Skepticism abounds after crypto miners say they want to restart a paper mill in Usk

The owners of a cryptocurrency operation on Tuesday announced a plan to rehire up to 150 workers to restart operations this fall at the Ponderay Newsprint factory in Usk. But the announcement is not worth the paper that the factory does not print, according to a government official.

Todd Behrend, who previously worked at Ponderay Newsprint and then was hired by California-based Allrise Capital Inc. as CEO of Ponderay Industries, announced the plan to restart the plant which was closed in 2020 after the filing of balance sheet of the previous owners.

But that’s only if the Pend Oreille County Utility District can supply an additional 70 megawatts of electricity.

“A lot of hard work and diligent business planning has gotten us to this point in the process,” Behrend said in a press release. “We can essentially start plant operations as soon as additional power can be made available to the site.”

However, Colin Willenbrock, general manager of the utility district that supplies power to the plant that had been Pend Oreille County’s largest employer, called Behrend’s press release “disingenuous” and “misleading.”

The cryptocurrency mining operation, under a company called Merkle Standard, was recently given the green light after months of study and contract negotiations to have up to 100 megawatts of power as part of a deal that starts Thursday.

However, this power allocation is intended to be used only for crypto mining, which officials at Merkle Standard specifically requested, Willenbrock said.

According to the Bonneville Power Administration report, Merkle Standard had previously abandoned plans to request power to restart the plant because it would have cost millions to upgrade the facilities.

“I have friends who lost their jobs” when the factory closed, Willenbrock said. “There is no better prospect for the community than to restart the factory. But we don’t appreciate misleading statements about what could be done. Don’t tell the community you can do both when we haven’t even researched that.

power struggle

The stationery’s murky saga, located on the 972-acre property that includes 29 buildings, began in 2020 when it fell into bankruptcy proceedings. As a result, around 140 local workers lost their jobs.

At auction, Irvine, Calif.-based Allrise Capital outbid the Kalispel Tribe and bought the plant for $18.1 million. At the time, bankruptcy officials said Allrise had expressed interest in restarting plant operations and possibly adding cryptocurrency mining.

However, the negotiations for power made it clear that cryptocurrency mining was at the center of the company led by CEO Ruslan Zinurov.

In March, the naturalized Russian investor told cryptocurrency publication Cointelegraph that he had formed a partnership with a Chinese tech company, Bitmain, to provide crypto-mining equipment that “will catapult our growth plan of build one of North America’s largest sustainable digital asset mining platforms.” .”

Zinurov announced his intention to obtain up to 500 megawatts for the crypto operation, under the trading name Merkle Standard. He made no mention of using the site for its traditional use as a paper mill.

When asked why Zinurov didn’t mention whether the plan was to restart the plant, Merkle Standard spokeswoman Laura Verity said it was a matter of semantics.

“Those quotes were about Merkle Standard,” she said. “Ponderay Industries is a separate entity. I think the context is a bit different.

Behrend, the CEO, told The Spokesman-Review earlier this year that Merkle was initially looking for 300 megawatts of a “mixed load” that would include around 85 megawatts for the factory and the rest for crypto mining.

Willenbrock explained that the electrical loads are different for a factory, which has big machines that cycle on and off, compared to cryptocurrency mining, which uses a constant stream of power to keep it running. computer banks permanently.

But the PUD sent the company a letter on April 1 referring to BPA studies that Merkle Standard could have 100 megawatts for the paper mill or crypto mining, but not both without system changes. .

“We were shocked when the BPA came back and said we could get 100 megawatts, but we couldn’t handle the papermaking business without grid changes,” Behrend told The Spokesman-Review in April.

But BPA documents show that Merkle pivoted his request and had previously only requested power for crypto mining.

“During this study, the customer modified its demand for a 100 MW load at near unity power factor,” the BPA documents say.

When asked why Behrend would say one thing and the BPA documents another, Verity replied, “It’s interesting.”

“There’s no denying that the final study says ‘just for crypto,'” she said. “But the original study asked for both.”

The BPA study noted that for Merkle Standard to increase its electricity consumption to 145 megawatts, it would take about $40 million to upgrade facilities.

To increase power consumption to 600 megawatts, the company would have to shell out about $104 million for new equipment.

But Willenbrock also noted something else. If Allrise Capital had wanted to restart the plant as they told bankruptcy officials, they had obtained BPA’s approval to do so a year ago.

And Willenbrock wondered if the factory could hire 150 people in a month.

He also noted that the parking lot once used by trucks to load rolls of paper is now filled with metal shipping containers that are used as modular mining rigs.

Asked how the company could start plant operations as early as a month, as Behrend predicted in the statement, Verity said many details would need to be ironed out.

“Everything is interdependent,” she said. “Our goal would be to have all the pieces in place.”

Hours after the reopening statement was issued, several Merkle Standard officials, including Behrend, attended a public PUD meeting and asked them to provide the additional 70 megawatts needed to restart the plant, Willenbrock said.

Verity said officials were only there to show PUD officials how much their help is needed.

“It was mainly to ask them to support the effort as much as possible,” she said. “We know it can be done.”

Willenbrock questioned the timeline, noting that Merkle Standard officials know it takes BPA 60 or 90 days to complete a load study of the magnitude they requested.

“Now at the 11th hour they’re saying, ‘Oh by the way, we’re restarting the factory’, when they’ve already been told they can’t do that by the BPA without a facility upgrade, it’s a disappointment” he said. “It’s misleading for people who are looking forward to restarting the plant.”