Resisting the EIA: One Possible Playbook

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The Biden Admin­is­tra­tion has inten­si­fied over­sight on the U.S. bit­coin min­ing sec­tor through an Ener­gy Infor­ma­tion Agency (EIA) emer­gency sur­vey, por­tray­ing elec­tric­i­ty usage by min­ers as a sig­nif­i­cant threat to nation­al grid sta­bil­i­ty. This move, which demands detailed dis­clo­sures from min­ers, mir­rors actions in Venezuela that led to min­ing con­fis­ca­tions, sig­nal­ing a con­cern­ing trend towards a full reg­istry of min­ing activ­i­ties. The arti­cle advo­cates for the bit­coin min­ing com­mu­ni­ty to unite against this over­reach, empha­siz­ing the pos­i­tive impact min­ers have on grid sta­bil­i­ty through demand response pro­grams. It cri­tiques the EIA’s legal and pro­ce­dur­al jus­ti­fi­ca­tions, high­light­ing poten­tial legal chal­lenges and the neces­si­ty for indus­try sol­i­dar­i­ty to pro­tect min­ing auton­o­my against reg­u­la­to­ry encroachment.

  • The emer­gency autho­riza­tion claimed by the EIA for the min­ing sur­vey is woe­ful­ly inad­e­quate, and doesn’t meet the bare min­i­mum require­ments imposed by the enabling statutes.
  • There are tech­ni­cal defects in the EIA’s autho­riza­tion sur­round­ing the col­lec­tion of Per­son­al­ly Iden­ti­fi­able Infor­ma­tion. Also, the EIA has not done enough to clar­i­fy who the required respon­dents are.
  • While an affect­ed min­er and an indus­try group can sue to block this action, there is a strong argu­ment that a sov­er­eign State, par­tic­u­lar­ly Texas because of ERCOT, could also have stand­ing to sue because the EIA’s action direct­ly over­steps state sov­er­eign­ty concerns.
  • A law­suit should eas­i­ly meet the require­ments for a pre­lim­i­nary injunc­tion, and, if suc­cess­ful, a per­ma­nent injunc­tion on the use of the emer­gency claim here.
  • Speed is a top con­cern, as the time­frame for this sur­vey is extreme­ly short.

Part 1: Intro

The EIA finds itself at the cen­ter of a con­tentious debate due to its hur­ried and manda­to­ry sur­vey of cryp­tocur­ren­cy min­ing oper­a­tions. The core issue is the EIA’s use of emer­gency pow­ers to require data col­lec­tion from cryp­tocur­ren­cy min­ers, jus­ti­fied by mis­placed con­cerns over ener­gy con­sump­tion and sys­tem reli­a­bil­i­ty amid ris­ing Bit­coin prices and envi­ron­men­tal concerns.

This arti­cle explores the legal, pro­ce­dur­al, and prac­ti­cal dimen­sions of the EIA’s actions, exam­in­ing the agen­cy’s ratio­nale and its impli­ca­tions for pub­lic engage­ment in reg­u­la­to­ry process­es. By exam­in­ing the legal frame­works that gov­ern such emer­gency rule­mak­ings, includ­ing the Admin­is­tra­tive Pro­ce­dure Act (APA) and the nuances of “good cause” exemp­tions, as well as the Paper­work Reduc­tion Act (PRA), this analy­sis lays bare the EIA’s defi­cient process in push­ing for­ward with this action. This piece then out­lines a poten­tial set of legal argu­ments that could be used to chal­lenge the sur­vey, and who can bring forth the challenge.

For fur­ther details on the EIA and the sur­vey itself, see this piece by Char­lie Spears and Storm Rund, as well as this piece by Mar­ty Bent.

At its base, the Ener­gy Infor­ma­tion Agency does indeed pos­sess the pow­er under statute to col­lect the data they want to col­lect in this sur­vey. 15 USC §772. (I will not argue here whether or not that pow­er is itself legit­i­mate, and there are good argu­ments that it may not be. Rather, I take aim at the process used by the EIA in order to show an expe­di­ent route to block the cur­rent action.)

Data col­lec­tion like this should only be done through a tra­di­tion­al notice-and-com­ment process, where the pub­lic has ade­quate notice that the agency intends to take an action, and both the pub­lic and the agency isn’t forced to hur­ry with a response. Recall the Fin­CEN rule­mak­ing which end­ed a few weeks ago. The pub­lic was allowed three months to exam­ine it, and gen­er­ate com­ments, such as the awe­some one draft­ed by Samourai Wal­let and signed by 25 oth­er Bit­coin companies.

The APA requires that agen­cies fol­low pro­ce­dures such as notice-and-com­ment to afford the pub­lic, includ­ing those with “high­ly rel­e­vant exper­tise in the sub­ject,” the oppor­tu­ni­ty to par­tic­i­pate in rule­mak­ing through sub­mit­ted comments.

