Papermill restart likely a bait-and-switch to get Pend Oreille residents to subsidize Beijing's Bitcoin Mining

The following appeared as an op-ed in the Newport Miner last October but continues to be even more relevant now as Bitmain/Allrise is engaged in negotiations for a new power contract with our PUD. 

Beijing’s Bitmain/Allrise Capital’s most recent power request to allegedly restart the former PNC papermill appears to be a bait-and-switch tactic to get control of the PUD Box Canyon Dam’s cheaper, renewable power for China’s Bitcoin mining while setting up the PUD to look like the bad guy should their plans fail.

Two weeks ago (mid-September 2022), Cascade Digital Mining submitted a new power request to the BPA for an additional 70MW of electricity. (NOTE: the report on the request is expected by the end of May 2023.) The Mead-Usk power connection, which supports their existing 100MW contract, is at maximum capacity. According to the BPA, expanding the system's capacity would require Bitmain/Allrise to spend at least $40 million for work that could not be completed before 2026.

Section 3.B. of the new request for an additional 70MW specifies the Box Canyon and Albeni Falls Dams as the source for the additional power using a 115kv power line from the Box Canyon Dam to Usk. (NOTE: the Albeni Falls Dam is owned and operated by the Bonneville Power Administration is not available for use by individual companies.)

Section 2.D.e. states that additional power is needed by November 2022 “to meet production commitments,” even though the paper mill could not possibly be put into operation a month from now or even before mid-2023.

Why does Cascade Digital Mining so urgently need the power years before the mill could produce any paper?

Why would they even want to risk millions of dollars reopening an unprofitable papermill on the cusp of a global recession? It does not make sense.

It only makes sense when you consider that the Bitmain/Allrise crypto mining venture is in severe financial trouble and desperately needs the Pend Oreille County ratepayers to bail them out.
 How did that happen?

Believing they had hit the crypto mother lode, the Usk crypto project took on enormous financial obligations. The mining computers had a market value of $227 Million plus $62 Million in import tariffs. Purchasing the mill site cost $18 Million. Site preparation, at least another $4 Million.

Under the crypto mining conditions when Allrise inked its deal with Bitmain in November last year, they could have reasonably expected to make over $350-500 Million a year even after power costs. However, the COVID-induced Bitcoin bubble's collapse and higher power costs have crushed their annual revenue projections.

The Usk project has only 3-5 years to pay back their financial obligations and earn a profit because the mining computers last no more than 3-5 years before needing to be replaced by another $300 Million of new machines. The Allrise/Bitmain team will struggle to clear $10 Million in total after-power revenue over the next year, making it impossible to pay off their financial commitments. EVER. Read about how the bitcoin "halving" scheduled for next year will be disaster for bitcoin miners: Only A Year Away From Disaster: Beijing’s Bitmain and Allrise Capital’s Usk Bitcoin mine faces financial collapse next spring unless bitcoin prices explode - PROTECT PEND OREILLE

That is unless they can dramatically reduce their power costs.

The Usk crypto facility has a maximum capacity of “mining” an average of 5.5 to 6.4 Bitcoin per day if all 17,949 machines run 24 hours a day, using 65+ MW of electricity. At the average market electricity price of 6-10 cents per kilowatt hour, the machines at Usk require $16,000-26,000 of electricity for each Bitcoin “mined,” leaving only insufficient after-power revenue to pay back its obligations.

The new power request submitted by Cascade Digital Mining to the BPA looks designed to solicit a specific response. Should the BPA find that the request to use power from Box Canyon Dam is feasible (uncertain), it will likely include the caveat that it cannot be mixed with the existing 100MW load from Meade to power the mill.

Bitmain/Allrise will undoubtably use the cheapest power to run their bitcoin miners. They will than argue that they will need to use load from Meade to restart the mill, which they will only be able to do if the PUD agrees to provide them with inexpensive power from the Box Canyon Dam for crypto mining. They will likely discover that the plan to restart the papermill is no longer feasible. See our previous report on why Allrise can't restart the papermill: PROTECT PEND OREILLE - Home

Clark County Public Utilities from Vancouver, WA, has been negotiating with the PUD for a long-term contract for the output of the Box Canyon Dam. Using the papermill straw man, Bitmain/Allrise hopes to pressure the PUD into committing our clean, renewable hydropower to profit China’s Bitmain, at the cost of millions of dollars a year to the residents of Pend Oreille County while assuming significant financial risk to its ratepayers instead of securing a safe and lucrative contract with Clark County and denying that power to our fellow Washingtonians.