that are, number one, much smarter than me, and number two, that had greater vision before I got on the council, about seven years ago to start to explore this initiative.
Here, the city recently has acquired some land for a site. We’re working on our permits from the Texas Commission of Environmental Quality. We’ve got two locations that we have in mind. One is along the inner harbor, right where the port is because that’s where the demand center is for industry, so we’re looking at this probably $200 million investment, so that way we can ensure we can have uninterrupted water, and with the opportunity to expand.
Buster Nicholson: That’s awesome. You can make that as simple or as complicated as you want with the desalinization operation. I mean, you got plenty of sun down there, so if you have the space, it basically does the work for you through evaporation.
Roland Barerra: Oh, yeah. It has not been without controversy as well as the discharge is pumping it back into the bay is that what it’s going to do the environment, but we’ve got some world-renowned scientists that are working with us, and we’ll feel confident that we’re going to have to move forward. The challenges with the heat here is that when we’re based on surface water is there’s times that we’re about in the midst where we may go into the first stage of a drought. Last year, we had some good rain, but when you have heat indexes of an excess of 110 degrees, then all the water that you may have accumulated from rain in a period of about a month will evaporate within the following month, and so that’s the big challenge that we just need to be prepared for.
We’ve been able to manage it here. I mean, I remember back in the ’80s, what is it? We did have some challenges. I remember my dad having the washer with the hose, going out into the yard, things like that. We would get creative, we’d put additional weights inside the toilet, so that way, we wouldn’t use as much water consumption. Back then, I learned to rinse myself, turn off the shower, soap myself, turn it back on, just things like that, and so we need to really work on consistent conservation. Going back to the same thing on power consumption, we’re just so spoiled as a community that so convenient to turn on the tap, and there it is.
Buster Nicholson: You’re right, you’re right. I was in a former life a town manager and I agree with you 100%. My main job was to run the water and sewer operation, and when you’re on that side of it, when you’re not the one just turning on the tap, or flushing the toilet, when you’re on the side at watching the water levels go down, paying more money for chemicals to process the sewage, you take a whole different look at the operation, a whole different look at the tap when you turn it on.
Roland Barerra: That’s the thing, we need to really look at conservation as a whole. We just felt that there’s other individuals that said that there’s a aquifer, which has water available as well, but then it comes to matter of economics. I mean, how costly is it to be able to treat that water? That’s really the big challenge is there’s a balance and we have a huge responsibility of the residential ratepayer, as well as industry and the thousands of people that they employ. That’s the thing, it’s obviously very complicated, and I, for one, when I first got out of the council, yeah, it was just overwhelming to try and get caught up on it. But fortunately, we have some good partners. Industry has recognized that we’re going to continue, then we need to be a good partner with this.
Buster Nicholson: Yeah, absolutely, and that is a great message. Well, Roland, thank you again for taking the time to speak with me. You are an asset to the community and I’m sure that the future will be exciting moving forward and looking at these projects and getting some things accomplished.
Roland Barerra: Well, thank you. Thank you. It’s been a pleasure to be here with you, and anytime that you’d like to have me back, I’d love to be on.
Buster Nicholson: I appreciate that, Roland. We want to thank the audience out there for listening. We hope that you have a good day and stay safe.