The Usk Money Mine–Part II

Civics, County Government, PUDs, and BPA

In the northeast corner of Washington State at the site of the former Ponderay Newsprint Mill south of Usk, along the Ponderay River in Pend Oreille County, a thinly-disguised Chinese company is already burning electrical energy (6 megawatts) from the Box Canyon Dam, power that would otherwise feed the U.S. power grid. (This is the same national grid that distributes the electricity that runs our appliances and heats and cools our homes [except for Texans].) “Merkle Standard,” with major investment and alliance with the Beijing-based company Bitmain, is conducting their business—and burning this electricity—at the old Mill site now zoned “Residential 5”—even as they seek rezoning that would make their operation legal. Merkle and its bevy of lawyers is apparently confident that they have done their homework and have the right people on their side. Apparently, this is the way business is done when the public isn’t paying much attention.

This is business, after all, and some say business is progress, that progress is always good, and that any business that wants to invest in rural Pend Oreille County ought to be welcomed. Some might assume that any business activity is bound to be better for the people of the county than an abandoned newsprint mill. Re-zoning ought to be a slam-dunk, the corporate lawyers will argue—and some local business-minded folk will agree. 

But there is not unanimity even among business-minded local Republicans. In January, as this re-zoning effort unfolded, one of the three Pend Oreille County Commissioners, Robert Rosencrantz, sounded a note of caution, not on the environmental or climate change basis that I might choose, but based on the business risk-benefit ratio for the people of the county. His due diligence, detailed analysis, and cautionary data is available as a pdf, the Rosencrantz Document. He counseled caution from basic research he had done on the company(ies) proposing the project, the effects of other crypto-mining operations on local communities, and hints of corrupt influence peddling. For his level-headed analysis and urge toward caution he was ridiculed as a “Republican in Name Only” (RINO) by local Republicans intent on appeasing this supposedly wonderful new business interest in Pend Oreille County.

But let’s back up a bit. The bankrupt Ponderay Newsprint mill was purchased at auction in April, 2021, by Allrise Capital (corporate parent of Merkle) for $18.1 million. At the time, Thomas Clouse reported in the Spokesman:

“They are planning to repurpose select portions of the mill for old, corrugated-cardboard-paper production,” said Chris Bell, managing broker for NAI Black, which helped market the mill. California-based Allrise Capital plans on “retooling the plant, making a significant investment to re-fire it and bring back the jobs.”

Allrise outbid the Kalispell Tribe, which also expressed what I expect were, for the Tribe, sincere plans to retool and reopen the plant and provide jobs. 

Allrise, it seems, never had any such intention. Bear with me. Here’s where we dive into the governmental weeds. Half a year later, in the fall of 2021, Allrise was evidently working behind the scenes, laying the groundwork for its crypto mine. The Pend Oreille County Community Development Department, under the leadership of Greg Snow, attempted to create a new Comprehensive Development Plan for the County that would have green-lighted the crypto mining facility by, incident to changes in the broader plan, re-zoning the Mill property as “Industrial” instead of “Residential 5.”

That Allrise gambit didn’t work only because a local group, “Responsible Growth – Northeast Washington”, successfully challenged the proposed new Comprehensive Development Plan with the Pend Oreille County Hearing Examiner on the basis of the Washington State Environmental Protection Act (SEPA)

Blocked by the hearing examiner’s ruling, Allrise/Bitmain (or one of the other nested shell companies) was forced down a different avenue: request a “Conditional Use Permit” (or CUP, in this case CUP-2021-012), a zoning exception that would allow the use of the Mill property for crypto mining, a use that clearly otherwise would not conform with “Resident 5” zoning. 

That put it back in Greg Snow’s domain in the Pend Oreille County Community Development Department. In March of this year (2022) Mr. Snow issued a Determination of Non Significance on the SEPA Checklist submitted by Ponderay Real Estate LLC (one of the Allrise shells and the named owner of the Mill property) certifying that Mr. Snow believed that the project would have no significant environmental impact and that no review by State or Federal regulatory agencies was required.

But wait! In April, Mr. Ed Styskel, a wildlife biologist in Newport, WA, filed an appeal to the SEPA Checklist arguing that Mr. Snow and the Community Development Department had failed to do due diligence in issuing a Determination of Non Significance. 

