Bitmain/Allrise-requested BPA study due this week appears designed to pick a fight with PUD

Over the last few weeks, crypto executives have repeatedly stated that they are waiting on the results of Bonneville Power Administration (BPA) study that they hope will allow them to begin planning on restarting the former Ponderay Newsprint Company paper mill/ current bitcoin mining facility in Usk, WA. They study, which was requested by Beijing's Bitmain and its partner Allrise Capital last September and is expected to be completed this week, appears designed to provoke a public fight with our citizen-owned PUD over whether the electricity from the Box Canyon Dam will be used to benefit residents of Pend Oreille County or to subsidize Beijing's crypto revenue. 

This report will review the history and context of the requested BPA study, examine what questions Bitmain/Allrise asked the BPA to study, and consider the implications of potential findings. 

History and Context

In early 2022, Bitmain and Allrise announced that they were planning on turning the former PNC paper mill in Usk, WA into a one of the largest bitcoin mining facilities in the world with a power capacity of 600 Megawatts. At that time they were planning on getting that massive amount of electricity through a large, international power broker called Brookfield Renewable. In fact, in April 2022 they told the PUD commissioners and staff in a public meeting that they would not require any electricity from our PUD for their facility. However, less than a month later, Brookfield Renewable walked away from negotiations after conducting a due-diligence "Know Your Customer" review of the Bitmain/Allrise. 

Around the same time, the BPA completed a power study previously requested by Bitimain/Allrise asking how much it would cost to expand the Usk facility to the planned 600 MW electricity load. The answer was not good for the crypto scheme- it would cost over $100 million and take 4-7 years. 

Desperate for new source of electricity, Bitmain/Allrise immediately began negotiations with our PUD for 100MW of power. They signed a 13-mongth contract with our PUD in mid-August 2022. During the three months of negotiations, Bitmain/Allrise did not ask for any power for a papermill restart.

However, less than two weeks after signing their new power contract with our PUD, Bitmain/Allrise suddenly announced that they wanted to restart the papermill as early as November 2022-- despite, as several former mill employees had observed, a potential restart requiring a year's worth of maintenance work and millions of dollars in new investment. A year before, Bitmain/Allrise executives had told the BPA not to even consider studying supplying power for a paper mill. See: Public Records Show Allrise Told PUD/BPA Not to Study Power for Paper Mill Shortly After Mill Purchase - PROTECT PEND OREILLE

So what changed? The answer is: power prices. 

Bitmain/Allrise's announcement of their new-found desire to reopen the paper mill was contingent on the PUD providing them with a new, lower-cost power contract. At the time that Allrise and Bitmain inked their joint venture agreement in the fall of 2021, they were expecting to be able to power their energy-hungry bitcoin computers for around 3 cents per kilowatt hour. By they time they were ready for full-scale operations in September 2022, however, power prices had skyrocketed. Power from Box Canyon Dam, which costs around 5 cents per kilowatt hour to produce, would allow them to get electricity cheaper than current market prices. See the chart below comparing market prices with the cost of power from Box Canyon Dam. The blue line is the average market price of power, the red line is the cost of Box power. See: POC Cryptonomics - PROTECT PEND OREILLE

The problem for Bitmain/Allrise was that the getting control of Box Canyon would mean that the residents of Pend Oreille County would need to subside their crypto mining by giving up millions of dollars of revenue each year from the Dam and accepting the extremely high financial risks involved in subsidizing one of the highest-risk industries in history. 

They could use the claim of restarting the paper mill, something almost universally supported in the county, as a red herring to trick the county's residents and pressure our PUD into subsidizing Beijing's bitcoin production. See: Facts on the Ground show Allrise couldn't open the paper mill within five years if they wanted to (and they probably don't) at PROTECT PEND OREILLE - Home

So, last September, they asked the BPA to study the feasibility of using the Box Canyon Dam to power their facility. 

What Bitmain/Allrise asked

What does Bitmain/Allrise want? As the customers paying for the study (it cost them around $30k), Bitmain/Allrise get to ask the questions they want the BPA to answer. The questions they asked had already been answered or what blatantly infeasible. It appears that the intent of the questions was to hope that the BPA would respond in a way that would support Bitmain/Allrise's pressure campaign on our PUD over Box Canyon Dam. 

The study asks:
1) Can the Box Canyon Dam be used to power the facility directly by using an existing 115kV power line connecting the Dam to the BPA's Bell Substation in Mead, WA? (The Bell Substation connects the Dam to the regional grid)
2) Can the BPA's Albeni Falls Dam be used to power the facility directly using the same power line?
3) Can Bitmain/Allirse purchase electricity on a day-ahead schedule instead of a month-ahead schedule? (This would allow the crypto facility to only purchase electricity when it is profitable.)
 
To see the original document, download the attached study request below.

The key point is that this would enable Bitmain/Allrise to use power either from the market or directly from the Box Canyon Dam, allowing them to use the cheapest source of power for their crypto mining business. 

What will BPA report?

First, it is important to remember that the decisions over how to use Box Canyon is our PUD's not the BPAs. The study is just meant to examine the feasibility.

The most likely outcome is that BPA will report negatively on all three questions. In a meeting between the BPA, our PUD, and Bitmain/Allrise on May 20, 2022, crypto execs asked the BPA if they had considered allowing them to use the 115kV line connection with Box to power their facility. The notes of the meeting indicated that the BPA responded that they had and that using the line and dam to support crypto mining would negatively impact the stability and reliability of the grid.

The question of Albeni Falls to directly power the crypto facility is absurd. The BPA does not use it own resources to directly power businesses. 

The BPA has also answered the question of day-ahead power purchases several times. The BPA system is simply not set up to facilitate such short notice changes in such large power flows.

But the BPA response could be ambiguous enough to serve Bitmain/Allrise's apparent purpose: to pressure our PUD to sacrifice its other 9,600 ratepayers to subsidize Beijing's profits.

To better understand the potential impacts on ratepayers in Pend Oreille County see:  What's at stake? Crypto plans in power negotiations would cost Citizens of POC millions, throttle local economy - PROTECT PEND OREILLE

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