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Spokane, Washington  Est. May 19, 1883

Critics question grant request to restart Usk papermill

Todd Behrend, former manager of the Ponderay Newsprint Mill, gives a tour of the closed facility on Dec. 17, 2020, in Usk. The mill owners are seeking a $400,000 grant from the state to reopen the mill.   (Tyler Tjomsland/THE SPOKESMAN-REVIEW)

The company that runs a cryptocurrency operation in Usk is seeking a $400,000 grant from the state that it says will help to restart a shuttered papermill even though the site doesn’t have access to the electrical power needed to operate the plant.

The grant request by Ponderay Industries is seeking money from the Evergreen Manufacturing Growth program that is administered by the state Department of Commerce.

According to state literature, the grants come from a $2 million pool of funding designed to “increase the number of manufacturing and research and development jobs in Washington State.”

“This grant will help restart what is essentially a brownfield industrial site bringing approximately 120 family-wage, manufacturing jobs back into Washington State,” the grant request from Ponderay Industries states.

However, the mill site, which is now home to a cryptocurrency mining operation called Merkle Standard, was told by the Bonneville Power Administration in 2022 that it could not operate both the data mining operation and the papermill without at least $40 million in infrastructure upgrades.

Pend Oreille County Commissioner Robert Rosencrantz said he doesn’t think its proper for Ponderay Industries, which owns the mill, to seek grant money if it knew it didn’t have a source of power.

“If there is a chance for that papermill to restart, and they can somehow get the power, I will be the biggest cheerleader for those jobs,” Rosencrantz said. “But I don’t want Pend Oreille County to get the reputation for supporting nonviable grant requests.

“I hope that Commerce does its due diligence and confirms or denies the viability of restarting.”

Ben Richards, a retired U.S. Army major who questioned many of the claims made by the mill last year in its process to obtain a conditional use permit to operate the cryptocurrency mining operation, said the mill is not being forthright in its grant application.

“At a minimum, they are submitting this grant without a positive confirmation that they could open the mill,” said Richards, who once taught at West Point.

Lee Keller, a spokeswoman for Ponderay Industries, said there is nothing nefarious behind the grant request.

“Everybody is very, very eager and sincere to making this work for the region,” Keller said.

Keller acknowledged that the mill does not now have the power needed to operate. But she put that responsibility squarely on the Pend Oreille County Public Utility District.

“We believe the PUD has a duty to serve its customers, both industrial and residential,” Keller said. “We continue to be optimistic and hopeful that the power needed will be available for us.”

Promises unfulfilled

The grant request is the latest development in the troubled history of the Ponderay Newsprint mill.

The huge plant, located on a 972-acre property that includes 29 buildings, shut down in 2020 when it fell into bankruptcy. As a result, owners laid off about 140 local workers.

At auction, Allrise Capital, which is based in Irvine, California, outbid the Kalispel Tribe and bought the plant for $18.1 million. Bankruptcy officials said at the time that Allrise expressed interest in restarting mill operations and possibly adding cryptocurrency mining.

However, negotiations for power made it clear that cryptocurrency mining was the focus of the company. It began moving in steel containers full of computers and equipment supplied by the Chinese tech firm Bitmain and stacked them in the parking lot where trucks used to haul out huge rolls of paper.

With a stated goal of becoming one of the largest cryptocurrency mining operations in the country, company officials began negotiating with the Pend Oreille County PUD and Bonneville Power Administration for huge amounts of electrical power.

The BPA in April informed the company that the existing infrastructure could provide power for either the crypto operations or the mill – which require different power loads – but not both.

Just to boost the power load to the plant to 145 megawatts, BPA said it would cost about $40 million in facility upgrades. A different study seeking 300 megawatts estimated that upgrades would cost about $107 million.

April Owen, co-interim general manger for the Pend Oreille County PUD, said that any system upgrades must be paid for by the prospective user. That way, the utility doesn’t place the burden of supplying power to one business on the monthly bills of all its customers.

If Ponderay Industries “needed to have infrastructure built to secure more power, then they would pay for that,” Owen said.

Despite the BPA study calling for at least $40 million in upgrades to supply the necessary power, Ponderay Industries announced in August it could open the papermill within weeks.

“If we can quickly obtain the needed additional power, the goal would be a full restart of employment and operations in the fourth quarter of 2022,” Ponderay Industries CEO Todd Behrend said in a news release.

Then earlier this year, the grant money became available through the state, which required any requests to be brought by each county’s designated economic development organization.

Jamie Wyrobek, director of the Pend Oreille Development Council, said the local economic development council voted to forward the request to the state on behalf of Ponderay Industries.

“The restart of the newsprint mill and the existing workforce have industrial synergies that can support a more efficient business environment,” the request states.

But nowhere in the request does it mention that Ponderay Industries never secured the power needed to restart the mill.

Asked if she believed she was obligated to accurately portray that reality to the state, Wyorbek said it was Ponderay Industries’ job to provide that information.

“I do not speak on behalf of the company,” Wyorbek said. “It’s up to them and the Department of Commerce.”

Penny Thomas, spokeswoman for the Department of Commerce, said the Ponderay Industries request is currently being considered but declined to respond to questions about the power situation.

“Many factors including job creation and community benefit are considered in making decisions to award available” funds,” Thomas wrote in an email. “I can’t offer much more than that while the application review due diligence process is underway on this request.”

Wyorbek pointed out that Ponderay Industries would have up to five years to meet the obligation of restarting the mill if it were to receive the grant funds.

“Our support is in the restart of the papermill and creation of 100-plus jobs,” she said.

Wyorbek said the council, which includes Merkle Standard spokeswoman Laura Verity, received a presentation from mill CEO Todd Behrend in January when it was considering seeking the grant.

“There were some questions about power,” Wyorbek said.

Verity, who would have had knowledge of BPA’s estimated infrastructure costs, did not participate in the vote to forward the request, Wyorbek said.

Asked if she got the impression from Behrend that Ponderay Industries would be able to reopen the papermill, Wyorbek replied: “Yes.”

Asked for comment, Verity had Keller respond to questions about the grant.

Behrend also did not respond to two phone messages this week seeking comment.

Keller, the spokeswoman, noted that the plant managers have requested a new study from the BPA.

Owen, of the PUD, said that request would answer what new infrastructure is needed to provide 170 megawatts of blended loads that could operate both the papermill and the cryptocurrency operation.

That BPA study was delayed and is now scheduled to be complete by May 26.

Owen would not speculate about potential costs for the power lines needed to supply added power to Ponderay Industries.

Asked if plant managers have ever indicated a willingness to pay for that infrastructure as a necessary step to get more power, Owen replied: “They haven’t commented either way.”