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

The owners of a cryptocurrency operation announced on Tuesday a plan to hire as many as 150 workers to resume operations this autumn at the Ponderay Newsprint factory in Usk. But the announcement is not worth the paper that the factory does not print, according to a power authority.

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 mill that closed in 2020 after the former owners filed for bankruptcy.

But that’s only if the Pend Oreille County Public Utility District can provide an additional 70 megawatts of power.

“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 mill operations as soon as additional power can be made available for the site.”

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

The cryptocurrency mining operation, under a company called Merkle Standard, recently got the green light after months of studies and contract negotiations to have as much as 100 megawatts of power under a deal starting Thursday.

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

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

“I have friends who lost their jobs” when the factory closed, Willenbrock said. “There is no better prospect for society than restarting the factory. But we do not appreciate the misleading statements about what can be done. Don’t tell society you can do both when we haven’t even studied it.”

Power struggle

The troubled saga of the paper mill, located on the 972-acre property that includes 29 buildings, began in 2020 when it entered bankruptcy proceedings. As a result, around 140 local workers lost their jobs.

At auction, Allrise Capital, which is based in Irvine, Calif., outbid the Kalispel tribe and bought the facility for $18.1 million. At the time, bankruptcy officials said Allrise expressed interest in restarting factory operations and possibly adding cryptocurrency mining.

However, the power negotiations made it clear that cryptocurrency mining was the focus 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 technology firm, Bitmain, to supply crypto mining equipment that will “catapult our growth plan to build one of North America’s largest sustainable digital asset mining platforms . . .

Zinurov stated plans to acquire as much as 500 megawatts for the crypto operation, under the business name Merkle Standard. He did not mention using the site for its traditional use as a paper mill.

Asked why Zinurov did not mention whether the plan all along was to restart the factory, Merkle Standard spokeswoman Laura Verity said it was a matter of semantics.

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

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

Willenbrock explained that the power load is different for a factory, which has large machines that turn on and off, versus cryptocurrency mining, which uses a steady stream of power to constantly run computers.

But the PUD sent the company a letter on April 1 referencing the BPA studies, which said Merkle Standard could have 100 megawatts for the paper mill or crypto mining, but not both without system modifications.

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

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

“During this study, the customer changed their request to a 100 MW load at near unity power factor,” BPA documents state.

Asked why Behrend would say one thing and the BPA document another, Verity said, “It’s interesting.”

“There is no argument that the final study says ‘only for crypto,'” she said. “But the original study asked for both.”

The BPA study noted that for Merkle Standard to increase its power consumption to 145 megawatts, it would require about $40 million in facility upgrades.

To increase power consumption to 600 megawatts, the company had to pay about $104 million for new equipment.

But Willenbrock also noted something else. Had Allrise Capital wanted to restart the mill as they told bankruptcy officials, they had BPA approval to do so a year ago.

And Willenbrock questioned whether the mill could hire 150 people within a month.

He also noticed that the parking lot once used by trucks to load paper rolls is now filled with metal containers used as modular mining platforms.

Asked how the company could begin operating the plant as early as a month as Behrend predicted in the release, Verity said many details needed to be worked out.

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

Hours after the reopening release came out, several Merkle Standard officials, including Behrend, attended a public meeting with the PUD and asked them to provide the additional 70 megawatts needed to restart the mill, Willenbrock said.

Verity said the officials were only there to show PUD officials how their help was needed.

“Mostly it was asking that they support the effort as much as they can,” she said. – We know it can be done.

Willenbrock questioned the timing, noting that Merkle Standard officials know it takes 60 or 90 days for the BPA to complete a stress 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 it by BPA without a facility upgrade, is a disappointment,” he said. “It’s misleading to people who are waiting with bated breath to restart the factory.”