Let's put the amount of electricity required for each bitcoin job at Beijing Bitmain's and Allrise Capital's bitcoin mining facility in Usk, WA, into perspective: 

The electricity required to power a single bitcoin-related job there requires so much electricity that it could power all of the homes in Pend Oreille County. 

Alternatively, a single bitcoin job in Usk requires well over twice the amount of electricity used by all other industrial and manufacturing businesses in our county combined, which employ hundreds of the county residents.

Beijing Bitmain's/Allrise's facility uses prodigious amounts of electricity to power specialized computers that do nothing but make quintillions of guesses each second​ in the hopes of winning a global competition for the next block of bitcoin. Their current electricity service agreement with our PUD is for up to 100 megawatts, or 876,000 megawatt hours each year. 

In return, according to their February filing with the State Department of Commerce, they provide a paltry total of six jobs. 

With a little math, we can see that the amount of electricity required for each job at the bitcoin facility requires about the same amount of electricity as the154.7 megawatt hours needed to power all of the homes in Pend Oreille County for a year.  Or more than twice the 63.3 megawatt hours required to power all other industries and manufacturers in our county for a year. 

This exposes the raw truth about large-scale bitcoin mining. First, the almost incomprehensible amounts of electricity required for each bitcoin job place a hard limit on the number of jobs bitcoin mining can create in our county (or any county). Second, if economic development and job creation in a location with limited power infrastructure is our goal, than investing in bitcoin mining is not the way to go. 

For an in-depth review of power in Pend Oreille County read: Box Canyon - PROTECT PEND OREILLE

For previous reporting on the number of jobs at the Usk bitcoin facility, read: Bitmain/Allrise exec admits they have been misleading county on employment numbers - PROTECT PEND OREILLE

And: ​Merkle Standard has six employees but claims to be one of largest employers in Pend Oreille County - PROTECT PEND OREILLE

Last week Merkle Standard CEO Steve Wood admitted that Beijing's Bitmain and Allrise Capital have been misleading the county about how many people they actually employee at their 100 MW bitcoin mining facility at the converted PNC papermill in Usk. They had publicly claimed to have 20 employees, but last week Wood confessed that their 20 employees were actually split between Usk, the Allrise Capital office in California, and their other bitcoin facility in South Carolina. 

As we previously reported, Merkle Standard, the LLC which is the public face of the Bitmain/Allrise facility, had repeatedly claimed to be one of the largest employers in the county even though they certified to the State Department of Commerce in February that they had only six employees. See Merkle Standard has six employees but claims to be one of largest employers in Pend Oreille County - PROTECT PEND OREILLE

Last May, they reported to our PUD that they (Allrise Capital) had six employees in California. The facility in South Carolina likely employees a similar number. 

Bitmain/Allrise's promises of economic benefits to our county keep get smaller and smaller. First, property tax revenues for their 900-acre Usk property have crashed by 75 percent (they will only pay $145,000 this year compared to close to $600,000 in 2020). Now the promise of jobs has proven to be just as empty. 

Last week the State Department of Commerce rejected an Evergreen Manufacturing grant application submitted by the Allrise Capital and the Pend Oreille County Economic Development Council (EDC). Allrise Capital claimed to be seeking $400,000in grant money to restart the former PNC Papermill, but in their application, they specified that they hoped to use the money to upgrade their "data center" bitcoin mining facility. 

The State's rejection of the grant application is indicative of the lack of credibility of our EDC after it mismanaged a previous grant for $300,000 for a silicon smelter to be built near Newport and clearly failed to conduct any due diligence review of Allrise's actual intent or ability to restart the mill. The EDC and county currently owe the State the $300,000. See: EDC Director Concealed $300,000 Debt to State for Four Months While Her Contract Under Review - PROTECT PEND OREILLE

The Spokesman-Review had questioned the validity of the grant application after it became apparent that Allrise likely did not have the ability to restart the mill. Critics question grant request to restart Usk papermill | The Spokesman-Review

We reported last February that there were five reasons why it was unlikely that Allrise intended to restart the mill: 

1.Ponderay Industries LLC has neither prepared nor presented a plausible business plan for operating the paper mill, nor does it appear such a business case exists. Market conditions for paper manufacturing are worse than when the PNC Mill declared bankruptcy in 2020. 
 
