County Commissioner John Gentle publicly admitted that he is lobbying State Legislators on behalf of Beijing’s Bitcoin mining operations in Usk.
 
During the public comment period at Monday’s (March 13) Commissioners’ meeting, Gentle was asked about House Bill 1416, an extension of the State’s existing Clean Energy Transformation Act intended to close loopholes that currently allow Beijing’s Bitmain and their junior partner Allrise Capital to use electricity from high-pollution sources that other industrial customers in the State are prohibited from using.
 
Gentle admitted that he was lobbying State Legislators on behalf of Beijing’s Bitmain and Allrise Capital to get their energy-intensive bitcoin mine in Usk exempted from the legislation. He specified that he was working with State Representative Beth Doglio (D-Olympia), the primary sponsor of the bill, to get the exemption added to the legislation.
 
Gentle is traveling to Olympia to meet with state legislators on Thursday and Friday before a Senate committee reviews the bill this Friday. Gentle and Bitmain/Allrise’s other lobbyist Tim Zenk have been pressing State Senator Shelley Short to use her position on the Senate Committee to alter the bill.
 
This is not the first time Gentle has used his position as County Commissioner to use his office to advance Beijing’s bitcoin mining business. Last fall, he skipped a County Commissioner meeting to lobby our PUD to agree to a new power contract for Bitmain and Allrise that would have cost residents of the county millions of dollars. Last spring, he used his position to block a proposed State-standard noise ordinance that would protect county residents from excessive crypto noise pollution that threatens local residents' quality of life—especially during warmer summer months (noise pollution enforcement is a county-level responsibility in Washington). He also used his position to block enforcement of Bitmain/Allrise’s zoning violations that were disrupting nearby neighborhoods.
 
Gentle’s actions are particularly concerning because he had a direct financial interest in this project since the beginning of 2021 through at least February 2022 when his wife was a business partner and later employee with Messers Monty Stahl and Russ Pelleberg (currently of Merkle Standard). 

​

​House Bill 1416 will be considered by the State Senate Committee on Environment, Energy & Technology in a public hearing this Friday morning at 8 am. (March 17). Our State Senator Shelley Short is a member of that committee.
 
To learn more about HB1416 and how it will benefit our County, read: HB1416 - PROTECT PEND OREILLE
 
To learn more about the misinformation Bitmain’s and Allrise’s lobbyist are spreading about HB1416, read here: Zenk Letter - PROTECT PEND OREILLE
 
Submit your own comments on HB1416 to the State Legislature here: ​Washington State Legislature - Public Bill Comments

Sunday evening the FDIC announced that they would extend their insurance coverage to all depositors at the SVB to cover the total amount of all deposits instead of the normal $250,000.  They also announced that all depositors would be able to access their funds on Monday (today). 

This ensures that Allrise Capital (and potentially Bitmain) will be able to pay their bills in the short term. 

The commotion over SVB also limited news coverage of the failure of another crypto bank over the weekend. Sunday the FDIC took control of Signature Bank. Like Silvergate Bank which collapsed last week, Signature Bank's core business is providing banking services to crypto companies. In a huge government bailout for the crypto industry, the FDIC also extended its insurance protections to all depositors at Signature Bank as well.

Of interest, former US Representative Barney Frank (D-Mass), coauthor of the infamous Dodd-Frank Wall Street Reform and Consumer Protection Act was a member of Signature Bank's board of directors.  

Here are two takeaways: 

1) While Allrise dodged a bullet, the collapse of SVB will likely have a deleterious impact on their pending negotiations with our PUD for a new power contract. Allrise will need to re-bank itself and, given the high-risk status of its current portfolio, may have a difficult time finding a bank as willing as SVB to extend credit and serve as a counterparty. 

