The Usk Money Mine–Part I

There’s something very wrong with this picture

Why are we letting this happen?

Last Sunday, May 15, at the top of the Northwest Section an article appeared that seemed easy to gloss over: “Examiner mulls approval of Usk crypto-mine operation”. Some obscure business entities are seeking a “conditional-use permit” from the government of Pend Oreille County, Washington, to operate what would be the largest crypto-currency mining operation in the United States at the now shuttered former Ponderay Newsprint Mill in Usk. Gleaning from the Spokesman article, the “conditional-use permit” would allow for the placement of 30,000 computer servers, cooling towers, and the use of water from the Pend Oreille River for the cooling. 

Some key points from the article (the bold is mine):

Susan Hobbs attended the Zoom hearing on Wednesday [May 11]. 

Hobbs, a former member of the Pend Oreille Planning Commission, asked the county to proceed with caution on Merkle Standard’s [the proposed mine’s operator] plans to obtain 600 megawatts of electricity a year, which would equate to two former Kaiser Aluminum Mead smelters operating at full capacity.“This is the largest thing that has ever come down the pike for Pend Oreille County,” Hobbs said. “If there were ever a time for being certain, that no stones are left unturned, this would be it. I hope we do that before rushing in.” 

But Hume, the attorney for Merkle Standard, said the county only needs to follow state and federal law, especially for an area that has had “certain impacts priced into that neighborhood … for a long, long, long time. 

“This is a very clean, high-tech use,” he said. “All we are doing is putting computers in boxes, putting them in the parking lot and letting them run.”

“Clean, high-tech”. What is so attractive that brings companies from God-knows-where to put boxes of computers in the parking lot of a shuttered paper mill in Usk, plug them into the grid, and let them run? The electronic money produced is, by its nature, highly transferrable. Apart from some property taxes, none of the crypto-currency the new plant will produce will benefit the citizens of Pend Oreille County (unless some individuals are getting perks in exchange for making things happen). 

Why eastern Washington?

From a Jan. 21, 2022, Spokesman article (the bold is mine):

At a hearing on the energy usage of blockchain technologies like Bitcoin, Steve Wright, who led the Wenatchee-based PUD until last April, told members of a House Energy and Commerce subcommittee what happened when Bitcoin miners started setting up their energy-intensive operations in Central Washington around 2014.

“These were small operations in shipping containers, vacant small businesses and residences” at first, Wright said, but soon the operations grew far bigger and caused concerns in the community over safety risks, how few local jobs the industry created relative to its energy use and a lack of tax revenue despite driving up energy costs for local residents.

Mining Bitcoin and other cryptocurrencies involves rooms full of computers working together solving complicated math problems to unearth a new coin. As more of the digital currency has been mined, the computing power required to acquire another coin has increased, leading to massive electricity usage even as the individual machines used have grown more efficient.

Running shipping containers full of high speed computers “mining” imaginary electronic money (crypto-currency) requires two things: large amounts of stable, day-and-night electrical power and a means of cooling the computers so they don’t malfunction or catch fire from the heat they generate. Eastern Washington has some of the cheapest electrical power in the country—and (at least for now) it has water for cooling. We have relatively cheap power because we have hydro. The aluminum industry landed in Spokane more than half a century ago precisely for that reason—but the aluminum industry produced jobs, a tangible, taxable product and spinoff industries (like aluminum casting). Crypto produces none of that.

Moreover, hydropower is a limited resource. We’re not making more of it. We already have little enough hydropower that we rely to some degree on burning coal and natural gas, i.e. greenhouse gas producing fossil fuels, for our energy needs. And wait a minute: Aren’t local Republicans already whining that the cost of heating and cooking will go up if we restrict natural gas hookups in new construction? Why aren’t Pend Oreille County Republicans (yes, they are all Republicans) worried that selling huge amounts of electricity to Merkle at a fixed price will mean a price increase in electricity for the average homeowner? Surely their vaunted “free market” will make a price increase for the average citizen inevitable. Where’s their media campaign protesting rising costs for the average Joe? Where is the astroturf-based “citizens’” initiative to outlaw this electricity sale (similar to Spokane’s Prop 1 in 2021)?

We can’t invent more hydropower. Hydropower covers the base load not just for the imaginary money producers who require it to keep their computers running day and night. Hydropower also satisfies the base load requirements to heat our homes and run our factories at night. If we guarantee the imaginary money producers hydropower to satisfy their steady-supply requirements, we are inevitably going to burn more natural gas (or coal or oil) to satisfy real needs, like staying warm in winter. 