That is the whole sequence that leads us to the article in the Spokesman last week concerning the Zoom hearing held on the Conditional Use Permit and Mr. Styskel’s appeal. That was the article that stimulated me to write last Wednesday’s post, The Usk Money Mine—Part I.

At that hearing, biologist Mr. Styskel, without legal council, was up against two law firms hired by the well-heeled Allrise nest of companies that were arguing for granting the crypto mine’s conditional use permit. It might be worth noting that the hearing examiner in this case (the earlier one in Pend Oreille County having retired), Christopher Anderson, “is an attorney appointed by the Board of County Commissioners” of Spokane County.

Mr. Anderson’s ruling will come out in the next couple of weeks. Regardless of evidence at that hearing that Allrise’s CUP application and SEPA checklist were inaccurate, a ruling in favor of the Allrise nest of companies seems likely.

This is the sort of thing that happens constantly within county governments, most of it out of the public eye and very hard to follow. 

Assuming approval of the “Conditional Use”, where does this go from here? The Allrise nest of companies still need to negotiate a sufficiently favorable contract with the Pend Oreille Public Utility District for transmission lines and electricity to burn that is cheap enough to offer them a tidy profit in imaginary money that will likely be electronically transmitted to China (where crypto-mining is banned, but still done). 

Here’s where things get interesting again. Public Utility Districts in the State of Washington date back to a people’s initiative passed in 1930. From the website of the Washington Public Utility Districts Association (the bold is mine):

In 1929, the Washington State Grange, a populist agricultural organization, collected more than 60,000 signatures – twice the number necessary – to send Initiative No. 1 to the Legislature, allowing rural communities to form their own publicly owned utilities.

When the Legislature failed to act, the measure went to a statewide election, where it passed in 1930 with 54 percent of the vote. The new PUD law went into effect in 1931.

Apparently, there was a huge fight at the time with private power interests like Washington Water Power who wanted to retain control. PUDs were a populist victory.

Now look at the legal mandate, the purpose, of PUDs according to the Revised Code of Washington (RCW) (the bold is mine):

“The purpose of this act is to authorize the establishment of public utility districts to conserve the water and power resources of the State of Washington for the benefit of the people thereof, and to supply public utility service, including water and electricity for all uses.”

Is burning a huge amount of local Washington State produced energy to manufacture cryptocurrency that will leave no value here “for the benefit of the people” of Washington State? It would seem that the three Pend Oreille County PUD Commissioners, in order to satisfy that statement of purpose, would be required to assess in detail the benefit of a crypto mine to the people of Pend Oreille County and the State of Washington. Are the PUD commissioners equipped to reliably make this assessment? Remember that Allrise did a “bait and switch” routine at the very outset. Where are the two hundred or so jobs at the Mill property that Allrise was going to provide once Mill was retooled and restarted? The crypto mine might at most hire a handful of people. The crypto mine will pay some paltry amount of property tax some of which will accrue locally. Does WA State government have to rely on the shaky representations of the Allrise nest of companies for the purpose leveling “Business and Occupation Tax” on mined cryptocurrency? 

The effects of burning vast amounts of our clean electrical energy will have rippling effects well beyond Pend Oreille County. The Box Canyon Dam, the only dam in Pend Oreille County actually owned by the Pend Oreille PUD, doesn’t produce sufficient power (only 90 megawatts) to satisfy Allrise’s stated intention to eventually draw 600 megawatts. The Pend Oreille PUD will need to buy power from the Bonneville Power Administration, a federal agency established in 1937 under the U.S. Department of Energy. Note that 600 megawatts is a significant piece of the 12,000 megawatts total of “firm hydropower” produced by all the federal and non-federal dams in the Northwest. It’s not as though that 600 megawatts is just waiting to be used. That 12,000 megawatts is already in use. Add that 600 megawatt load to the system and its going to translate into burning coal or gas, eventually increasing the cost of electrical energy to the rate payers (i.e. us) and (by the way) contributing to global warming.

Allowing this profligate use of our energy for the production of imaginary money is immoral. It is not “conserving” (as in the PUD mission statement), it is wasting—for little, if any, benefit to Pend Oreille County, Washington State, the United States, or the world. It is high time this mine is seen for what it is—a travesty—and this “business” put to rest. Let the crypto-miners pursue building their own solar/wind farm somewhere for their energy needs (and then search for a means of cooling their computer heat generators).

Keep to the high ground,