2) It's unclear which lesson the banking sector will learn from the rapid collapse of a large portion of the crypto-servicing banking industry. They could either learn that crypto clients are high risk and should be treated as such, or they could learn that the government will reward risky baking practices by protecting banks from their own bad risk management practices. ​

It's been a tough few weeks for Allrise Capital and their senior partner Bitmain. On Friday (March 10), Allrise Capital's bank, Silicon Valley Bank (SVB), collapsed and was shut down by the FDIC. The collapse could have significant impacts on Allrise's ability to conduct business in the following ways:

1) Make payroll for its 6 employees at its Usk facility (via Merkle Standard)
2) Make its monthly electricity payments to the PUD
3) Make its next property tax payment to the County
4) Result in significant financial loss (the FDIC only insures $250,0000 in deposits)
5) Significantly limit Allrise's access to credit or extend the terms of existing loans.

Because SVB had mostly corporate customers with large deposits, over 90 percent of its deposits are not covered by FDIC insurance. 

SVB also specialized in serving Chinese tech companies doing business in the US, so it is possible that Bitmain will also be affected. 

In addition to its problems SVB, Allrise and Bitmain had to deal with the collapse of Slivergate Bank earlier in the week. Silvergate was smaller than SVB but specialized in serving crypto customers who, due to their distate for normal standards of financial accountability, would otherwise have trouble obtaining banking services. It is unknown whether Allrise or Bitmain had direct exposure to Silvergate, but the bank's collapse dropped Bitcoin prices by $3,000. 

Furthermore, several of Allrise's other investments in other crypto companies have gone sour. Gemini has become insolvent and has halted customer withdrawals and Kraken was recently fined $30 million by the SEC for selling unregistered securities. 

An HB1416 continues its progress in the State Legislature. The House Bill would require Allirise/Bitmain to comply with the Clean Energy Transformation Act (CETA). As they currently use no CETA- compliant electricity, the bill would increase their electricity costs by requiring them to purchase and use clean, renewable power. Allrise/Bitmain is the only business in Pend Oreille County not using CETA-compliant power, so they will be the only ones affected.

And just to add insult to injury, the White House announced plans to create a 30% excise tax on crypto miners as part of President Biden's new budget proposal.

A remarkable failure to conduct due diligence combined with last May's collapse of the Bitcoin bubble and higher energy costs have already made the Usk facility unprofitable, so these additional financial challenges call into question the Bitcoin mining facilities ability to continue as a going concern. 

Last May, Allrise/Bitmain's negotiations with Brookfield Renewable for a large power contract to service their Bitcoin Mining in Usk collapsed after Brookfleld conducted a due-diligence review of Allrise/Bitmain. Beijing's Bitcoin team turned to the PUD for a new service agreement. Because Allrise//Bitmain were high risk customers, the PUD required that they obtain a performance guarantee from a major bank who would effectively co-sign the agreement.  

Allrise asked the PUD to accept their bank SVB as the guarantor. Fortunately, the PUD viewed SVB as too risky and made Allrise turn to a more traditional major bank. 

It is now clear that the PUD's effective risk management practices protected it citizen owners from SVB's collapse.

The county's crypto-advocates should bear this lesson in mind before advocating that PUD abandon its policy of protecting its ratepayers in order to subsidize Beijing's bitcoin. 

Last week the Newport Miner published a feature profiling Pend Oreille County Commissioner John Gentle. Deep on the second page of the story, the Miner reported that, “Gentle said he doesn’t care if Allrise wants to reopen the mill to sell it.”
 
This is what is interesting about that comment:
 
1) It was not a response to a question. Gentle just offered it up out without any prompting. So where did the comment come from?
 
2) Gentle is in a position to know. Gentle and his spouse Kim have been in the Allrise/Bitmain inner circle at least since the beginning of 2021 when Kim began working with current Allrise/Bitmain local executives Monty Stahl and Russ Pelleberg to bring a large crypto project to the county. Both Gentles continue to work closely with Allrise/Bitmain and have used their public offices to advance Allrise/Bitmain’s interests at the expense of county residents.
 
3) It makes sense. The speculative Allrise/Bitmain bitcoin mining venture in Usk has been a financial disaster so far. The collapse of the Bitcoin bubble, the rise in regional wholesale power prices, and other factors have increased Bitcoin mining costs and have made the former PNC mill in Usk a non-competitive site for Bitcoin mining. Allrise/Bitmain could still make a profit on Bitcoin mining—just not in Usk. For example, their other facility in Spartanburg, SC, is likely generating a return on investment around 3x higher than their facility in Usk. And it turns out that “modular data center” shipping containers filled with Bitcoin mining computers are very easy to move.    
 
