SB79 (2024 fiscal session), as engrossed 4/24/24, which became Act 174 of 2024 (digital asset mining)
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1 State of Arkansas As Engrossed: S4/24/24
2 94th General Assembly A Bill
3 Fiscal Session, 2024 SENATE BILL 79
4
5 By: Senators Irvin, J. Bryant
6 By: Representative J. Moore
7
8 For An Act To Be Entitled
9 TO AMEND ARKANSAS LAW CONCERNING DIGITAL ASSET MINING
10 BUSINESSES; TO AMEND THE ARKANSAS DATA CENTERS ACT OF
11 2023; TO AMEND ARKANSAS LAW TO PROVIDE FOR THE
12 PERMITTING AND REGULATION OF DIGITAL ASSET MINING
13 BUSINESSES; TO DECLARE AN EMERGENCY; AND FOR OTHER
14 PURPOSES.
15
16
17 Subtitle
18 TO AMEND THE ARKANSAS DATA CENTERS ACT OF
19 2023; TO PROVIDE FOR THE REGULATION OF
20 DIGITAL ASSET MINING BUSINESSES; AND TO
21 DECLARE AN EMERGENCY.
22
23
24 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
25
26 SECTION 1. Arkansas Code § 14-1-602(b), concerning legislative intent
27 and findings for the Arkansas Data Centers Act of 2023, is amended to read as
28 follows:
29 (b) Through the enactment of this subchapter, the General Assembly
30 intends to:
31 (1) Recognize recognize that data centers create jobs, pay
32 taxes, and provide general economic value to local communities and this
33 state; and
34 (2) Clarify the guidelines needed to protect data asset miners
35 from discriminatory industry-specific regulations and taxes.
36
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1 SECTION 2. Arkansas Code § 14-1-605(a), concerning prohibiting a local
2 government from imposing ordinances or zoning regulations on a digital asset
3 mining business with the intent to discriminate against the digital asset
4 mining business, is amended to read as follows:
5 (a) Except as provided by subsection (d) of this section, a local
6 government shall not:
7 (1) Enact or adopt an ordinance, policy, or action that limits
8 the sound decibels generated from home digital asset mining other than the
9 limits set for sound pollution generally;
10 (2) Impose a different requirement for a digital asset mining
11 business than is applicable to any requirement for a data center;
12 (3) Rezone rezone an area in which a digital asset mining
13 business is located without complying with applicable state law and local
14 zoning ordinances; or
15 (4) Rezone an area with the intent or effect of discriminating
16 against a digital asset mining business.
17
18 SECTION 3. Arkansas Code Title 14, Chapter 1, Subchapter 6, is amended
19 to add an additional section to read as follows:
20 14-1-606. Ownership of digital asset mining business by prohibited
21 foreign-party-controlled business prohibited — Definitions — Penalty —
22 Reporting.
23 (a) As used in this section:
24 (1) "Interest" means an ownership interest of greater than zero
25 percent (0%);
26 (2) "Prohibited foreign-party-controlled business" means a
27 digital asset mining business in which a prohibited foreign party owns an
28 interest; and
29 (3) “Prohibited foreign party” means:
30 (A) A citizen, resident, or agent of a country subject to
31 § 126.1 of the International Traffic in Arms Regulations, 22 C.F.R. § 120.1
32 et seq., as existing on January 1, 2024;
33 (B) A foreign government formed within a country subject
34 to § 126.1 of the International Traffic in Arms Regulations, 22 C.F.R. §
35 120.1 et seq., as existing on January 1, 2024;
36 (C) A party other than an individual or a government that
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1 is created or organized under the laws of a foreign government within a
2 country subject to § 126.1 of the International Traffic in Arms Regulations,
3 22 C.F.R. § 120.1 et seq., as existing on January 1, 2024;
4 (D) Any party other than an individual or a government:
5 (i) That is created or organized under the laws of
6 any state; and
7 (ii) In which a significant interest or substantial
8 control is directly or indirectly held or is capable of being exercised by:
9 (a) An individual referred to in subdivision
10 (a)(3)(A) of this section;
11 (b) A foreign government referred to in
12 subdivision (a)(3)(B) of this section;
13 (c) A party referred to in subdivision
14 (a)(3)(C) of this section; or
15 (d) A combination of the individuals, parties,
16 or governments referred to in this subdivision (a)(3)(D)(ii);
17 (E) An Entity of Particular Concern designated by the
18 United States Department of State; or
19 (F) An agent, trustee, or other fiduciary of a person or
20 entity enumerated in subdivisions (a)(3)(A)-(E) of this section.
