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Spokane, Washington  Est. May 19, 1883

Hearing examiner mulls approval of Usk crypto mining operation at Ponderay Newsprint Mill

Todd Behrend, Interim Mill Manager of the Ponderay Newsprint Mill looks out over the vacant property as he gives a tour of the closed facility on Thursday, December 17, 2020, at the Ponderay Newsprint Mill in Usk.  (Tyler Tjomsland/THE SPOKESMAN-REVIEW)

At the end of about five hours of testimony Wednesday, a hearing examiner ended the discussion about permitting what could become the largest crypto-mining operation in the country in Usk with a question: What name do I use?

Christopher Anderson, a Spokane County hearing examiner, who also sometimes hears cases for Pend Oreille County, hosted the virtual hearing on whether to approve a conditional-use permit brought by California-based Allrise Capital Inc. to convert a former Ponderay Newsprint Mill into a massive electricity-consuming cryptocurrency mining site.

“I am curious to one point that I’ll admit is slightly confusing in all of this,” Anderson said. “Who is the entity … that this should be directed towards as far as conditions, etc.?”

Spokane-based attorney Taudd Hume, one of two attorneys at the hearing representing Merkle Standard, the company that will operate the cryptocurrency mining operation, didn’t immediately provide the name.

“I think I have an answer for you. Let me check with my colleagues here,” Hume said as he muted his Zoom call for several seconds. “We are going to answer your question with a question.”

Hume said the county’s staff report listed Pend Oreille Real Estate LLC on the application, but Hume noted it would be operated by a different company, Merkle Standard. That’s not to be confused with Pend Oreille Industries LLC, which was another company formed by Allrise Capital.

While the confusion probably won’t effect the outcome of the permit, it represented yet another line of questions for opponents and even those residents who said they would be willing to support the operation.

Susan Hobbs attended the Zoom hearing on Wednesday.

Hobbs, a former member of the Pend Oreille Planning Commission, asked the county to proceed with caution on Merkle Standard’s 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.”

However, an appeal filed by Ed Styskel argued the county failed to contemplate the noise impacts on humans and wildlife from more than 30,000 computers and dozens of cooling towers planned for the site.

Styskel, a wildlife biologist, testified about nearby white pelicans, threatened long-eared bats and other species that are known to live in the area.

“The applicant provided no acknowledgment that loud noise is a significant byproduct of 30,000 proposed crypto-mining servers and failed to identify measures that would minimize or avoid public nuisance complaints,” he said.

Hume noted that conflicts over noise generally are dealt with after-the-fact through “nuisance” lawsuits.

“Noise is a very strange animal in the land-use world,” he said. “We don’t have case law that says you don’t have a right to not hear anything. What we live in is a regulatory environment that says you have the right to not hear something at a certain decibel level at certain times.”

Ultimately, Hume argued Styskel’s effort to force the county to perform a more detailed environmental impact statement failed on several fronts.

Under questioning, Styskel could not say how much sound would be created by the computers or whether the 900-plus acre site was currently home to any endangered or threatened species, Hume said.

Proving the impacts was “their job,” Hume argued. “We know that there’s a lot of, quite frankly smart people, that have been able to find lot of information on the internet.

“What we haven’t heard is what happens on the site. That’s what they needed to do and they didn’t accomplish that.”

But the internet appears to have helped Merkle Standard secure a “determination of nonsignificance,” which means the county planning officials did not believe the cryptocurrency mine would have a significant adverse environmental impact.

County Planning Director Greg Snow testified that when he was informed by company officials that the computer servers would generate about 75 decibels of sound, he didn’t know what the equivalent noise level would be.

“I looked on the internet. ‘What does that equate to?’ ” Snow said. “It came out to be a dishwasher.”

Hume also pointed out that the Washington departments of Ecology, which regulates noise, and Fish and Wildlife offered no comments about potential impacts in the county’s conditional-use permit application.

“We know that a lack of comment means that those agencies don’t have anything specific that they were concerned about,” he said.

Styskel, who also provided a witness who said the sound levels coming from the site could be many times worse than those tested by the company, said he felt like the system was unfairly weighted in favor of the applicant.

Styskel also noted that he was not allowed to visit the site to measure noise or look for wildlife.

“First of all, you have to have an attorney to present a case on the impacts just for a citizen like me to comment,” Styskel said. “Secondly, the weight of the evidence that is being called for right at the project site, is totally unreasonable.”

Anderson, the hearing examiner, noted that the conditional use permit process received about 87 written comments, which were about split supporting the proposal and those opposed. He said it would take at least two weeks for him to issue his written decision about the conditional-use permit.

While much of the hearing centered on noise impacts, which Hume said the company plans to install sound buffers to help mitigate, a new issue came up during the testimony.

Resident Kathleen Werr noted that Merkle Standard didn’t announce it was would be using “liquid-cooled” electronics until after it submitted its request for a conditional use permit.

On the environmental checklist, referred to as SEPA, the company listed “no” about expected water withdrawals from the Pend Oreille River and “no” on anticipated discharges.

But the conditional use permit indicated that Merkle Standard would use “processed water from the Pend Oreille River and company officials in public presentations said they expected to discharge in the river as well,” she said.

“I feel like we need more information about that,” Werr said.

Ernie Hood said he worked 17 years for Hewlett Packard. He said he also had concerns about the liquid-cooled machines.

“I’m very familiar,” he said. “You don’t use straight water because of corrosion.”

Companies often add the same chemicals used in antifreeze to the water used to cool machines, he said. “I heard no discussion about how to protect the groundwater in that area,” Hood said.

Responding to those comments, Hume said any spills would be handled by applicable law.

Sharon Verity said she lives across the river from the former mill site. She supports the cryptocurrency mine.

“When the mill was in operation, it was a very low impact on the community,” she said. “I have the same expectations for the proposed use.”

Chris Meador said he operates a small cryptocurrency mining operation, and he supports the effort by Merkle Standard.

“People have valid concerns and questions, but they have misrepresented how actual sound and actual things will go on the site,” he said. “I’m 100% in favor of this project.”

Connie Kimble thanked all of her fellow residents for participating in the process to “preserve the beauty and life we have here,” she said.

However, she said there is a big difference between a few machines contemplated by the conditional-use permit and company statements indicating it wants to become one of the largest cryptocurrency mining operations in North America.

“I did not have a problem with the mill. And, I don’t have a problem if the noise doesn’t increase from where it is now,” Kimble said. “I have a problem with the lack of transparency of these companies.

“I think we are looking at a world of trouble down the road if these issues aren’t addressed.”