Mr. Ed Styskel is a professional Wildlife Biologist. He submitted the following letter to the County Community Development Department on March 30, 2022. He will be speaking at the Protect Pend Oreille public meeting this Tuesday May 3 at 7 PM at the American Legion Hall in Cusick. 

I am college trained and now retired after working 40+ years as a Certified Wildlife Biologist with the USDA Forest Service and in private natural resource consulting. In my working career, I surveyed and wrote management recommendations for endangered, threatened, and sensitive species of vertebrate animals and plants. I also helped prepare NEPA Environmental Assessments and Environmental Impact Statements. Those experiences taught me how to find and interpret relevant scientific literature about subjects outside of my primary expertise.
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The SEPA Checklist, as submitted for the Ponderay Cryptomining Facility, is inadequate because it ignores or understates effects to the environmental elements of Animals, Environmental Health, and Aesthetics. The County must not consider CUP approval until these concerns have been answered and the public has a second opportunity to comment on them. Specific deficiencies are described as follows.

To read the rest of Mr. Styskel's letter, download the PDF file below.

In December 2021, Ponderay Real Estate LLC, a subsidiary of Allrise Capital, submitted a conditional use application CUP-2021-012 in order to conduct commercial cryptocurrency mining at the former Ponderay Newsprint Paper Mill near Usk. Ponderay Real Estate LLC, acting on behalf of Merkle Standard LLC (also a subsidiary of Allrise Capital), needed a conditional use permit before beginning operations because the former PNC Mill site is actually zoned as Residential. Using the site for commercial or industrial purposes without an approved conditional use permit violates county zoning rules. To date the CUP application has not been approved.  A third-party Hearing Examiner will be considering whether to approve the application on May 12. 

Despite not having an approved conditional use permit, Merkle Standard has been commercially mining cryptocurrency for several months. They have given tours to residents and openly admitted they are currently mining in public meetings and to the media. Initially they put forth the specious argument that they were using thousands of their mining computers, which produce a substantial amount of heat, to heat the mill building. But now they are running the mill's HVAC system and noisy cooling fans 24/7 to "de-heat" the buildings from the extensive commercial bitcoin mining taking place inside. 

Even though the few thousand machines in the building are a small fraction of the total Merkle Standard hopes to turn on soon (the white shipping container "Modular Data Centers" in the parking lot contain many times more computers), neighbors are already complaining about annoying noise levels that are negatively impacting their quality of life. Several residents have complained to the county about the issue, even testifying before the County Commissioners last Monday. 

So the question is, why won't the County enforce its own rules when Merkle Standard is so blatantly violating them? This unanswered question casts doubt on the County's elected and unelected public servants' willingness to protect the process of law that protects the rest of us.

UPDATE: The County Prosecuting Attorney, Ms. Dolly Hunt, and the Community Development Department have responsibilities for enforcing County zoning laws. If you would like to comment on this issue, you can email these County public servants at:

County Prosecuting Attorney Ms. Dolly Hunt: [email protected]

Community Development Department:
Mr. Greg Snow:  [email protected] 
Mr. Andy Huddleston:  [email protected]
Ms. Vicki Koehler:  [email protected]

You can also comment to the County Commissioners by email at [email protected] or in person on Mondays at 4pm at the Commissioners conference room on the first floor of the County Courthouse or vis Zoom 
COMMISSIONERS’ MEETINGS AVAILABLE VIA ZOOM
https://zoom.us/j/5094474119;
Meeting ID: 509 447 4119 Or Dial
by your location: +1 301 715 8592 US
or +1 253 215 8782 US.
Meeting ID: 509 447 4119

The Selkirk Sun recently published the "Rosencrantz Document" on its website. 
What is the "Rosencrantz Document"? On January 24, 2022, Pend Oreille County Commissioner Robert Rosencrantz spoke about his concerns about the proposed Merkle Standard Cryptocurrency mining facility being constructed at the former PNC Paper Mill site near Usk. After his comments, The Newport Miner and the Selkirk Sun requested copies of Mr. Rosencrantz comments and supporting documents. The document includes over 40 pages of supporting evidence in addition to his comments and is well worth the read. The Selkirk Sun has now published them at the following links:

Selkirk Sun
Rosencrantz Document.pdf - Google Drive

The following comments were made by Commissioner Robert Rosencrantz on January 24, 2022. Since they were published by the media as a matter of public record, we did not seek or receive permission from Commissioner Rosencrantz to use his comments here.
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I'll start by explaining what I'm doing today and why I'm doing it.