21 (b)(1) A prohibited foreign party shall not acquire or hold by grant,
22 purchase, devise, descent, or otherwise any interest in a digital asset
23 mining business in this state.
24 (2) A person shall not acquire or hold a digital asset mining
25 business as an agent, trustee, or other fiduciary for a prohibited foreign-
26 party-controlled business.
27 (c)(1) A prohibited foreign-party-controlled business in operation
28 before the effective date of this act shall have three hundred sixty-five
29 (365) calendar days from the effective date of this act for the prohibited
30 foreign party to divest all interest in the digital asset mining business.
31 (2) If a prohibited foreign party fails to divest all interest
32 in the digital asset mining business under subdivision (c)(1) of this
33 section, the Attorney General may commence an action in a circuit court with
34 proper jurisdiction under subsection (e) of this section.
35 (d) Upon request of a person or upon receipt of information that leads
36 the Attorney General to believe that a violation of this section may exist,
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1 the Attorney General may conduct an investigation that includes without
2 limitation:
3 (1) Receiving sworn statements; and
4 (2) Issuing subpoenas to compel the:
5 (A) Testimony of witnesses subpoenaed before him or her;
6 and
7 (B) Production of records and other documents under § 25-
8 16-705.
9 (e)(1) If as a result of an investigation under subsection (d) of this
10 section the Attorney General concludes that a violation of this section has
11 occurred, the Attorney General may order a prohibited foreign party to divest
12 all interest in the digital asset mining business within three hundred sixty-
13 five (365) calendar days.
14 (2) If the prohibited foreign party fails to divest all interest
15 in the digital asset mining business within three hundred sixty five (365)
16 calendar days, the Attorney General may commence an action in a circuit court
17 with proper jurisdiction over the digital asset mining business.
18 (3)(A) If the circuit court finds that a violation of this
19 section has occurred, the circuit court shall issue an order for the digital
20 asset mining business to be sold through judicial foreclosure.
21 (B) The proceeds of the sale under subdivision (e)(3)(A)
22 of this section shall be disbursed to the lienholders, in order of priority,
23 except for liens that under the terms of the sale are to remain.
24 (C) If the assets of the digital asset mining business
25 include real property, the Attorney General shall promptly record a copy of
26 the following in the local land records:
27 (i) Upon commencement, notice of the pendency of the
28 action under subdivision (c)(2) or subdivision (e)(2) of this section; and
29 (ii) The order for the sale of the digital asset
30 mining business under subdivision (e)(3)(A) of this section.
31 (3) The Attorney General may pursue other remedies in an action
32 brought under subdivision (c)(2) or subdivision (e)(2) of this section,
33 including without limitation:
34 (A) A civil penalty not to exceed up to one million
35 dollars ($1,000,000) or twenty-five percent (25%) of the fair market value,
36 on the date of the assessment of the civil penalty, of the prohibited foreign
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1 party’s interest in the digital asset mining business for the failure to
2 divest of all interest in the digital asset mining business within three
3 hundred sixty-five (365) calendar days as required under this section;
4 (B) Court costs;
5 (C) Prejudgment interest and postjudgment interest at the
6 maximum rates permitted by law; and
7 (D) Reasonable attorney's fees.
8 (4) In addition to the remedies under subdivision (e)(3) of this
9 section, the Attorney General may pursue treble damages against a digital
10 asset mining business if the digital asset mining business:
11 (A) Is held in violation of this section;
12 (B) Is ordered to pay a civil penalty under subdivision
13 (e)(3)(A) of this section; and
14 (C) Fails to pay a civil penalty under subdivision
15 (e)(3)(A) of this section within the scope of the order of the circuit court.
16 (5) The approval of a digital asset mining business by a local
17 government or the receipt by a digital asset mining business of a permit or
18 other authorization from the state to operate shall not be a defense to a
19 cause of action brought under subdivision (c)(2) or subdivision (e)(2) of
20 this section.
21 (f) Civil penalties and damages received by the Attorney General under
22 this section shall be distributed as follows:
23 (1) Fifty percent (50%) to the Oil and Gas Commission Fund, §
24 19-6-410; and
25 (2) Fifty percent (50%) to the Attorney General to be used in
26 the same manner as provided in § 25-16-718.
27 (g) A prohibited foreign-party-controlled business shall report the
28 composition of its ownership to the Attorney General.
29 (h) Title to real property is not invalid due to a violation of this
30 section by any former owner of the real property.
31
32 SECTION 4. Arkansas Code, Title 23, is amended to add an additional
33 chapter to read as follows:
34
35 CHAPTER 119 - DIGITAL ASSET MINING BUSINESSES
36
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1 23-119-101. Legislative intent – Findings - Purpose.