2.The existing power infrastructure supporting the former PNC mill site cannot support the operations of both the existing bitcoin mining center and the paper mill. According to already completed BPA Interconnection Studies, expanding power infrastructure to the necessary level would take at least 4-7 years.
 
3.Ponderay Industries LLC grossly misrepresented the cost of investment necessary to restart the mill. The currently required investment will exceed $100 million, not the $1.4 million indicated in the grant application.
 
4.Ponderay Industries LLC, which has no known assets or income, does not have the ability to finance the necessary investment. Its parent company, Allrise Capital Inc., has neither committed to financing the necessary investment nor does it appear to have the assets, income, or credit necessary to fund the required investment.
 
5.Funding this project is inconsistent with state climate and environmental protection policies embodied in the Clean Energy Transformation Act and current House Bill 1416. The existing Bitcoin mining operating at the former PNC mill site purchases no e-tagged electricity, uses no clean, renewable power, and has repeatedly misrepresented the source and carbon cost of the electricity it uses. 

For a detailed analysis of Allrise's ability to reopen the mill, download and read the report below:

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.

It’s called “the halving” and it’s happened roughly every four years since the first Bitcoin token was created in 2009.  But the next one, currently expected in March or April next year, will devastate the bitcoin mining industry unless the price of Bitcoin doubles over the next year.
 
The halving is important to the residents of Pend Oreille County because it substantially increases the risks to our citizen-owned PUD and its ratepayers in providing Bitmain/Allrise more than three times more electricity than the rest of our county together uses—especially as our PUD is currently engaged in negotiations for a new electricity service agreement for bitcoin mining to take effect this October and Bitmain/Allrise is aggressively working to coerce our PUD into subsidizing their power.
 
Bitcoin mining is essentially a guessing game conducted by hundreds of thousands of highly specialized computers around the world making up to 440 quintillion guesses each second in a competition to be the first to randomly guess a complex 64-digit code. The miner that wins that competition currently receives a reward of 6.25 bitcoin and the right to charge fees on the next block of bitcoin transactions. Approximately 98% of miners’ income comes from selling the bitcoin they receive for winning. Each competition takes approximately 10 minutes.
 
When a halving event happens, the number of bitcoin awarded to miners from winning each competition is cut in half—hence “the halving.” Next March or April (the date is based on how quickly bitcoin is created) the reward will drop from 6.25 bitcoin to 3.125 bitcoin.

The creators of bitcoin cleverly designed "the halving" as a method to inflate the value of bitcoin tokens over time by regularly increasing the cost of producing bitcoin. This is why many describe bitcoin as a ponzi scheme that relies on later buyers paying higher and higher amounts to the profit of a small number of creators and initial investors. When bitcoin was first created in 2009, the reward was 50 bitcoin, then 25, then 12.5, now 6.25. Next year, 3.125.  At some point, the cost of producing bitcoin would become unsustainable. For many miners, that time will be next March or April. 
 
Because most of their income depends on the sale of the bitcoin they win, the halving will also halve their revenue. An alternative way to frame it is that the halving will double their costs. The following chart shows the current and future approximate average cost of electricity for each bitcoin for Beijing’s Bitmain and Allrise Capital win at their Usk facility based on electricity usage data from their website MerkleStandard.com.  Please note that this chart on shows only the cost of electricity and does not include the costs for the computers themselves, the facility, employees, or other operating costs.
 
The green line shows the current electricity cost per bitcoin depending on the power price. The red line shows the cost
The black vertical line shows the adjusted average market cost of electricity on the Mid-Columbia Hub market since last September (adjusted downward by excluding spikes above $200 per megawatt hour. 

The chart shows that even at today’s relatively elevated bitcoin price of $28,500 (at the time of this writing), after next March/April, the cost of electricity alone will exceed the value the of the bitcoin that the Usk facility can win.
 
One of two things will need to happen for bitcoin mining as an industry to be viable after the halving (or a combination of both). Either the price of bitcoin will need to increase substantially (roughly double) or one half to two-thirds of current miners will need to go out business (a reduction in the number of miners competing for bitcoin increases the number of competitions each individual miner can potentially win).
 