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

As you can see, the EIA is not oper­at­ing with access to “high­ly rel­e­vant expertise”:

Sev­er­al cryp­tocur­ren­cies, most notably Bit­coin, use a proof of work approach that requires cryp­tocur­ren­cy min­ers to val­i­date blocks of trans­ac­tions by solv­ing com­plex cryp­to­graph­ic puz­zles that require sig­nif­i­cant com­pu­ta­tion­al power.

EIA Sup­ple­men­tal Mate­ri­als (empha­sis added)

An agency may short-cir­cuit the nor­mal notice-and-com­ment process “when the agency for good cause finds (and incor­po­rates the find­ing and a brief state­ment of rea­sons there­fore in the rules issued) that notice and pub­lic pro­ce­dure there­on 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).

BUT, and it’s an absurd­ly mas­sive “but”, the emer­gency pro­ce­dure they’re oper­at­ing under is com­i­cal­ly tenuous.

Agen­cies have a long his­to­ry of invok­ing the “good cause” excep­tion of the Admin­is­tra­tive Pro­ce­dure Act (APA) in order to short-cir­cuit pub­lic involve­ment, and the courts have increas­ing­ly become sus­pi­cious of such extreme­ly loose uses 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 through the COVID era have begun to show judi­cial impa­tience with agen­cies apply­ing emer­gency pow­ers in sit­u­a­tions where there is no legit­i­mate ratio­nale to do so.

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

  1. Bit­coin’s price has gone up.
  2. High­er prices incen­tivize more mining.
  3. It’s cold out­side right now.
  4. Some­thing bad hap­pened five years ago.
  5. We actu­al­ly don’t real­ly know if it’s that bad.
  6. But we feel like it might be, so we need to col­lect data NOW NOW NOW.

As evi­dence, the price of Bit­coin has increased rough­ly 50% in the last three months, and high­er prices incen­tivize more cryp­to­min­ing activ­i­ty, which in turn increas­es elec­tric­i­ty con­sump­tion. At the time of this writ­ing, much of the cen­tral Unit­ed States is in the grip of a major cold snap that has result­ed in high elec­tric­i­ty demand. The com­bined effects of increased cryp­to­min­ing and stressed elec­tric­i­ty sys­tems cre­ate height­ened uncer­tain­ty in elec­tric pow­er mar­kets, which could result in demand peaks that affect sys­tem oper­a­tions and con­sumer prices, as hap­pened in Platts­burgh, New York in 2018. Such con­di­tions can mate­ri­al­ize and dis­si­pate rapid­ly. Giv­en the emerg­ing and rapid­ly chang­ing nature of this issue and because we can­not quan­ti­ta­tive­ly assess the like­li­hood of pub­lic harm, EIA feels a sense of urgency to gen­er­ate cred­i­ble data that would pro­vide insight into this unfold­ing issue.”

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

This jus­ti­fi­ca­tion is shock­ing­ly flim­sy for the extra­or­di­nary pow­er of an emer­gency action, and courts have blocked agen­cies for not hav­ing suf­fi­cient “good cause” when they had sig­nif­i­cant­ly stronger jus­ti­fi­ca­tions than the EIA does here. See, i.e., 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 (ie: grant an injunc­tion pre­vent­ing the EIA from enforc­ing it). Below we go into greater detail as to how such a chal­lenge could look, and who can bring it.

Part 2: Standing

The ini­tial com­po­nent of any case analy­sis is a deter­mi­na­tion of who can bring a law­suit. The basic require­ments for stand­ing are that a plain­tiff must per­son­al­ly have:

  1. suf­fered some actu­al or threat­ened injury;
  2. the injury can fair­ly be traced to the chal­lenged action of the defen­dant; and
  3. that the injury is like­ly to be redressed by a favor­able decision.

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

Clear­ly, any min­er that has received a let­ter from the EIA falls with­in that cat­e­go­ry. Accord­ing to their OMB state­ment, the EIA has a list of 82 min­ers in mind that they intend to demand infor­ma­tion from, and any of those 82 would be able to sue here.

What about a min­er that is not part of those 82? That’s a hard­er case. First of all, at present the list of 82 min­ers has not been made avail­able, so a min­er might not yet know if they are required to respond or not. Fur­ther­more, it’s not imme­di­ate­ly clear if a min­er who does­n’t receive the let­ter and is not on the list of 82 tar­get min­ers is required to respond. The EIA form itself states that those “who are required to com­plete this form are all com­mer­cial cryp­tocur­ren­cy min­ing facil­i­ties in the Unit­ed States.” (empha­sis added). A “com­mer­cial cryp­tocur­ren­cy min­ing facil­i­ty” is not clear­ly defined, so a min­er oper­at­ing on a com­mer­cial site could rea­son­ably believe that they are required to respond.