2 (a) This chapter establishes the standards and criteria for the
3 permitting and regulation of digital asset mining businesses.
4 (b) The General Assembly finds:
5 (1) Digital asset mining businesses represent a new and emerging
6 industry that presents significant challenges for the citizens of Arkansas,
7 including without limitation:
8 (A) Significant noise emissions;
9 (B) Massive consumption of power;
10 (C) The usage of large quantities of water that could
11 potentially threaten resources for citizens and future economic development
12 opportunities; and
13 (D) Potential issues involving cybersecurity.
14 (2) While the State of Arkansas welcomes new businesses and
15 economic growth, the General Assembly likewise has a responsibility to ensure
16 that the operations of new industries do not negatively impact the public
17 peace, health, and safety or otherwise damage the well-being of the citizens
18 of the state;
19 (3) When an industry presents harm to the public peace, health,
20 and safety, it has been the practice of the General Assembly to provide for
21 regulation of that industry to ensure that the industry operates successfully
22 while not harming the citizens of the state and its natural resources; and
23 (4) Based upon the challenges presented by digital asset mining
24 businesses, it is necessary to regulate digital asset mining businesses as
25 provided in this chapter to provide a regulatory framework for the safe
26 operation of this new, emerging industry.
27 (c) The purpose of this chapter is to:
28 (1) Promote, preserve, and protect the public peace, health, and
29 safety through effective permitting and regulation of digital asset mining
30 businesses;
31 (2) Provide for the powers and duties of the Oil and Gas
32 Commission relating to the permitting and regulation of digital asset mining
33 businesses; and
34 (3) Prescribe penalties for violations of this chapter.
35
36 23-119-102. Definitions.
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1 As used in this chapter:
2 (1) “Blockchain network” means a group of computers operating
3 and processing together to execute a consensus mechanism to agree upon and
4 verify data in a digital record for the purpose of generating digital assets;
5 (2) “Digital assets” means cryptocurrency, virtual currency, and
6 natively electronic assets, including without limitation stable coins,
7 nonfungible tokens, and other digital-only assets, that confer economic
8 rights or powers;
9 (3) “Digital asset mining business” means a group of computers
10 working at a single site that consumes more than one megawatt (1 MW) of
11 electrical energy on an average annual basis for the purpose of generating
12 digital assets by securing a blockchain network; and
13 (4) "Local government" means a county, a city of the first
14 class, a city of the second class, or an incorporated town.
15
16 23-119-103. Permit – Application.
17 (a) A digital asset mining business shall not operate in Arkansas
18 without a valid permit from the Oil and Gas Commission under this chapter.
19 (b) The commission shall establish the application for a permit for a
20 digital asset mining businesses to operate.
21 (c) The issuance of a digital asset mining business permit shall be
22 contingent upon compliance with all applicable state laws, including without
23 limitation the Arkansas Data Centers Act of 2023, § 14-1-601 et seq.
24
25 23-119-104. Rules.
26 The Oil and Gas Commission shall promulgate rules to implement this
27 chapter, including without limitation rules establishing requirements for:
28 (1) Permitting;
29 (2) Application for a permit;
30 (3) Renewal of a permit;
31 (4) The requirements and terms for a permit; and
32 (5) The establishment and operation of a digital asset mining
33 business.
34
35 23-119-105. Enforcement.
36 (a) The Oil and Gas Commission shall have jurisdiction of and
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1 authority over all persons and property necessary to administer and enforce
2 effectively:
3 (1) This chapter; and
4 (2) The Arkansas Data Centers Act of 2023, § 14-1-601 et seq.
5 (b) Upon receipt of a complaint under subsection (d) of this section,
6 the commission may make inquiries it deems proper relating to its duties to
7 administer and enforce this chapter and the Arkansas Data Centers Act of
8 2023, § 14-1-601 et seq., including without limitation:
9 (1) Making reasonable investigations and inspections;
10 (2) Examining properties, leases, papers, books, and records;
11 (3) Holding hearings;
12 (4) Requiring the keeping of records and the making of reports;
13 and
14 (5) Taking such action as may be reasonably necessary to enforce
15 this chapter.
16 (c) Upon receipt of a complaint under subsection (d) of this section,
17 the commission may make, after hearing and notice, such reasonable orders as
18 necessary from time to time in the proper administration and enforcement of
19 this chapter and the Arkansas Data Centers Act of 2023, § 14-1-601 et seq.
20 (d)(1) An individual or legal entity may file a complaint with the
21 commission relating to the compliance of digital asset mining businesses with
22 state law, the requirements and terms of a permit, or the rules of the
23 commission.