Bitcoin industry news sites predict the halving will trigger a “survival of the fittest” natural selection process where only the companies with the most efficient miners and lowest electricity prices will survive. As we previously reported, the Bitmain/Allrise Usk is not among the fittest due to their higher-than-average power prices and mediocre efficiency of most of the mining computers. See our previous report: POC Cryptonomics - PROTECT PEND OREILLE
 
Next year’s halving creates significant risk for the residents of Pend Oreille County. Bitmain/Allrise through their joint venture LLC Cascade Digital Mining, are currently renegotiating their electricity service agreement with our citizen-owned PUD. It is critical that our PUD staff includes the existential risk posed to the viability of the Usk bitcoin mining facility by the halving in its considering how to insulate itself and its customers from the pending failure of bitcoin mining in our county.  See our previous report on what is at stake: ​What's at stake? Crypto plans in power negotiations would cost Citizens of POC millions, throttle local economy - PROTECT PEND OREILLE

Last May, crypto prices collapsed amid revelations of widespread fraud. Bitcoin prices are just now beginning to tentatively surpass the market price levels from last May. You would think that would be a good thing for Beijing Bitmain's and Allrise Capital's massive bitcoin mining facility at the converted former PNC paper mill site in Usk, WA. 

But you would be wrong. Counterintuitively, as Bitcoin prices have edged higher, the Usk facility's revenue potential has fallen.

Here's why: Bitcoin mining in simply a guessing game in which miners use highly specialized computers in a competition to be the first miner to correctly guess a secret code. The winner gets 6.25 bitcoin and the right to charge fees for the next "block" of bitcoin transactions. As the price of bitcoin increases, more miners join the competition. This increases the difficulty for any individual miner to win the competition.

A recent article in the crypto news site Bitcoinist explained it this way: "The mining difficulty is a built-in feature of the Bitcoin blockchain that decides how hard miners would currently find it to mine blocks on the network. This concept exists because the BTC blockchain aims to keep the block production rate (or more simply, the rate at which miners handle transactions) at a constant value.

"When the network hashrate (a measure of the total computing power connected to the chain) goes up, miners are able to hash blocks faster. But as the chain doesn’t wish for this to happen, it increases the difficulty to slow down miners just enough to get them back to the desired pace.

"Because of the difficulty’s existence, revenues for individual miners shrink whenever the hashrate goes up. This is due to the fact that the block rewards always remain the same (except for during halving events, where they are halved), meaning that if more miners connect to the network, the individual shares of everyone involved become smaller." Bitcoin Miners Are Still Under Pressure, Here's Why (bitcoinist.com)

The problem for the Usk miners is that the difficulty level is outpacing the price of bitcoin. The hashrate, which is the number of guesses bitcoin miners are making each second, recently set an all-time high of 427 quintillion guesses per second compared to an average of 225 quintillion guesses last September when the Usk facility reached full operational capability. The translates into a difference in the daily bitcoin earning potential of 5.7 bitcoin at the hashrate at the time of writing (402 EH/s) compared to 9 bitcoin per day last September. From another perspective, Bitcoin would need to be at nearly $40,000 to earn the same revenue today as the facility could earn last September when Bitcoin was around $25,000. But it's only around $30,000.

So why are so many miners joining the competition if it reduces revenues for everyone? The basic answer is because it doesn't all miners equally. There are three main reasons for this right now. First, at the height of the bitcoin bubble in the fall of 2021, Bitcoin miners invested heavily in purchasing new mining computers. Most of these computers were only recently delivered and installed, and the build out of these industrial miners will not be complete until this summer. Second, as of last October, there were between 250,000 and 500,000 bitcoin miners not being used because of low bitcoin prices and high-power prices. A Huge Glut of Bitcoin Mining Rigs Is Sitting Unused in Boxes (coindesk.com) Third, power prices around the country are falling. 

Together these factors incentivize other miners to increase the number of guessing computers they are operating. But those incentives are less applicable to the Usk facility. The most important factor is the regional disparity in power prices. The following chart of electricity spot prices across the US shows that electricity in the Pacific Northwest is currently 3-5 times more expensive than in the rest of the country. As electricity is by far the greatest input cost into bitcoin mining, this makes the Usk facility less competitive than miners elsewhere in the country. Second, most other miners are simply turning on computers they have already paid for. The Usk facility is already not competitive compared to other industrial miners and this trend will decrease their revenue potential even further. For a more detailed examination of their revenue potential, read POC Cryptonomics - PROTECT PEND OREILLE

We assess that Beijing's Bitmain and Allrise Capital will increase their pressure on our PUD to subsidize their power rates at the expense of our PUD's citizen owners. 