Anoth­er lev­el of stand­ing is orga­ni­za­tion­al and asso­ci­a­tion­al stand­ing. Here, an indus­try group can assert orga­ni­za­tion­al stand­ing when its mis­sion is direct­ly impact­ed by the agency action. See, i.e. PETA v. USDA, 797 F.3d 1087 (D.C. Cir. 2015) (hold­ing that the USDA’s chal­lenged non-action plain­ly impaired PETA’s activ­i­ties in a non-spec­u­la­tive man­ner by requir­ing PETA to divert and redi­rect its lim­it­ed resources to coun­ter­act and off­set the defendant’s unlaw­ful con­duct and omis­sions.) Alter­na­tive­ly, an orga­ni­za­tion can assert asso­ci­a­tion­al stand­ing “to bring suit on behalf of its mem­bers when: (a) its mem­bers would oth­er­wise have stand­ing to sue in their own right; (b) the inter­ests it seeks to pro­tect are ger­mane to the organization’s pur­pose; and © nei­ther the claim assert­ed, nor the relief request­ed, requires the par­tic­i­pa­tion of indi­vid­ual mem­bers in the law­suit.” See Hunt v. Wash­ing­ton State Apple Adver­tis­ing Comm’n, 432 U.S. 333, 343 (1977); see also Ass’n of Am. Physi­cians & Sur­geons v. Tex. Med. Bd., 627 F.3d 547, 550 (5th Cir. 2010); and Ctr. for Bio­log­i­cal Diver­si­ty v. EPA, 937 F.3d 533, 536 (5th Cir. 2019).

It is con­ceiv­able that an orga­ni­za­tion which rep­re­sents min­ers could poten­tial­ly have both com­po­nents of stand­ing, but clear­ly asso­ci­a­tion­al stand­ing will be met. The most con­tentious ele­ment would be where a spe­cif­ic mem­ber need not be direct­ly involved with the law­suit, how­ev­er as this is an action to ensure that a reg­u­la­to­ry agency fol­lows prop­er pro­ce­dure, and that the relief is to enjoin the agency from pro­ceed­ing, it seems unlike­ly that a spe­cif­ic min­er would be required to be a par­ty here.

But there is one addi­tion­al lit­i­gant that could bring this suit, and it would be an extreme­ly inter­est­ing one: a State. Under the doc­trine of parens patri­ae, a State has the abil­i­ty to main­tain a law­suit on behalf of its cit­i­zens if it can meet addi­tion­al bur­dens. See Alfred L. Snapp & Son, Inc. v. Puer­to Rico ex rel. Barez, 458 U. S. 592, 607 (1982) (“In order to main­tain [a parens patri­ae action], the State must artic­u­late an inter­est apart from the inter­ests of par­tic­u­lar pri­vate par­ties, i.e., the State must be more than a nom­i­nal par­ty. The State must express a qua­si-sov­er­eign inter­est.”). In Mass­a­chu­setts v. EPA, the Supreme Court elab­o­rat­ed on parens patri­ae by extend­ing Mass­a­chu­setts spe­cial solic­i­tude to sue, based on that state’s qua­si-sov­er­eign inter­est in pro­tect­ing its envi­ron­ment. 549 U.S. 497, 518 (2007) (“Well before the cre­ation of the mod­ern admin­is­tra­tive state, we rec­og­nized that States are not nor­mal lit­i­gants for the pur­pos­es of invok­ing fed­er­al juris­dic­tion.”). See also, Lexi Zer­ril­lo, Who’s Your Sov­er­eign?: The Stand­ing Doc­trine of Parens Patri­ae & State Law­suits Defend­ing Sanc­tu­ary Poli­cies, 27 Wm. & Mary Bill Rts. J. 573 (2018); Tara L. Grove, When Can a State Sue the Unit­ed States, 101 Cor­nell L. Rev. 851 (2016).

Using the State of Texas as an exam­ple, I believe there is a rea­son­able argu­ment that Texas itself, and per­haps oth­er states, would be able to achieve stand­ing in this spe­cif­ic sit­u­a­tion under parens patri­ae and spe­cial solic­i­tude. ERCOT is a Texas qua­si-gov­ern­men­tal agency which is tasked with reg­u­lat­ing the ener­gy sec­tor with­in the State of Texas. Indeed, in 2023, the Texas Supreme Court rec­og­nized ERCOT as hav­ing sov­er­eign immu­ni­ty, hold­ing “that ERCOT is enti­tled to sov­er­eign immu­ni­ty because PURA “evinces clear leg­isla­tive intent” to vest it with the ” ‘nature, pur­pos­es, and pow­ers’ of an ‘arm of the State gov­ern­ment’.” CPS Ener­gy v. Elec. Reli­a­bil­i­ty Coun­cil of Tex., 671 S.W.3d 605, 628 (Tex. 2023).