We claim in this State of Washington to be working to reduce the burning of fossil fuels in order to combat climate change. Governor Inslee campaigned for President in 2020 on his climate change credentials. We claim to be trying to convert to electricity-powered transportation. In this milieu Republican naysayers and climate deniers, captives of the fossil fuel industry, are fond of dissing solar and wind power as unreliable—and, therefore, conversion of transportation to electricity impractical—but here are the Republican county commissioners of Pend Oreille County setting up to sell our region’s clean hydropower at a discount to the makers of imaginary money. This fixed price sale will make electricity-based transportation both more expensive and less climate friendly. What is wrong with this picture?

In a sense all money is imaginary. Money works only because some group of humans decide that some form of the stuff—dollars, rubles, gold, silver, or bitcoin—has value. These humans agree that whatever their money is can be traded for things of value, like food, housing, transportation, and services. Dollars, on account of their relative stability, have been the favored global currency for the last half century. Dollars are to some degree under the control of the U.S. federal governance structures, for example, the Federal Reserve’s efforts to combat inflation by adjusting interest rates, just like rubles are to some degree under the control of the Russian monetary system. Dollars (and other state currencies), generally speaking, can be tracked and taxed, and the taxes can be used to provide roads, schools, ports, and law enforcement. 

Crypto-currencies, e.g. Bitcoin, have value only so long as a group of humans believe in that value. The charm of crypto-currencies is that the blockchain technology on which such currencies are based guarantees, through dispersed computer computations and dispersed computer record-keeping, that a unique Bitcoin is real, not counterfeit. Moreover, the supply of Bitcoin is limited by the cost of the computational power necessary to mine it. Sadly, that “computational power” depends on burning energy from a cheap source in a compliant community—like Pend Oreille County. The price of power to produce a crypto-currency will be driven up (along with cost of all the power we use for other tasks) by the “free” market. Once the cost to produce it exceeds the value of the “coin” produced, this wasteful energy use will no longer turn a profit and the mine will be abandoned, having robbed the locals and having left with the profits. (Click here for a primer on cryptocurrency by Paul Krugman.)

The value of the crypto-currency mined in Usk will not accrue to the citizens of Pend Oreille County, Washington. That crypto-value will belong to the opaquely owned companies developing the Usk mine and to whomever owns those companies, be they wealthy U.S. investors, Russians, Chinese, or other global citizens. The “coins”, unlike gold or silver and other hard currencies, will exist only virtually as an electronic record on a network of computers dispersed worldwide. 

Where is the far right wing of the Republican Party, the folks who lap up conspiracy theories and condemn “globalists”, The New World Order, George Soros, and the Rothschilds? A globally dispersed network of arguably untraceable currency based on our inexpensive power and water, a currency that is electronically transferred to parts unknown ought to be grand fodder for them. What do we hear for those Republicans? Crickets. 

This is nuts, just plain wrong. This is a “free market” distortion we should not allow. This is local government at work in the form of County Commissioners, Public Utility Districts, hearing examiners, and, supposedly, according to Merkle Standard’s lawyer, “the county only needs to follow state and federal law”, which is his way of saying, “We’ve got this. Nothing to see here. Don’t overthink this.” When a lawyer paid for by a far away company makes that argument, citizens’ antennae should vibrate with alarm.

Call, email, and write Governor Inslee and your legislators. Write to U.S. Representative Cathy McMorris Rodgers—but don’t expect much from her. McMorris Rodgers only knows to shout “clean hydropower!” every time either climate change or helping the salmon is mentioned (by removing the low-producing Snake River dams). Now the “clean hydropower” will be sold to make electronic money that will leave Washington the moment it is generated, leaving little to no benefit. If we’re forced into keeping McMorris Rodgers’ precious dams—and sacrificing the fish, let’s at least use the power for something useful—like charging batteries for transportation based on clean electricity.

Keep to the high ground,


P.S. The six hundred megawatts of clean hydropower Merkle Standard proposes to buy at a discount from the grid (thru a contract with the “Public Utility District”) is a huge amount of power. If run all year at that level a sale of six hundred megawatts of power would be 3.6% of all the electrical energy currently generated in a year in the State of Washington. Put another way, at the 4 miles per kilowatt hour mileage of my Tesla Model 3, that much electrical energy would take me the distance to Mars and back not once but 247 times! Or it would power 168,200 Tesla Model 3s to each travel 100,000 miles. Do we see why this fire sale of our clean power to enrich crypto mining investors is insane?

P.P.S. Approval of the conditional use permit may be a done deal. Presumably, the next step will be the crypto folks negotiating the power discount from which they expect to benefit with the Pend Oreille County Public Utility District Commissioners.