4) The timing fits. There are two events coming over the next six months that could easily trigger an exit by Allrise and/or Bitmain from Bitcoin mining in Usk. The first event is the expiration of their current power contract with the PUD in September. An increase last year in average market power prices have left Allrise/Bitmain are struggling to pay their bills under their current power contract.  Most months they have not been able to afford enough electricity to turn on all of their Bitcoin mining computers. If they can’t get substantially reduced power prices in a new contract, Allrise and Bitmain may move the mining computers to other locations where they can operate profitably. The biggest challenge to the kind of power contract Allrise/Bitmain needs is that it would require the PUD’s other 9,600 customers to both assume enormous financial risk and subsidize Beijing’s Bitcoin mining through higher power rates for the rest of us.
 
The second event is a possible contract deadline between Allrise and Bitmain. Sources familiar with the contract between Allrise and Bitmain have reported that Bitmain would transfer ownership of the mining computers to Allrise after the facility had generated enough bitcoin to pay off Bitmain’s initial investment (which was between $200-300 million in market value). They have also reported that this repayment was supposed to have taken one year—which was reasonable given that the facility’s expected first year income was $300-500 million when Allrise and Bitmain partnered together in Fall 2021. The facility will complete its first year of full operational capacity in August and the bitcoin generated by the facility will not have returned even one-tenth of the initial investment value.  Bitmain may find Allrise in breach of contract, cancel its partnership with Allrise, and unilaterally move their machines to greener pastures with new partners who did a little more due diligence.
 
5) A Paper Mill just isn’t Allrise Capital’s thing. Allrise Capital is a small venture capital and investment property holding company. Like other venture capital companies, their business model (which hasn’t been too successful) is based on investing in short-horizon projects that can be cashed out for a profit after a few years. Operating a paper mill is a long-horizon project with little to no short-term financial return. Profitability comes only after many years of successful operation. Given that many other paper companies evaluated the potential profitability of the mill in 2020 and universally passed on the opportunity to purchase it an enormous discount and that the business conditions for paper mills of all types have only gotten worse since the PNC bankruptcy, it is questionable whether the Usk mill could ever be profitable again. Furthermore, Allrise has no corporate experience in the paper industry or operating a large industrial plant. Only four former mill employees remain on Merkle Standard’s payroll.  
 
To be sure, Allrise’s six local employees at Merkle Standard appear to be working frantically to shape the conditions to save their jobs by trying to convince the PUD’s citizen owners that mining Bitcoin for Beijing is worth higher utility rates for the rest of us. But it is unclear whether Allrise’s and Bitmain’s higher-level corporate officers are as committed to staying in Usk. 

Allrise/Bitmain/Merkle Standard have been misleading the citizens of Pend Oreille County in claiming that our PUD secretly negotiated with Clark County PUD to sell the output of the Box Canyon Dam.
 
PUD documents obtained through public records requests show that our PUD not only directly informed Allrise Capital about the negotiations but also provided extensive details about their content and status at least FIVE MONTHS before entering into the contract with Clark County at the end of October 2022. 
 
These documents also show that Allrise Capital positively affirmed just two weeks before PUD commissioners approved the contract with Clark County PUD that Allrise was not in a financial position to enter into a contract for the dam’s power.
 
The smoking gun document is a letter dated May 19, 2022, from the PUD to Ruslan Zinurov, Allrise Capital’s CEO at the time, titled “RE: Power Supply Negotiations.” The letter includes multiple paragraphs about Box Canyon describing the details of the future contract with Clark County PUD and the status of the negotiations.
 
Another letter from the PUD to Merkle Standard’s Steve Wood, dated October 17, 2022, and titled “Re: Box Canyon Output,” states that on September 26, 2022, Mikhail Trubchik, Allrise Capital’s current CEO, had told PUD leaders that Allrise could not afford a deal for Box Canyon power.
 