The EIA’s action here, using emer­gency pow­ers as they have, rep­re­sents a spe­cif­ic insult to Texas, as it deprives ERCOT the abil­i­ty to engage with the agency process as experts in their domain. Indeed, ERCOT leads the coun­try on the use of Bit­coin min­ers as large flex­i­ble loads, and so not only has the EIA’s emer­gency action deprived Texas of the abil­i­ty to com­ment on the thrust of the action, it has deprived the rest of the coun­try the ben­e­fit for ERCOT’s exper­tise in this field.

Fur­ther­more, the EIA’s emer­gency action also impacts the abil­i­ty of Texas to engage in the prop­er reg­u­la­tion of their inter­nal grid, through ERCOT, which being entire­ly inter­nal to the State of Texas, is not cov­ered by the Com­merce Clause, and is out­side of much of the juris­dic­tion of the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion. When a State’s reg­u­la­to­ry frame­work is at risk due to a Fed­er­al reg­u­la­tion, such as it is here, the spe­cial stand­ing of a State has been upheld. See, i.e., Wyoming v. Unit­ed States, 539 F.3d 1236, 1241–42 (10th Cir. 2008)(“In light of the “spe­cial solic­i­tude” the Mass­a­chu­setts Court afford­ed to states in our stand­ing analy­sis, id., and because our dis­cus­sion below demon­strates that Wyoming’s stake in this con­tro­ver­sy is suf­fi­cient­ly adverse, we con­clude that Wyoming has Arti­cle III standing.”).

The State of Texas has a unique and specif­i­cal­ly iden­ti­fi­able qua­si-sov­er­eign inter­est here, and we believe that they would be an ide­al plain­tiff or co-plain­tiff on this matter.

Part 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 guar­an­tee 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 pred­i­cat­ed 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 assure 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)(quoting Unit­ed States v. Mead Corp., 533 U.S. 218, 230 (2001), quot­ing Smi­ley v. Citibank (S.D.), N.A., 517 U.S. 735, 741 (1996)). The good cause excep­tion, in turn, “is essen­tial­ly an emer­gency pro­ce­dure[.]” Unit­ed States v. Valverde, 628 F.3d 1159, 1165 (9th Cir. 2010) (quot­ing Buschmann v. Schweik­er, 676 F.2d 352, 357 (9th Cir. 1982)). The excep­tion also is “nar­row­ly con­strued” and “reluc­tant­ly coun­te­nanced.” Cal­i­for­nia v. Azar, 911 F.3d 558, 575 (9th Cir. 2018) (quot­ing Alcaraz v. Block, 746 F.2d 593, 612 (9th Cir. 1984)).

Cham­ber of Com­merce of U.S. v. U.S. Dep’t of Home­land Sec., 504 F. Supp. 3d 1077, 1080 (N.D. Cal. 2020)(Some inter­nal cita­tions omitted)

The courts’ inter­pre­ta­tions of what con­sti­tutes “good cause” have var­ied, lead­ing to an evolv­ing jurispru­den­tial land­scape. The deter­mi­na­tion of good cause hinges on the agen­cy’s abil­i­ty to con­vinc­ing­ly demon­strate that the cir­cum­stances neces­si­tat­ing the rule are urgent enough to jus­ti­fy for­go­ing the usu­al pro­ce­dur­al require­ments. This jus­ti­fi­ca­tion must be more than mere asser­tions; it requires sub­stan­tial evi­dence that adher­ing to the nor­mal rule­mak­ing process would be imprac­ti­ca­ble, harm­ful, or con­trary to pub­lic interest.

His­tor­i­cal­ly, courts have applied a def­er­en­tial arbi­trary-and-capri­cious review to agency asser­tions of good cause. Begin­ning in 2014, and cement­ed by cas­es relat­ed to COVID, courts began adopt­ing a sig­nif­i­cant­ly more strin­gent de novo review stan­dard. De novo review entails a thor­ough exam­i­na­tion of the agen­cy’s jus­ti­fi­ca­tion with­out defer­ring to the agen­cy’s exper­tise or dis­cre­tion. This evo­lu­tion in judi­cial scruti­ny under­scores the grow­ing con­cern with increas­ing­ly per­func­to­ry and pre­tex­tu­al emer­gency deter­mi­na­tions. “The dec­la­ra­tion of emer­gency becomes a ‘self-ful­fill­ing prophe­cy’ in which the exec­u­tive has judged a sit­u­a­tion an emer­gency and frames its response in such a way as to con­struct a new emer­gency real­i­ty. Emer­gency admin­is­tra­tion, if left unchecked, becomes the norm.” Desirée LeCler­cq, Judi­cial Review of Emer­gency Admin­is­tra­tion, 72 Am. U. L. Rev. 143, 170 (2022–2023) (empha­sis added).