First the why — Since becoming a commissioner, I've advocated multiple times for us to stand up a committee that would oversee everything occurring at the PNC site, whether Allrise or related entities. It's a work in progress and we've been moving in that direction. Recent events, which I'll get into, have convinced me that we need to speed up the process, as well as expand the scope and reach of our oversight. That's why we're discussing this today. My purpose is to get started on making this board actively and expansively involved in making sure that the people of Pend Oreille County get all the benefits and money they can from everything that happens at the PNC, that we protect them from anything bad that might occur because of what happens at the PNC site, and that we individually and collectively act so the public trusts us and has confidence in us.

Now the what — I'm going to go through the issues related to the PNC site and Allrise, as well as current developments. This will be a statement of facts. I'll tell you now my summary opinion based on these facts, and that is that all these facts considered we better get going with oversight. Two important points:

• First, you're either in control early or you're not in control
• And second, the appearance of a conflict is a conflict. I'm sensitive to this issue because in my previous career undisclosed conflicts could kill your career

Speaking strategically, as a board we need to anticipate events, not just react to them. Our obligation as leaders is to influence other people's actions, and to not allow their actions to unduly influence us. To that end I see at least three top-tier priorities:

• Protect the interests of the people of Pend Oreille County
• Capture every dollar that we are entitled to collect from all on-site and off-site activities related to the PNC site
• Be transparent, courageous, proactive and act with integrity. One example is that outside of our public meetings, we shouldn't discuss things such as the conditional use permits

So here are the facts and how the story grew in my mind:
In open session John a few times said his wife Kim was working as an energy consultant in Nebraska. I thought, "that's interesting," so I did an internet search on `Kim Gentle, energy consultant Nebraska.' The result was a story from Stanton, Nebraska about Northern Data AG of Germany trying to do a major data center there. Northern Data describes itself as follows: "With its new class of green and highly efficient data centers, Northern Data offers Bitcoin Hosting & Services and cloud based High Performance Computing on a global scale."

The article had a photo that said Kim Gentle was making the presentation. But it wasn't Kim, so I watched the video and learned that the woman in the photo was Amy Smock, previously of the Pend Oreille PUD. The story also stated that Monty Stahl was Northern Data's Managing Director for North America West. I recognized Monty as having been the person who bought 32 Telephone Road in Newport in 2018 for $159,000, put some bitcoin mining equipment on it and sold in in 2021 for $1,750,000. He sold it to Allrise under 32 telephone Road LLC.

Now I was curious about Northern Data, so I started doing 'related entities' searches. Finding a relationship between entities does not prove a working relationship. They could be the equivalent of siblings or of third cousins twice removed. But after a lot of searching I found a related entity called Merkle Standard LLC, with the co-founder listed as Joshua Zappala. I met Joshua when I visited Allrise before becoming a commissioner. Young man who started his business career in 2019. Not the depth of experience I would expect for a co-founder that will be investing hundreds of millions of dollars. More on that in a minute. I searched the LLC records for Merkle and learned its CEO is Ruslan Zinurov.

On Saturday morning, two days ago, I found on my internet feed a press release from Ruslan Zinurov of Merkle Standard that Merkle "Announced a new miner purchase order from [Chinese Company] Bitmain Technologies Limited. The executed purchase order is for 13,500 mining rigs." This is for their "Eastern Washington Flagship Site.' That would be PNC. The press release detailed the equipment, so I looked it up and calculated its value, which is over $150,000,000. According to Jim McCroskey that equipment can be classified as real property, so at a taxing rate of 0.9% could provide $1,350,000 in revenue every year to the County. That could fund other services or provide property tax relief to county homeowners.

