Bill Summary – FastDemocracy

 State of Arkansas
 94th General Assembly
 Fiscal Session, 2024                                                                  SR 17
 4
 By: Senator Irvin
 6
                                 SENATE RESOLUTION
                 TO AUTHORIZE THE INTRODUCTION OF A NONAPPROPRIATION
                 BILL TO AMEND ARKANSAS LAW CONCERNING DIGITAL ASSET
                 MINING BUSINESSES, TO AMEND THE ARKANSAS DATA CENTERS
                 ACT OF 2023, TO AMEND ARKANSAS LAW TO PROVIDE FOR THE
                 LICENSURE, PERMITTING, AND REGULATION OF DIGITAL
                 ASSET MINING BUSINESSES AND BUSINESSES UTILIZING A
                 BLOCKCHAIN NETWORK, AND TO DECLARE AN EMERGENCY.
15
16
                                          Subtitle
                         TO AUTHORIZE THE INTRODUCTION OF A
                         NONAPPROPRIATION BILL TO AMEND THE
                         ARKANSAS DATA CENTERS ACTS OF 2023, TO
                         REGULATE DIGITAL ASSET MINING BUSINESSES
                         AND BUSINESSES UTILIZING A BLOCKCHAIN
                         NETWORK, AND TO DECLARE AN EMERGENCY.
24
25
 BE IT RESOLVED BY THE SENATE OF THE NINETY-FOURTH GENERAL ASSEMBLY OF THE
 STATE OF ARKANSAS:
28
          THAT Senator Irvin is authorized to introduce a bill which as
 introduced will read substantially as follows:
31
 "Title
  TO AMEND ARKANSAS LAW CONCERNING DIGITAL ASSET MINING BUSINESSES; TO AMEND
 THE ARKANSAS DATA CENTERS ACT OF 2023; TO AMEND ARKANSAS LAW TO PROVIDE FOR
 THE LICENSURE, PERMITTING, AND REGULATION OF DIGITAL ASSET MINING BUSINESSES
 AND BUSINESSES UTILIZING A BLOCKCHAIN NETWORK; TO DECLARE AN EMERGENCY; AND
     *JLL424*                                                         04/10/2024 1:44:10 PM JLL424
                                                                                   SR17
 FOR OTHER PURPOSES.
 2
 Subtitle
 TO AMEND THE ARKANSAS DATA CENTERS ACTS OF 2023; TO PROVIDE FOR THE
 REGULATION OF DIGITAL ASSET MINING BUSINESSES AND BUSINESSES UTILIZING A
 BLOCKCHAIN NETWORK; AND TO DECLARE AN EMERGENCY.
 7
 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
 9
      SECTION 1.      Arkansas Code § 14-1-602(b), concerning legislative intent
 and findings for the Arkansas Data Centers Act of 2023, is amended to read as
 follows:
      (b) Through the enactment of this subchapter, the General Assembly
 intends to:
               (1) Recognize recognize that data centers create jobs, pay taxes,
 and provide general economic value to local communities and this state; and
               (2) Clarify the guidelines needed to protect data asset miners
 from discriminatory industry-specific regulations and taxes.
19
      SECTION 2.      Arkansas Code § 14-1-604(a), concerning digital asset
 mining, is amended to read as follows:
      (a)   A digital asset mining business may operate in this state if the
 digital asset mining business complies with:
               (1)   State law concerning business guidelines and tax policies;
               (2)   Any ordinance concerning operations and safety;
               (3)   Any rule or rate for utility service provided by or on
 behalf of a public entity; and
               (4)   State and federal employment laws, including without
 limitation employment laws.
30
      SECTION 3.      Arkansas Code § 14-1-605(a), concerning discrimination
 against digital asset mining businesses, is amended to read as follows:
      (a)   Except as provided by subsection (d) of this section, a local
 government shall not:
               (1)   Enact or adopt an ordinance, policy, or action that limits
 the sound decibels generated from home digital asset mining other than the
                                           2             04/10/2024 1:44:10 PM JLL424
                                                                                      SR17
 limits set for sound pollution generally;
               (2)   Impose a different requirement for a digital asset mining
 business than is applicable to any requirement for a data center;
               (3)(2)     Rezone an area in which a digital asset mining business
 is located without complying with applicable state law and local zoning
 ordinances; or
               (4)(3)     Rezone an area with the intent or effect of
 discriminating against a digital asset mining business.
 9
      SECTION 4.        Arkansas Code Title 14, Chapter 1, Subchapter 6, is amended
 to add additional sections to read as follows:
      14-1-606.      Operation of digital asset mining business or business
 utilizing blockchain network.
      (a)(1)      The sound emitted by a digital asset mining business or a
 business utilizing a blockchain network shall not exceed sixty (60) decibels.