“As I’ve stated before, your continued threats to interfere with this transaction and intentionally hurt the people of Pend Oreille County are not well taken,” wrote former PUD general manager Colin Willenbrock to Merkle Standard CEO Steve Wood last October. A few days later he wrote again, “[T]he actions and statements by Allrise and its agents are undoubtedly targeted at harming the District and its ratepayers.”

Documents obtained through public records requests show that Willenbrock was responding to a series of threats (including fourteen emails between June 2021 and October 2022) from representatives of Allrise Capital and Beijing’s Bitmain. Merkle Standard CEO Steve Wood, COO Monty Stahl, and GM Todd Behrend each threatened our PUD as did their contracted energy consultant, Mr. Dana Zentz. These threats began the first day that Allrise took ownership of the former PNC paper mill with plans to build the largest bitcoin mining facility in the country.

In November 2021, Willenbrock responded to Merkle GM Todd Behrend, “The continued threats of harm to Pend Oreille PUD in your letters is not well taken. The PUD has zero interest in that type of back-and-forth…. I will respond only briefly respond to a couple of specious points raised in your letter.”

The following May, Willenbrock told Wood, “It’s unfortunate that Allrise seems more interested in pointing fingers and making unreasonable demands than in finding a mutually agreeable path forward…. Those sorts of statements will only position the parties toward conflict, and the deal toward defeat. I hope you will reconsider and refrain from making inflammatory statements going forward.”

Most of the threats were in response to our PUD’s refusal to make its other customers subsidize power costs and take on the risks for their bitcoin mining operation. As Willenbrock responded to Wood last September, “The District and its customers cannot subsidize Cascade’s operations or mitigate its attendant risks.”

In June Willenbrock again responded to Wood, "“Your reference to ‘all our past conversations up until the last turn of the new ESA’ is false and proves that Cascade signed the May 31 term sheet in bad faith and for the sole purpose of inducing the District to supply 26 MW to the Usk site in June.” He then emphasized the PUD had a responsibility “to ensure the District is always able to serve its general service ratepayers with the lowest-cost resource.”  For more information about how our PUD protects its residential and business customers, see our previous report: What's at stake? Crypto plans in power negotiations would cost Citizens of POC millions, throttle local economy - PROTECT PEND OREILLE

Our county deserves better-behaved business partners than Beijing’s Bitmain and Allrise Capital.

In a blow to Beijing Bitmain's and Allrise Capital's bitcoin mining business at the former PNC paper mill in Usk, WA, Washington State's legislature passed House Bill 1416 on April 12 with a 30-19 floor vote in the Senate. The House passed the bill on February 9 with a vote of 58-39. 

The legislation will require the Bitmain/Allrise joint venture to transition to using clean energy. This will result in a slight increase in the price of electricity they use, but because the cost of electricity is the only significant input in their business, it will have an outsize impact on their bottom line compared to manufacturing or industrial uses. To understand how power prices impact Bitmain/Allrise's bitcoin business, read our previous report: POC Cryptonomics - PROTECT PEND OREILLE

HB1416 closes a loophole in the State's 2019 Clean Energy Transformation Act (CETA) that allowed industrial customers of some utilities in the state to purchase non-CETA compliant power. Our PUD was one of these utilities and Bitmain/Allrise exploited that loophole to purchase non-CETA compliant electricity at discounted rates on the market because they did not want to pay the small difference in price for power from sources specified as being clean energy.  This was despite publicly claiming to be committed to using clean energy and even falsely advertising on their website that they were using hydro power. 

We assess that Bitmain/Allrise will increase its efforts, directly and indirectly through its surrogates in the County EDC and County Commissioners office, to pressure our PUD into subsidizing their power rates at the cost of millions of dollars to the other businesses and residents of the county. See our previous report on some of the damaging policies that Bitmain/Allrise are pressuring our PUD to adopt: What's at stake? Crypto plans in power negotiations would cost Citizens of POC millions, throttle local economy - PROTECT PEND OREILLE

The bill was introduced and passed at the request of the State Department of Commerce. When testifying on behalf of the bill, the head of the state Energy Policy Office, Glenn Blackmon, specified Bitmain/Allrise's massive bitcoin mining facility in Usk as the prime example of why the state needed to close the CETA loophole with HB1416.