Allrise/Bitmain/Merkle’s misinformation campaign to smear our PUD in hopes of derailing a lucrative deal for County residents and coercing the PUD into a power contract that favors Beijing’s bitcoin mining ahead of the citizens of Pend Oreille County is reprehensible.  

Read the documents for yourself by downloading them below:
​

Pend Oreille Economic Development Council Director Jamie Wyrobek concealed for four months from the County Commissioners that the State Department of Commerce had demanded the County repay $300,000 after the EDC breached its contract with the State. The County Commissioners were actively debating Wyrobek’s employment contract during this time and revealing that she was responsible for a $300,000 debt for the County could reasonably be expected to have adversely impacted the outcome of the debate over whether it was worth continuing to fund the EDC and Wyrobek’s lucrative $75,551annual salary. During her decade-long tenure as director (and the sole salaried employee), the EDC has made few, if any, accomplishments—especially accomplishments that justify a salary more than twice the county average and over $1 million of taxpayer funds spent.
 
The EDC had entered into a contract with the Commerce in 2017 to use $300,000 from the Governor’s Strategic Reserve Fund to create 200 jobs in Pend Oreille County within five years in partnership with HiTest Sand, Inc. HiTest was exploring the possibility of building a silicon smelter in the County, but subsequently selected a site in Tennessee for its facility. The five-year contract window expired last year, no jobs were created, and the State wants its ill-spent money back.
 
Last October, Commerce sent a letter and a billing invoice to Wyrobek (see attached documents). The letter stated: “Washington State is requesting Pend Oreille EDC repay the $300,000 from the investment of SRF [Strategic Reserve Funds] to HiTest Sand Inc. within 30 days of receipt of this letter.” The EDC is created and funded by the Pend Oreille County Commissioners, which leaves the County’s taxpayers responsible for repayment.
 
Wyrobek concealed the letter's existence, the County’s debt, and the State’s demand for repayment until mid-February. Wyrobek surprised the commissioners at the February EDC meeting when she stated she was sending a letter to HiTest requesting repayment. Still, she only revealed the letter's existence under direct questioning from Commissioner Robert Rosencrantz. During discussions, Rosencrantz had raised concerns about the disposition of the grant funds last September, and whether the high cost of funding Wryobek’s position and an EDC budget was an appropriate use of taxpayer funds.
 
As chairman, County Commissioner John Gentle was responsible for the EDC when Commerce demanded repayment from the County and had fiduciary oversight of the organization on behalf of the County. Did Gentle know?
 
Whether or not the EDC is a waste of taxpayer dollars may be debatable, but what is not is that Wyrobek and EDC have broken trust with the County – And it’s hard to do business with people you can’t trust. 



NOTE: Ms. Wyrobek will be reporting to the County Commissioners on Monday, March 6 at 1:30 pm. You can watch her explain her conduct in person in the County Commissioners conference room or via Zoom at https://zoom.us/j/5094474119

You can download and read the Commerce Letters to the EDC below: 

Over the last two years, Allrise Capital and its senior partner, Beijing’s Bitmain, have invoked restarting the paper mill four times.

The first time improved their odds of securing court approval for their ownership of the mill in April 2021.

The second time was only a week after concluding their power contract with the PUD in August 2022. Public records show they had not mentioned power for the mill during months of negotiations. Only when they failed to accurately forecast power costs for their crypto-mining operations did they discover they could reopen the mill in three months—but only if the PUD agreed to a new, cheaper power contract for crypto-mining—a claim that looks questionable in hindsight.

The third time was at the end of January 2023 when they invoked restarting the mill in hopes of getting $400,000 of taxpayer funds through a questionable application for a state grant.

Now, it appears they are invoking restarting in hopes that State Senator Shelley Short will amend HB1416 to exempt their crypto-mining operations from the Clean Energy Transformation Act – legislation that will actually benefit our county by protecting our residential rates from being raised to subsidize Beijing’s crypto-mining.