24 (2) Upon receipt of a complaint, the commission may:
25 (A) Investigate the complaint; and
26 (B) Assess penalties in response to any identified
27 noncompliance.
28 (e) The commission shall promulgate rules establishing:
29 (1) The procedures for ensuring compliance with state law, the
30 requirements and terms of a permit, and rules of the commission; and
31 (2)(A) Penalties for failure to comply with state law, the
32 requirements and terms of a permit, or rules of the commission, including
33 without limitation:
34 (i) Financial penalties; and
35 (ii) The suspension or revocation of a permit issued
36 under this chapter.
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1 (B) Financial penalties under this subdivision (e)(2)
2 shall not exceed five thousand dollars ($5,000) per day of a violation.
3 (f) This chapter does not:
4 (1) Prohibit a local government from adopting one (1) or more
5 ordinances, resolutions, or other appropriate legislative enactments to
6 regulate digital asset mining businesses that:
7 (A) Address areas of regulation that are not otherwise
8 addressed by federal law, state law, or the rules of the commission; and
9 (B) Are not inconsistent with federal law, state law, or
10 the rules of the commission; and
11 (2) Prevent a local government from enforcing an ordinance,
12 resolution, or other appropriate legislative enactment regulating digital
13 asset mining businesses that is not inconsistent with federal law, state law,
14 or the rules of the commission.
15
16 SECTION 5. Arkansas Code § 19-6-140 is amended to read as follows:
17 19-6-410. Oil and Gas Commission Fund.
18 The Oil and Gas Commission Fund shall consist of those special revenues
19 as specified in § 19-6-301(62), and (111), and (275) and § 14-1-606, there to
20 be used for:
21 (1) The maintenance, operation, and improvement required by the
22 Oil and Gas Commission in carrying out the functions, powers, and duties as
23 set out in § 15-72-101 et seq. and § 23-119-101 et seq.;
24 (2) Payment of expenses of the Office of the State Geologist
25 under § 15-71-107(b)(2)(B); or
26 (3) Other duties imposed by law upon the commission.
27
28 SECTION 6. Arkansas Code § 19-6-301 is amended to add an additional
29 subdivision to read as follows:
30 (275) Digital asset mining business penalties under § 23-119-101
31 et seq.;
32
33 SECTION 7. DO NOT CODIFY. TEMPORARY LANGUAGE. APPLICATION FOR
34 INITIAL PERMITS.
35 (a) Within ninety (90) days of the effective date of the initial rules
36 promulgated under § 23-119-104, an individual or legal entity operating one
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1 (1) or more digital mining asset businesses in Arkansas shall apply for a
2 permit for each digital asset mining business operated by the individual or
3 legal entity in Arkansas.
4 (b) This act does not prohibit a digital asset mining business from
5 operating:
6 (1) Before the effective date of the initial rules promulgated
7 under § 23-119-104;
8 (2) During the ninety-day period to apply for a permit under
9 subsection (a) of this section; and
10 (3) While the Oil and Gas Commission is considering the digital
11 asset mining business's application for a permit.
12 (c) A digital asset mining business shall cease operations if:
13 (1) The digital asset mining business is operating on the
14 effective date of the initial rules promulgated under § 23-119-104 and fails
15 to apply for a permit in the ninety-day period to apply for a permit under
16 subsection (a) of this section; or
17 (2) The digital asset mining business's application for a permit
18 under subsection (a) of this section is denied.
19
20 SECTION 8. EMERGENCY CLAUSE. It is found and determined by the
21 General Assembly of the State of Arkansas that digital asset mining
22 businesses present significant threats to the public peace, health, and
23 safety, including without limitation significant noise emissions, massive
24 power consumption, the use of large quantities of water that potentially
25 threatens water resources, and potential issues with cybersecurity; that the
26 continuous noise emitted by digital asset mining businesses threatens the
27 public peace, health, and safety as it risks potential damage to the hearing
28 and quality of life of the citizens of this state; that in light of these
29 threats it is imperative that the General Assembly regulate by permit digital
30 asset mining businesses to protect the public peace, health, and safety; and
31 that this act should become effective at the earliest opportunity to begin
32 the regulatory process and protect the citizens of the state from any harmful
33 actions related to digital asset mining businesses. Therefore, an emergency
34 is declared to exist, and this act being immediately necessary for the
35 preservation of the public peace, health, and safety shall become effective
36 on:
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1 (1) The date of its approval by the Governor;
2 (2) If the bill is neither approved nor vetoed by the Governor,
3 the expiration of the period of time during which the Governor may veto the
4 bill; or
5 (3) If the bill is vetoed by the Governor and the veto is
6 overridden, the date the last house overrides the veto.
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8 /s/Irvin
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