Going back to Cham­ber of Com­merce, there the court found that even con­sid­er­ing the extreme sit­u­a­tion of the COVID pan­dem­ic, and its unde­ni­able impact on domes­tic employ­ment, the Agency could not jus­ti­fy using an emer­gency rule to make changes to the H1‑B visa program.

Anoth­er case, Ass’n of Cmty. Can­cer Ctrs. v. Azar, 509 F.Supp. 3d 482 (D. Md. 2020), found that an agen­cy’s jus­ti­fi­ca­tion for an emer­gency action, which attempt­ed to reg­u­late alleged­ly run­away drug prices dur­ing COVID, fell far short of the require­ments need­ed here: 

The pur­port­ed jus­ti­fi­ca­tion for invok­ing the good cause excep­tion in this case falls flat. First, like the fac­tu­al­ly defi­cient jus­ti­fi­ca­tions cit­ed in Ten­nessee Gas Pipeline and Soren­son Com­mu­ni­ca­tions, CMS here relies more on spec­u­la­tion than on evi­dence to estab­lish that the COVID-19 pan­dem­ic has cre­at­ed an emer­gency in Medicare Part B drug pric­ing suf­fi­cient to jus­ti­fy dis­pens­ing with valu­able notice and com­ment procedures.

While it may be that the antic­i­pat­ed ben­e­fits of the rule even­tu­al­ly would be borne out by empir­i­cal study, CMS’s con­clu­so­ry and spec­u­la­tive asser­tions do not pro­vide, par­tic­u­lar­ly in the short term, a rea­soned basis suf­fi­cient to jus­ti­fy deny­ing to the pub­lic the ben­e­fi­cial require­ments of the six­ty-day notice and com­ment peri­od. An agency may not rely sole­ly on its own exper­tise to estab­lish good cause; find­ings of fact are required.

Ass’n of Cmty. Can­cer Ctrs. v. Azar, 509 F.Supp. 3d 482 (D. Md. 2020)(citing Soren­son Comm­c’ns Inc. v. Fed. Comm­c’ns Com­m’n, 755 F.3d 702, 706 (D.C. Cir. 2014) and Ten­nessee Gas Pipeline Co. v. FERC, 969 F.2d 1141, 1145 (D.C. Cir. 1992))

Final­ly, in ITServe All., Inc. v. Scalia, the court did­n’t apply the de novo stan­dard because the agency was so defi­cient in its evi­dence and analy­sis that there was no need even to con­sid­er the stan­dard. “For these rea­sons, even under the arbi­trary and capri­cious stan­dard, Plain­tiffs are like­ly to suc­ceed in show­ing that no emer­gency exist­ed in the con­text of the H‑1B pro­gram, and there­fore, that the Depart­men­t’s argu­ment that it was imprac­ti­ca­ble to com­ply with the stan­dard rule­mak­ing pro­ce­dure was insuf­fi­cient. ” ITServe All., Inc. v. Scalia, Civ­il Action No. 20–14604 (SRC), 14 (D.N.J. Dec. 3, 2020)

The PRA Angle

The EIA might argue that the Paper­work Reduc­tion Act (PRA) is the only aspect that con­trols here, and attempt to frame the argu­ment sole­ly in that realm. As I stat­ed above, the rel­e­vant stan­dard under the PRA is when an “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). This pow­er is explic­it­ly invoked by the EIA under 5 CFR §1320.13.

While there’s essen­tial­ly no case law that inter­prets this sec­tion, look­ing broad­ly at §3507 you see that it mir­rors the APA in many ways, requir­ing that the agency engage in a sim­i­lar notice-and-com­ment pro­ce­dure. The emer­gency stan­dard isn’t explic­it­ly the same “good cause” stan­dard of the APA, it’s not so dif­fer­ent as to need a com­plete­ly dif­fer­ent analy­sis. The first argu­ment here would be for the courts to apply the “good cause” de novo review to this emer­gency action, based on the anal­o­gous sit­u­a­tion and pur­pos­es of the PRA and APA.

How­ev­er, like the sit­u­a­tion in ITServe above, even if the courts were to apply a weak­er “arbi­trary and capri­cious” stan­dard, the total bank­rupt­cy of the EIA’s evi­dence as laid out in Part 4 below, their unwar­rant­ed delay, and the plain lan­guage of their “jus­ti­fi­ca­tion” does not ratio­nal­ly approach a find­ing of “pub­lic harm is rea­son­ably like­ly” required by that statute.