               (2)   A digital asset mining business or a business utilizing a
 blockchain network shall utilize a soundproofing enclosure to ensure that the
 sound emitted by the digital asset mining business or the business utilizing
 a blockchain network does not exceed forty (40) decibels.
      (b)(1)      A digital asset mining business or a business utilizing a
 blockchain network beginning operations on and after the effective date of
 this act shall not utilize water to cool any equipment used as part of the
 operations of the digital asset mining business or the business utilizing a
 blockchain network.
               (2)(A)(i)      Subdivision (b)(1) of this section does not prohibit a
 digital asset mining business or a business utilizing a blockchain network
 operating before the effective date of this act from utilizing water to cool
 any equipment used as part of the operations of the digital asset mining
 business or the business utilizing a blockchain network for no longer than
 twenty-four (24) months from the effective date of this act.
                        (B)   For the purposes of subdivision (b)(2)(A) of this
 section, a digital asset mining business or a business utilizing a blockchain
 network that is connected to an electrical network and consuming electrical
 energy no later than thirty (30) days after the effective date of this act
 shall be considered as operating before the effective date of this act.
36
                                              3             04/10/2024 1:44:10 PM JLL424
                                                                                    SR17
      14-1-607.      Ownership of or investment in digital asset mining business
 located in this state by certain foreign nationals prohibited — Definition.
      (a)   It is the intent of the General Assembly that this act shall be
 used to protect our state's security from foreign individuals or countries
 that may use large amounts of computing power on Arkansas soil to disrupt and
 attack Arkansas interests through ransomware, computer hacking, or an attack
 on Arkansas's electrical grid.
      (b)(1)     As used in this section, "foreign national" means a citizen of
 a prohibited foreign party who is subject to § 126.1 of the International
 Traffic in Arms Regulations, 22 C.F.R. §§ 120.1 — 130.17, as it existed on
 January 1, 2023.
               (2)   As used in this section, "foreign national" does not include
 an individual who is a citizen of the United States.
      (c)   Notwithstanding any other law, a foreign national shall not own or
 operate a digital asset mining business in this state.
      (d)   An ownership interest in or investment in a digital asset mining
 business in violation of this section is subject to divestiture as provided
 in this section.
      (e)   Upon request of a person or upon receipt of information that leads
 the Attorney General to believe that a violation of this section may exist,
 the Attorney General may issue subpoenas requiring the:
               (1)   Appearance of witnesses;
               (2)   Production of relevant records; and
               (3)   Giving of relevant testimony.
      (f)(1)     If as a result of the investigation under subsection (e) of
 this section the Attorney General concludes that a violation of this section
 has occurred, the Attorney General may order the foreign national to divest
 himself, herself, or itself of all interest in the digital asset mining
 business within one hundred twenty (120) days.
               (2)   If the foreign national under subdivision (f)(1) of this
 section fails to divest himself, herself, or itself of all interest in the
 digital asset mining business, the Attorney General may commence an action in
 a circuit court within the jurisdiction of the location of the digital asset
 mining business.
               (3)(A)   Except in the case of dismissal, the circuit court under
 subdivision (f)(2) of this section may order that the digital asset mining
                                           4             04/10/2024 1:44:10 PM JLL424
                                                                                      SR17
 business be sold.
                     (B)   The Attorney General may pursue other remedies in an
 action brought under subdivision (f)(2) of this section, including without
 limitation:
                              (i)     A civil penalty not to exceed twenty-five
 percent (25%) of the fair market value, on the date of the assessment of the
 penalty, of the foreign national's interest in the digital asset mining
 business for the failure to divest himself, herself, or itself of all
 interest in the digital asset mining business within one hundred twenty (120)
 days as required under subdivision (f)(1) of this section;
                              (ii)    Court costs; and
                              (iii)    Reasonable attorney's fees.
                     (C)(i)     Proceeds of the sale under subdivision (f)(3)(A) of
 this section shall first be disbursed to lien holders in the order of
 priority.
                              (ii)    The owners of the digital asset mining business
 shall receive the remaining proceeds of the sale under subdivision (f)(3)(A)
 of this section.
19
      SECTION 5.      Arkansas Code, Title 23, is amended to add an additional
 chapter to read as follows:
      23-119-101.      Legislative intent – Findings - Purpose.
      (a)    This chapter establishes the standards and criteria for the
 licensure, permitting, and regulation of digital asset mining businesses and
 businesses utilizing a blockchain networks.
      (b)    The General Assembly finds:
               (1)   Digital asset mining businesses and blockchain networks
 represent a new and emerging industry that presents significant challenges
 for the citizens of Arkansas, including without limitation:
                     (A)   Significant noise emissions;
                     (B)   Massive consumption of power that places a strain on
 electrical grids;
                     (C)   The usage of vast amounts of water that could
 potentially threaten resources for citizens and future economic development
 opportunities; and
                     (D)   Potential issues involving cyber-security.