Although many aspects of the CETA may be sub-optimal policy choices, given that it is already the law of the land, HB1416 will actually benefit the businesses and residents of Pend Oreille County (with the single exception of Bitmain/Allrise). See our previous report: HB1416 - PROTECT PEND OREILLE

In February local crypto executives claimed that HB1416 posed "an existential threat" to their business and mobilized their surrogates to conduct a misinformation campaign in hopes of defeating the bill. See HB1416 - PROTECT PEND OREILLE.

These included County Commissioner John Gentle who admitted he was lobbying state legislators on behalf of Bitmain/Allrise. See Gentle Admits He is Lobbying for Bitmain and Allrise - PROTECT PEND OREILLE

These also included a west-side consultant/lobbyist friend of the Gentles, Mr. Tim Zenk, who relayed Bitmain/Allrise's request for a "Cascade" amendment to the bill (likely a reference to their joint venture LLC Cascade Digital Mining) that would protect their bitcoin mining operations from needing to pay for clean energy while costing Pend Oreille residents and businesses millions of dollars. See: Zenk Letter - PROTECT PEND OREILLE.

According to the Department of Commerce, "The law requires utilities to phase out coal-fired electricity from their state portfolios by 2025. By 2030, their portfolios must be greenhouse gas emissions neutral, which means they may use limited amounts of electricity generated from natural gas if it is offset by other actions. By 2045, utilities must supply Washington customers with electricity that is 100% renewable or non-emitting with no provision for offsets." CETA Overview - Washington State Department of Commerce

​While the bill will not fully impact Bitmain/Allrise for another year and a half, it changes the calculus for future investment in the site, the future of which is already uncertain. See: Did County Commissioner John Gentle just leak Allrise/Bitmain’s plan to sell the former PNC mill? - PROTECT PEND OREILLE

And PROTECT PEND OREILLE - Home

In the fall of 2020 and spring of 2021 Economic Development Council (EDC) board members Russ Pelleberg (who is the EDC treasurer) and Kim Gentle conspired with local crypto executive Monty Stahl to take down our citizen-owned PUD. Part of their plan was to set up their own utility that would power a large crypto facility in Pend Oreille County. Kim Gentle, Pelleberg, and Stahl engaged in a common business enterprise with the promise of significant financial return for each party to build a 10-40 MegaWatt crypto mining facility on Stahl's property. Their plan was to take control of the PUD's Pine Street Substation in Newport and then create a new "Newport PUD" which would provide power to the crypto facility. 

• Kim Gentle, Pelleberg, and Stahl believed their actions would result in substantial financial damage to our PUD, which would have been financially devastating for the county's residents and businesses.
• Pelleberg used his position as Manager of City of Newport to advance the business plan.
• County Commissioner John Gentle was likely fully aware of and supported taking down our PUD in his role as newly elected county commissioner.
• Commissioner Gentle recently endorsed providing tax-payer funds to a new "Clean Energy Coalition" led by his wife Kim to seek clean energy grants he wants the county to use to support Bitcoin mining.
• Pubilc officials and an EDC with members with a history of seeking to undermine our county's economy in pursuit of their own benefits is not in the best interest of the citizens of the county. 

According to emails between Kim Gentle, Pelleberg, and Stahl obtained through public record request show that in September 2020, Gentle began working with Pelleberg to set up a "Newport PUD." They both acted as executives of this prospective PUD and even offered contract terms on behalf of the prospective "Newport PUD" to at least one crypto mining company. The plan relied on Pelleberg using his position as Newport City Manager to persuade the City Council to reject a pending renewal of the City's franchise agreement with our PUD. They hoped this would force our PUD to sell the substation to them. They would then contract with investor-owned utility Avista for power for the City of Newport and large crypto facility would use much more power than the city. Gentle even offered to provide a lawyer to help speed up the process. 

Gentle wrote to Pelleberg, “This would be catastrophic for the PUD as they cannot serve the county without the Pine Street substation.” She also thought that once our PUD lost ownership of the Pine Street substation, “the PUD would be forced to sell other infrastructure.” (Download the email below)

In June 2021 email, PUD Commissioner Curt Knapp wrote that the trio "were in cooperation with taking down Pend Oreille PUD." He continued in bold type, "You need to understand, we believe this was, and continues to be an all-out attack on our public utility district."