The EIA may also attempt to argue that 44 USC §3507(d)(6) blocks judi­cial review of the infor­ma­tion col­lec­tion action. This argu­ment fails as that sec­tion is nar­row­ly con­strued. “For exam­ple, it does not pro­hib­it judi­cial review of an OMB deci­sion to approve col­lec­tions that are not con­tained in an agency rule.” Hyatt v. Office of Mgmt. & Bud­get, 908 F.3d 1165, 1171 (9th Cir. 2018). Fur­ther­more, “the statute pre­cludes judi­cial review only of a deci­sion by the OMB to approve, whether through express approval or a fail­ure to act upon, a col­lec­tion with­in an agency rule. Any oth­er deci­sion remains sub­ject to judi­cial review.Id. Final­ly, the judi­cial review bar is con­strained fur­ther in that it “shall apply only when an agency pub­lish­es a notice of pro­posed rule­mak­ing and requests pub­lic com­ments.” 44 USC §3507(d)(5).

Asso­ci­at­ed Rule­mak­ing Information

RIN: Stage of Rule­mak­ing: Fed­er­al Reg­is­ter Cita­tion: Date:

    Not asso­ci­at­ed with rulemaking 

Fed­er­al Reg­is­ter Notices & Comments

    Did the Agency receive pub­lic com­ments on this ICR? No

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

By their own admis­sion, the EIA’s col­lec­tion is nei­ther inci­den­tal to a par­al­lel or pri­or rule­mak­ing, nor was a notice issued or pub­lic com­ments received.

Fur­ther­more, the use of the emer­gency pow­er of §3507(j) lies out­side the scope of §3507(d), so the (d)(6) bar does not apply. See Sil­vers v. Sony Pic­tures Entm’t, Inc., 402 F.3d 881, 885 (9th Cir .2005) (en banc) (‘‘The doc­trine of expres­sio unius est exclu­sio alterius ‘as applied to statu­to­ry inter­pre­ta­tion cre­ates a pre­sump­tion that when a statute des­ig­nates cer­tain per­sons, things, or man­ners of oper­a­tion, all omis­sions should be under­stood as exclu­sions.’ ’’ (quot­ing Boudette v. Bar­nette, 923 F.2d 754, 756–57 (9th Cir. 1991)).

Part 4: The EIA’s Overreach

Return­ing to the EIA’s jus­ti­fi­ca­tions, there are sev­er­al avenues of attack.

Attack 1: Unwarranted Delay

Plain­tiffs argue that Defen­dants undu­ly delayed in tak­ing action and for­feit­ed the abil­i­ty to rely on the good cause excep­tion. “Good cause can­not arise as a result of the agen­cy’s own delay[.]” Nat’l Educ. Ass’n, 379 F. Supp. 3d at 1020–21 (inter­nal brack­et omit­ted, quot­ing Nat’l Res. Def. Coun­cil v. Nat’l High­way Traf­fic Safe­ty Adm’n, 894 F.3d 95, 114 (2d Cir. 2018)); see also Nat’l Ven­ture Ass’n v. Duke, 291 F. Supp. 3d 5, 16 (D.D.C. 2017) (quot­ing Wash. All. of Tech. Work­ers v. U.S. Dep’t of Home­land Sec., 202 F. Supp. 3d 20, 26 (D.D.C. 2016), aff’d, 857 F.3d 907 (D.C. Cir. 2017)). “Oth­er­wise, an agency unwill­ing to pro­vide notice or an oppor­tu­ni­ty to com­ment could sim­ply wait until the eve of a statu­to­ry, judi­cial, or admin­is­tra­tive dead­line, then raise up the ‘good cause’ ban­ner and pro­mul­gate rules with­out fol­low­ing APA pro­ce­dures.” Nat’l Res. Def. Coun­cil, 894 F.3d at 114–15 (quot­ing Coun­cil of S. Mtns. v. Dono­van, 653 F.2d 573, 581 (D.C. Cir. 1981))

Cham­ber of Com­merce of U.S. v. U.S. Dep’t of Home­land Sec., 504 F. Supp. 3d 1077, 1087 (N.D. Cal. 2020)

The only actu­al dat­a­point that the EIA cites in their “jus­ti­fi­ca­tion” is an inci­dent in Platts­burgh, New York, in 2018. The EIA does­n’t cite any details, except to state that the min­ing “could result in demand peaks that affect sys­tem oper­a­tions and con­sumer prices, as hap­pened in Platts­burgh, New York in 2018”. Ignor­ing the fact that it is unclear if there was actu­al­ly any appre­cia­ble neg­a­tive impact to either sys­tem oper­a­tions or con­sumer prices in that case, the sim­ple fact that the Agency has delayed six years in seek­ing to address the sit­u­a­tion shows that there is absolute­ly no need to avoid a few month notice-and-com­ment peri­od to pro­vide for robust and com­plete pub­lic input.

Attack 2: Insufficiency of Evidence

The com­bined effects … could result in demand peaks that affect sys­tem oper­a­tions and con­sumer prices … [and the] EIA feels a sense of urgency to gen­er­ate cred­i­ble data that would pro­vide insight into this unfold­ing issue.