13,500 mining rigs. Hundreds of megawatts of electricity. The unintended and unanticipated consequences of those deserve significant consideration. For reference I've included a couple articles that describe what some other communities have experienced. This all led me to conclude that we as a board need to treat this with urgency. You're either in control early or you're not in control. We need to take control and do it soon. This is both urgent and vital and we need to treat it that way.

Jim McCroskey — $ for appraisals to makes sure that real estate and personal property fully assessed, taxed and collected
Nicole Dice — All sales taxes collected
Marianne Nichols — Monitor deeds to property and identify transfers
Dolly Hunt — Help in writing the Resolutions needed to adopt BOC policies and money for outside legal counsel to help with complex agreements
PUD — interlocal agreements covering things such as

• If permitted noise levels are exceeded on site the power gets shut off
• If sales taxes on equipment aren't paid the power isn't turned on
• Negotiate and enforce when we have leverage and build into all agreements the ability to maintain leverage

So what's my plan? Briefly, with full speed ahead do the following:

• Establish policies that provide that makes sure we collect every dollar of real estate taxes, personal property taxes, sales taxes, permit and impact fees, and other money we should get because of increases in value to the PNC site or other activity on the site
• Establish policies that establishes oversight of activity at the PNC site and provides the means for addressing violations
• Establish policies for monitoring and enforcing conflicts-of-interest

We have our work cut out for us. Working together we're up to the challenge. Let's get started. Your comments please.

The following letter was written by Connie A. Kimble, a concerned resident of Pend Oreille County.

I am writing to request that you deny the Conditional Use Permit for the proposed Merkle Standard/BITMAIN joint venture cryptocurrency mining operation being installed in the former Pend Oreille Newsprint plant. It doesn’t take much research to reveal multiple environmental harms that typically stem from these types of plant operations. Other crypto mining plants across this nation are currently involved in community litigation because of extreme noise pollution and negative environmental impact.

Our area is home to nesting eagles and osprey, migrating swans, geese, ducks. There are a multitude of other wildlife that populate the areas around the site. We are asking the county commissioners to deny a permit for this operation until thorough and accurate environmental impact studies are completed and shared with the community. In addition to this, those of us living in the close vicinity of the site demand that the companies provide guarantee of noise mitigation, as this is a common byproduct of such a plant. We are requesting that our county government develop a noise ordinance, and that Merkle Standard/Allrise/BITMAIN are required to meet the standards of such an ordinance, with mechanisms in place to shut down operations should they violate county laws and ordinances.

I live immediately across the river from the plant. I have taken video (and have screen shots from a conversation with a current employee working at the plant) that show they are currently running machines and the fans. If this entity has already begun it's operations without a CUP... then how are they to be trusted to do the right thing for the environment and their neighbors in the future? They have stated in press releases to online digital entities that they are currently in operation as well.

We are called to be stewards of our land and the creatures that inhabit it, including fellow humans. The county MUST endeavor first to cause no harm to the area. Monetary considerations for a few should never take priority over quality-of-life considerations for the many.

We feel there has been also some conflict of interest with regards to one of our commissioners and his ties to the industry via his spouse. He should recuse himself from this decision.

It is the responsibility of our elected officials to PROTECT the rights and needs of ALL their constituents. Please ensure that this application is more thoroughly reviewed for accuracy and that the environmental safeguards are solidly in place prior to allowing this cryptocurrency mine to continue operations.

Lastly, I would ask to be allowed to speak briefly at the hearing on May 12th to voice my concerns publicly.

Respectfully,
Connie A. Kimble

This Blog appeared in the Newport Miner, page 4A, on April 13, 2022

Rural communities across the county are being devastated by the impacts of industrial cryptocurrency mining. The Chinese Communist Party, which controls two-thirds of global Bitcoin production, is directing its massive Bitcoin mining industry to relocate its ecologically destructive operations away from Chinese communities. This policy of offshoring costs while retaining profits has triggered an open season for Chinese corporations hunting for communities with cheap electricity and lax regulation to exploit. Pend Oreille County faces an enormous risk of becoming the next Chinese trophy in this program of predation.
 