A key part of the plan was building a 10 MW crypto mining facility, which they planned to expand to 40 MW, on a property owned by Stahl outside of Newport. In the fall of 2020, Stahl was already using the property to host crypto mining computers owned by other companies such as Allrise Capital. When the PNC Paper Mill bankruptcy in 2020 (leaving our PUD with $22 million in unpaid bills) compelled our PUD to raise rates, Stahl's hosting business could no longer operate profitably, and he was forced to close it down on December 31, 2020. Stahl and Gentle hoped to redeem his fortunes by selling the property to a crypto company called Bitcap (www.bitcap.co).

The facility, which Gentle hoped to label "the Washington Computational Corridor" would specialize in mining the cryptocurrency Ethereum. Both Gentle and Pelleberg were actively involved in the crypto project. Gentle drafted a non-disclosure agreement that all three signed (Pelleberg signed on behalf of the city of Newport), conducted a site visit and evaluation of the power infrastructure on Stahl's property at 32 Telephone Rd, and provided a quote for power delivery from the "Newport PUD" to the crypto facility (Note: Bitcap planned on operating the facility under an LLC called MagicPool). (Download the emails below) She also encouraged Pelleberg to use his private email for communications, which would make their discussions inaccessible to future public records requests.

However, because the "Newport PUD" project was not progressing quickly enough (the franchise agreement between Newport and our PUD did not expire until later that summer), Bitcap had to seek a power contract with our PUD. Using a page from the crypto mining playbook, Bitcap promised that they would bring up to 100 jobs into the county and millions of dollars of taxable income. When our PUD refused to make its other customers subsidize their power bill, Bitcap decided the PUD-proffered cost of 4.5 cents per kilowatt was too expensive for them and abandoned the effort in early April.

Gentle helped ghost write a public letter, ostensibly from Bitcap, to the "Constituents of Newport" attacking our PUD for "stifling economic development." In fact, our PUD was only guilty of protecting its citizen owners and the residents and business of Pend Oreille County, including Newport, by refusing to make other customers subsidize crypto mining. Had the Newport PUD/ Bitcap crypto facility plan succeeded, it is likely that not only would our PUD have faced financial insolvency, but the City of Newport would have faced imminent bankruptcy. Under their plan, the City of Newport would have taken on millions of dollars of debt to take over the Pine Street Substation. Just over a year after the plan would have gone into effect, the Bitcap crypto facility would have gone bankrupt. In September 2022, Ethereum halted all mining operations for the crypto token and because the computers used to "mine" Ethereum cannot be efficiently used to profitably mine Bitcoin or other cryptocurrencies, the failure of the Newport PUD's largest customer, using many times the amount of power as the City of Newport, would have left the residents of the city with millions of dollars of debt that they would have to pay for. 

Within weeks of the Bitcap project failing, Stahl sold his crypto facility outside of Newport to Allrise Capital. Last Fall, Stahl told the County Republicans that he was responsible for persuading Allrise Capital to purchase the former PNC Mill and that the bitcoin mining facility there was his "brain child." Given that timing of the change of Stahl's plans from selling to Bitcap to selling to Allrise occurred only a couple of weeks before Allrise became a last-minute bidder on the mill site (Allrise became a qualified bidder on April 19, the auction was on April 23), it is likely that he was still actively working with Pelleberg and Gentle. Both used their positions (in Gentle's case her husband's position as well) to solicit the Bankruptcy Trustee on Allrise's behalf. Futhermore, Allrise Capital purchased the mill with intent to convert it into a large crypto facility at a time when Gentle and Pelleberg were still planning on replacing our PUD with their own utility with the plan of powering a large crypto mining facility. The situation has the appearance of financial conflict of interest. 

In the summer of 2021, the scope of Pelleberg, Gentle, and Stahl's plans were uncovered by the Newport Miner. Both Pelleberg's and Gentle's employment was terminated. At the time Gentle worked for the power consulting company GDS Associates which also worked for our PUD-- creating a conflict of interest in Gentle's actions to take down her employers' own client. Gentle's own employment at the PUD had been terminated not long before, which also calls into question some of her motives in attacking her former employer. However, within a few months Stahl provided both Gentle and Pelleberg with lucrative executive positions at the crypto companies he was an executive at (Northern Data and then Merkle Standard). 