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

In Soren­son, the court took a rather dim view of such a spec­u­la­tive harm. We’ll just leave this here:

Curi­ous­ly, how­ev­er, there were no fac­tu­al find­ings sup­port­ing the real­i­ty of the threat. Instead, the agency spec­u­la­tive­ly stat­ed “absent Com­mis­sion action, there could be insuf­fi­cient funds avail­able … to meet the needs of the Fund.” Inter­im Order, 28 FCC Rcd. at 707 (empha­sis added) … Cause for con­cern? Per­haps. But hard­ly a cri­sis. … Lack­ing record sup­port prov­ing the emer­gency, we hold the Com­mis­sion erred in pro­mul­gat­ing the Inter­im Order with­out notice and comment.

Soren­son Comm­c’ns Inc. v. Fed. Comm­c’ns Com­m’n, 755 F.3d 702, 706 (D.C. Cir. 2014)

Attack 3: Disconnect Between Cause and Effect

The EIA has pro­vid­ed no spe­cif­ic evi­dence regard­ing the con­nec­tion between high­er bit­coin prices and how that trans­lates into the inten­si­ty of min­ing (and the sub­se­quent pow­er use). While we don’t dis­pute that such a con­nec­tion exists, the short term impact is much more com­plex than the EIA’s assumed “Num­ber Go Up there­fore Min­ing Go Up!” con­clu­so­ry state­ment. As any pro­fes­sion­al bit­coin min­er knows, adding sig­nif­i­cant capac­i­ty is a com­pli­cat­ed indus­tri­al con­struc­tion process, involv­ing per­mits, inter­na­tion­al ship­ping, sup­ply chains, local elec­tric work­ers, and many oth­er aspects which add a sig­nif­i­cant delay to the NGU -> MGU equation.

Fur­ther, every min­er also is aware that the halv­ing is immi­nent, and that will like­ly cause a retrac­tion in min­ing inten­si­ty, unless NGU ful­ly over­whelms the halv­ing of the block sub­sidy. The EIA makes no men­tion of this, and actu­al­ly appears to want to rush the review while they know the data will be skewed high, pre-halving.

Attack 4: Technical Defects

On the OMB’s announce­ment, the OMB and the EIA make the fol­low­ing disclosure:

Does this ICR request any per­son­al­ly iden­ti­fi­able infor­ma­tion (see OMB Cir­cu­lar No. A‑130 for an expla­na­tion of this term)? Please con­sult with your agen­cy’s pri­va­cy pro­gram when mak­ing this deter­mi­na­tion. No

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

In the cit­ed OMB Cir­cu­lar No. A‑130, “‘Per­son­al­ly iden­ti­fi­able infor­ma­tion’ means infor­ma­tion that can be used to dis­tin­guish or trace an individual’s iden­ti­ty, either alone or when com­bined with oth­er infor­ma­tion that is linked or link­able to a spe­cif­ic individual.”

On the sur­vey form itself, in Sched­ule 1 the sur­vey clear­ly asks for the name and con­tact infor­ma­tion for a sur­vey con­tact and that individual’s supervisor’s name and con­tact infor­ma­tion. Under 2 CFR §200.79, PII “includes, for exam­ple, first and last name, address, work tele­phone num­ber, email address”. While §200.79 defines that as so-called pub­lic PII, the OMB Cir­cu­lar No. A‑130 does not make that dis­tinc­tion, so the dis­clo­sure is defi­cient as to how that PII will be man­aged. It’s just more evi­dence that the EIA and the OMB rushed this sur­vey through with­out prop­er vet­ting, and is one more exam­ple that prop­er notice-and-com­ment pro­ce­dures should have been followed.

Addi­tion­al­ly, the EIA, in their rush to push this out NOW NOW NOW, cre­at­ed uncer­tain­ty in the pub­lic as to who is actu­al­ly required to respond to their action. Are only the enti­ties who receive a let­ter required to respond, or are “all com­mer­cial cryp­tocur­ren­cy min­ing facil­i­ties in the Unit­ed States” cov­ered, as they state in their autho­riza­tion? If the lat­ter, who specif­i­cal­ly qual­i­fies? Are off-grid min­ers includ­ed, even though they don’t have any inter­ac­tion with grid infra­struc­ture under the EIA’s purview? If the EIA had sim­ply engaged in the prop­er notice-and-com­ment pro­ce­dure, again, these plain con­fu­sions would have been caught and addressed by the process.

Part 5: Standard for an Injunction

A plain­tiff seek­ing a pre­lim­i­nary injunc­tion must estab­lish that he is like­ly to suc­ceed on the mer­its, that he is like­ly to suf­fer irrepara­ble harm in the absence of pre­lim­i­nary relief, that the bal­ance of equi­ties tips in his favor, and that an injunc­tion is in the pub­lic interest.