                                                5             04/10/2024 1:44:10 PM JLL424
                                                                                 SR17
            (2)   While the State of Arkansas welcomes new businesses and
 economic growth, the General Assembly likewise has a responsibility to ensure
 that the operations of new industries do not negatively impact the public
 peace, health, and safety or otherwise damage the well-being of the citizens
 of the state;
            (3)   When an industry presents harm to the public peace, health
 and safety, it has been the practice of the General Assembly to provide for
 regulation of that industry to ensure that the industry operates successfully
 while not harming the citizens of the state and its natural resources; and
            (4)   Based upon the challenges presented by digital asset mining
 businesses and blockchain networks that have become evident, it is necessary
 to regulate digital asset mining businesses and businesses utilizing a
 blockchain network as provided in this chapter to provide a regulatory
 framework for the safe operation of this new, emerging industry.
      (c)   The purpose of this chapter is to:
            (1)   Promote, preserve, and protect the public peace, health, and
 safety through effective licensure, permitting, and regulation of digital
 asset mining businesses and businesses utilizing a blockchain network;
            (2)   Provide for the powers and duties of the Department of
 Energy and Environment relating to the licensure, permitting, and regulation
 of digital asset mining businesses and businesses utilizing a blockchain
 network; and
            (3)   Prescribe penalties and fines for violations of this
 chapter.
25
      23-119-102.   Definitions.
      As used in this chapter:
            (1) “Blockchain network” means a group of computers operating and
 processing together to execute a consensus mechanism to agree upon and verify
 data in a digital record;
            (2) “Digital asset” means cryptocurrency, virtual currency, and
 natively electronic assets, including without limitation stable coins,
 nonfungible tokens, and other digital-only assets, that confer economic,
 proprietary, or access rights or powers;
            (3) “Digital asset mining” means the use of electricity to power
 a computer for the purpose of securing or validating a blockchain network;
                                        6             04/10/2024 1:44:10 PM JLL424
                                                                                    SR17
 and
                (4) “Digital asset mining business” means a group of computers
 working at a single site that consumes more than one megawatt (1 MW) of
 electrical energy on an average annual basis for the purpose of generating
 digital assets by securing a blockchain network.
 6
       23-119-103.      License – Application – Fees.
       (a)(1)(A)      An individual or a legal entity shall not operate one (1) or
 more digital asset mining businesses or businesses utilizing a blockchain
 networks in Arkansas without first obtaining a license from the Department of
 Energy and Environment under this chapter.
                      (B)   The department may delegate its duties under this
 chapter to a state entity within the department.
                (2)   When considering whether to issue a license under
 subdivision (a)(1) of this section, the factors evaluated by the department
 shall include without limitation the:
                      (A)   Financial condition and responsibility of the
 applicant;
                      (B)   Financial and business experience of the applicant;
 and
                      (C)   Character and general fitness of the applicant.
       (b)    Each digital asset mining business or business utilizing a
 blockchain network operated by an individual licensed under subsection (a) of
 this section shall obtain a permit from the department under this section.
       (c)    The department shall establish the application for a:
                (1)   License to operate one (1) or more digital asset mining
 businesses or businesses utilizing a blockchain network in Arkansas; and
                (2)   Permit for a digital asset mining business or business
 utilizing a blockchain network to be operated by an individual or legal
 entity licensed under subsection (a) of this section.
       (d)(1)     The department shall charge application fees and renewal fees
 as established by rule.
                (2)   The application fee for a license to operate one (1) or more
 digital asset mining businesses or businesses utilizing a blockchain network
 in Arkansas shall not exceed five thousand dollars ($5,000).
                (3)   The application fee for a permit for a digital asset mining
                                            7               04/10/2024 1:44:10 PM JLL424
                                                                                           SR17
 business or business utilizing a blockchain network shall not exceed five
 thousand dollars ($5,000).
 3
          23-119-104.        Rules
          The Department of Energy and Environment shall promulgate rules to
 implement this chapter, including without limitation rules establishing
 requirements for:
                   (1)   Licensing;
                   (2)   Permitting;
                   (3)   Fees;
                   (4)   Application for a license;
                   (5)   Renewal of a license;
                   (6)   The establishment and operation of a digital asset mining
 business or business utilziing a blockchain network, including without
 limitation rules pertaining to the location of digital asset mining
 businesses and businesses utilizing a blockchain network;
                   (7)   Compliance with and enforcement of relevant laws and the
 rules of the department; and
                   (8)(A)     Penalties for failure to comply with the requirements and
 terms of a license or permit, including without limitation:
                                   (i)    Penalties for th