Although he no longer works or resides in Pend Oreille County, Pelleberg is the treasurer of the taxpayer-funded EDC. Gentle is a member of the board of directors of the EDC, an elected POVA commissioner, and recently started a "Clean Energy Coalition" that has alternatively identified itself as a committee of the EDC or as independent organization depending on the meeting. In a recent series of meetings with the county commissioners, Gentle sat across the table from her husband and requested additional taxpayer funds to seek clean energy grants that Commissioner Gentle stated he hoped the county could use to support Bitcoin mining. Rosencrantz proposes County Clean Energy Strategy; Gentle says clean energy grant money should go to bitcoin manufacturing - PROTECT PEND OREILLE

Our PUD is the gateway to our economy and the guardian of the cost of living for residents. It is unsettling that some of our public officials and members of the EDC have a history of seeking to undermine the economic foundations of our county and the financial well-being of their neighbors in pursuit of their own fortunes. 

Merkle Standard has repeatedly claimed that they are one of the largest employers in the county. They most recently repeated this claim at a public town hall meeting with Ms. Cathy McMorris-Rodgers recently held at the Camas Center near Usk, WA. In the last six months they have made this claim to the State Department of Commerce, to the Pend Oreille County hearing examiner, and to the Clark County PUD and perhaps to others.

The problem with this claim is that Merkle Standard only had six employees last month- a number that is a couple of orders of magnitude away from being ranked among the county's largest employers. 

In a recent Evergreen Grant application to the State Department of Commerce asking for hundreds of thousands of tax-payer dollars to upgrade the electrical wiring at their Bitcoin mining facility at the former PNC paper mill in Usk (work they alleged would help them begin to produce paper), Merkle Standard certified in their application to the state that they in fact only had six employees.

While it seems to be standard practice for crypto miners to promise dozens or even hundreds of new jobs (which they fail to deliver) to the communities they plan to exploit, continuing to repeat the demonstrably false claim that they are one of the largest employers in the County surely sets a new "Merkle" standard for deceptive advertising.

By Ben Richards

Last April (one year ago) I submitted a public records request to Pend Oreille County for copies of Commissioner John Gentle's emails. Mr. David Whiting, the county's full time public records officer, quickly responded that Mr. Gentle had 3,000 emails from the time period I specified and that he would turn over 125 emails each week. 

In the year that followed, Whiting turned over only 50 emails, delaying even that small release until the end of December 2022. Public records requests typically only require a few weeks, and for larger requests maybe a few months to fulfill-- a timeline Mr. Whiting initially stated he was fully able to meet. 

As a county commissioner, and especially as the chairman of the commissioners in 2022, Mr. Gentle has direct oversight of Mr. Whiting's year-long violation of the state's public records act. This is extremely problematic as Mr. Gentle as multiple people in our county have pointed out that Mr. Gentle has an apparent financial conflict of interest between his wife's close involvement in the crypto mining ventures in our county and his role as a commissioner. 

Gentle's spouse Kim was a part of a business venture with Merkle Stanard executive Monty Stahl and former Merkle executive Russ Pelleberg in late 2020 and early 2021 seeking to establish a large crypto facility in the county. Later, Stahl provided a lucrative executive job to Kim. At least through February 2022, Stahl and Kim had a direct business interest in the Allrise/Bitmain crypto facility in Usk, where they hoped to install thousands of bitcoin miners owned by their company Northern Data AG. 

Despite his financial interest in the crypto facility, Gentle not only refused to recuse himself from actions affecting the Allrise/Bitmain crypto facility, he repeated used his office to publicly lobby for Beijing's Bitmain/Allrise in ways that could have financially benefitted Kim (and himself). He acted to block measures such as a proposed county noise ordinance and enforcement of Allrise's zoning violations that were creating a noise nuisance for neighbors. Most recently he has proposed using public funds to finance a "Clean Energy Coalition" led by his wife that would seek clean energy grants that Gentle stated he hoped could be used to support Bitcoin manufacturing in support of Bitcoin mining. 

Acting under the supervision of Commissioner John Gentle, the county's refusal to turn over public records relating to his communications reinforces the appearance of misconduct. 

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