Win­ter v. Nat­ur­al Res. Def. Coun­cil, Inc., 555 U.S. 7, 20 (2008)

We believe that an injunc­tion is clear­ly war­rant­ed, and like­ly to be grant­ed. But for com­plete­ness, we’ll ana­lyze all four ele­ments. The detailed injunc­tion analy­sis present in Azar is quite thor­ough for our pur­pos­es here. See Ass’n of Cmty. Can­cer Ctrs. v. Azar, 509 F.Supp. 3d 482 (D. Md. 2020).

Prong 1: Likely to Succeed on the Merits

This is where all the action will be, and essen­tial­ly is cov­ered by the above analy­sis in Part 3. But in sum, the EIA’s attempt to employ an emer­gency process here is clear­ly and facial­ly ille­git­i­mate, and so the EIA is like­ly to lose on the mer­its, either under the de novo stan­dard or the arbi­trary and capri­cious standard.

Prong 2: Likely to Suffer Irreparable Harm in the Absence of Preliminary Relief

The spe­cif­ic harm here is the fact that the EIA has avoid­ed the required notice-and-com­ment pro­vi­sions of the APA and/or the PRA. If the agency is allowed to pro­ceed with their data col­lec­tion, there will be no way to rem­e­dy the agency action. As dis­cussed in detail in Azar, a “vio­la­tion of the APA can­not be ful­ly cured by lat­er reme­di­al action.” Azar, 509 F.Supp. 3d at 501.

Prong 3 & 4: The Balance of the Equities Support The Injunction, and it is in the Public Interest

Again we look to the excel­lent lan­guage in Azar, stat­ing that “Of course, Con­gress has also deter­mined, in pass­ing the APA, that it is in the pub­lic inter­est to allow the pub­lic to com­ment on pro­posed reg­u­la­tions pri­or to their pro­mul­ga­tion. And giv­en the lim­it­ed dura­tion of a tem­po­rary restrain­ing order, it would be more accu­rate to say—at least at this stage of the proceedings—that the court would be delay­ing the imple­men­ta­tion of the rule rather than pre­vent­ing it. The court acknowl­edges and gives weight to CMS’s desire to low­er drug prices to ben­e­fit seniors, but CMS has adduced no evi­dence that any harm will result if its sev­en-year test does not com­mence on Jan­u­ary 1.” Azar, 509 F.Supp. 3d at 502 (inter­nal cita­tion omitted).

Sim­i­lar­ly, giv­en the six year delay that the EIA has already tac­it­ly con­doned, there is no seri­ous addi­tion­al harm to the EIA here by delay­ing the data col­lec­tion, while there is sig­nif­i­cant harm to those affect­ed by their actions. And the pub­lic inter­est is clear­ly served by forc­ing them to hew to prop­er APA procedure.

Part 6: Conclusion

We sub­mit that a prop­er­ly craft­ed law­suit has a strong chance of suc­cess in at least delay­ing the EIA’s sur­vey, com­pelling them to ini­ti­ate a prop­er notice-and-com­ment process that promis­es a nar­row­er, more thought­ful­ly designed sur­vey. This action is not only a legal recourse but a nec­es­sary step towards ensur­ing a fair and trans­par­ent reg­u­la­to­ry process. We pro­vide these cita­tions with the hope that mem­bers of our indus­try can swift­ly move to secure a pre­lim­i­nary injunc­tion against the EIA.

At this piv­otal moment, it is cru­cial for legal pro­fes­sion­als, min­ers, and bit­coin indus­try experts to unite against the EIA’s intru­sive sur­vey. This col­lec­tive effort is essen­tial as we con­front this reg­u­la­to­ry over­reach and advo­cate for the prin­ci­ples of trans­paren­cy and due process. Legal experts can dis­sect the EIA’s emer­gency sur­vey’s foun­da­tions, ensur­ing com­pli­ance with statu­to­ry require­ments, while min­ers offer first­hand accounts of the sur­vey’s impact, high­light­ing the real-world impli­ca­tions of such reg­u­la­to­ry measures.

As we stand togeth­er, our uni­fied response can cham­pi­on the cause of Bit­coin and pro­tect our indus­try from undue reg­u­la­to­ry bur­dens. Bit­coin pro­fes­sion­als, with their deep under­stand­ing of the ecosys­tem’s nuances, are instru­men­tal in shap­ing pub­lic dis­course and influ­enc­ing pol­i­cy. Now is the time to lever­age our col­lec­tive exper­tise, influ­ence, and pas­sion to advo­cate for reg­u­la­tion that nur­tures inno­va­tion and growth. Our indus­try is cur­rent­ly seen as a soft­er tar­get, but oth­ers will be next, and show­ing that we can and will fight, while also scor­ing a vic­to­ry against reg­u­la­to­ry malfea­sance, ben­e­fits not only Bit­coin, but all Amer­i­cans. By engag­ing with pol­i­cy­mak­ers and con­tribut­ing to pub­lic com­men­tary, we can forge a future for our indus­try that is both pros­per­ous and fair.

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

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

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