The public faces of Merkle Standard, Messrs. Monty Stahl and Todd Behrend are good people who have labored to answer some of our questions. But only some. The answers to the most important questions about the costs to our community they keep behind their oft-recited mantra that a private company has no obligation to share information with the public.
But Stahl and Behrend are just underlings. The corporate filings are clear. The real bosses are in Beijing (Bitmain Mining CEO Du ShiSheng) and California (Allrise Capital CEO Ruslan Zinurov).
 
Unfortunately, that is the only thing that corporate filings make clear. Bitmain and Allrise Capital have surrounded their Bitcoin mining operation with at least six shell companies including Ponderay Real Estate LLC, Ponderay Data LLC, Ponderay Industries LLC, Merkle Standard LLC, Merkle Standard Infrastructure LLC, and Cascade Digital Mining LLC. Neither the County nor any regulatory agency will be able to hold Du or Zinurov accountable. The silver lining is that one-third of employees get to be a CEO!
 
Why worry? High-ranking leaders and prominent journalists in Ukraine have directly accused Zinurov, who was born and raised in Russia, of laundering wealth for cronies of Russian leader Vladimir Putin. In 2019 the State of Nevada ordered Allrise Capital to cease and desist business operations in the state (most of Allrise’s business is in Nevada and California). His small holding company has left a trail of litigation from Los Angeles to Grant County, WA.
 
Merkle Standard is a joint venture with China’s Bitmain (who is providing most of the investment in the project). Du’s domestic operations were shut down because they were “extremely harmful” to Chinese communities. Bitmain’s first attempt at a public stock IPO in 2018 failed under allegations of cooking books and manipulating cryptocurrency prices. Their second attempt failed in 2020 over allegations of Bitmain’s role in a cryptocurrency Ponzi scheme that defrauded investors of more than $722 Million.
 
Last week we learned that Merkle Standard has been misleading the public about its communications with the PUD and the Bonneville Power Administration. We now know that the real problem was that Du and Zinurov had to choose between either reopening the mill or moving forward with their crypto mining plans. These are not patterns that promote trust.
 
The Conditional Use Permit (CUP) and State Environmental Policy Act (SEPA) application submitted for the project is incomplete, vague, full of mischaracterizations, and in some cases, demonstrably false. Some examples: The application is so different from plans published on Merkle’s website and press releases that they could be confused as separate projects. The application omits plans to quintuple the facility's size by the end of the year. The application also glosses over noise pollution, including noise from only one of the many types of cooling systems described (the quietest one), under unrealistic operating conditions, and likely using a reporting gimmick that misrepresents the actual noise level produced. There is no description of the frequency range, which can change with temperature from a loud hum to a roaring whine of a jet engine to the oppressive squeal of a dentist drill that other communities have experienced.
 
Bitmain has deceived other American communities about economic benefits- in one case promising 400 jobs but delivering 14. Bitcoin mining is not workforce intensive. The CUP application states the project may provide as many as 30-35 jobs. Half of these are left over from mill operations. Merkle Standard has conceded that many of the remaining 10-15 hires will be entry-level. Instead of a boon to property tax revenues, Allrise/Merkle will pay $175,000 less in 2022 than in 2021. Quality-of-life destroying noise pollution threatens to crash property values of hundreds of residents, wiping out millions of dollars in home equity and reducing County property tax revenues while destroying the recreational value of miles of river and threatening income from thousands of visitors to hundreds of RV and rental properties.
 
To responsibly manage risks, we must ask the Hearing Examiner on April 21 to delay approval of Merkle’s CUP until: 1) there has been a credible determination of fact on the impacts on our community under all operating conditions; 2) these impacts have been studied and quantified by responsible agencies; and 3) enforceable protective regulations are in place.