In testimony on House Bill 1416 to the Washington State House of Representatives Energy Committee hearing on January 30, 2023, Mr. Glenn Blackmon, the senior energy advisor to the state, was asked “Could you give me an example of what this bill is trying to address?” He answered that the Allrise/Bitmain crypto mining facility in Usk is the best example. “Under current law, they wouldn’t necessarily have to use clean electricity in compliance with CETA…, yet CETA says that all of the electricity that is used by customers in Washington should be clean…”
​
And Allrise/Bitmain uses no clean energy.

The following letter to the editor appeared in the November 2 edition of the Newport Miner:

County Commissioner John Gentle’s conflict of interest between his duty and the financial benefits he receives from the employment of his spouse has become too apparent to ignore.
 
Ms. Gentle is in charge of energy and site development for the bitcoin mining company Northern Data. They have a long and close relationship with Beijing’s Bitmain, which operates the $300 Million crypto facility in Usk, and who their CEO described as “our partner, with whom we work closely and trustingly.”
 
In November 2021, Northern Data reported to its investors that they secured 110,000 bitcoin mining computers which they planned on turning on by December. However, they must install most of these machines in facilities owned by other companies because their own facilities will not be ready before 2024.  In December 2021, they hired Mr. Gentle’s wife to find these facilities, creating a direct business interest in Bitmain.
 
Last February 9th, this newspaper reported that Northern Data met with Cascade Digital Mining/Bitmain. Bitmain was planning a 500MW, hydro-powered facility. The most likely reason for the meeting was to discuss a contract to host Northern Data’s machines at Usk. Since then, Northern Data’s stock has fallen 93%, and they are at risk for bankruptcy. Bitmain holds a lifeline.
 
On August 30, Mr. Gentle skipped his commissioners' meeting to lobby the PUD for a new power contract that would financially benefit Bitmain and potentially benefit his wife as she desperately seeks a host for her bitcoin miners.
 
Mr. Gentle has crossed the line of a “possible appearance of a conflict of interest” standard outlined in Section 3 of the POC Governance Manual that regulates commissioner ethics. It is past time for him to disclose the full nature and extent of his financial interest in Bitmain to County Prosecutor Dolly Hunt and to the public.

-- Ben Richards

For an in-depth examination of Commissioner Gentle's apparent conflict of interest, watch this video presentation:

May 27th, the Hearing Examiner released his ruling authorizing the Conditional Use Permit for the Bitmain/Allrise Capital Crypto Facility at the former PNC Mill Site near Usk. A copy of the CUP decision is available to download below.

However, at a special meeting on May 26th, the Pend Oreille PUD revealed that the expected electricity provider for the proposed Bitmain/Allrise Capital industrial cryptocurrency mining facility has withdrawn from the project, leaving the Bitmain/Allrise without a power source. The electricity provider Brookfield Renewable operates several hydro facilities in British Columbia and was expected to provide at least 100 MW of electricity to the Bitmain/Allrise Capital facility through the PUD. 

Bitmain/Allrise Capital, in partnership with the PUD, will now need to find a different power provider before they can begin industrial-scale operations. This increases the risk that the start of large-scale operations could be delayed. Allrise Captial and its subsidiary, Merkle Standard LLC, have been negotiating a power contract with the PUD and Brookfield Renewable for around nine months before Brookfield Renewable withdrew. Brookfield did not provide an explanation for their decision. 

During the special meeting, the PUD also indicated that Brookfield Renewable's withdrawal also increased the risks to the PUD and its existing customers in the county and that the increased risk levels would need to be factored into future negotiations. 

Brookfield's abandonment of the project comes during a volatile time for crypto currencies in general as crypto currency prices have sharply declined in the last couple weeks deterring many investors while energy prices are growing.

The PUD appeared committed to helping Bitmain/Allrise find a new energy provider but also emphasized that they had a responsibility to protect existing customers from a repeat of the PNC Mill bankruptcy which left customers responsible for $15 million in energy contracts that the mill reneged on leading to a rate increase.

From Dallas Becker:

Not only do cryptomining facilities have a negative impact on the environment, due to that negative impact, the cryptocurrency industry is shifting away from the transaction model that uses them.  It is very plausible that due to consumer/investor demand and government regulation, proof-of-work currencies (which use cryptomines) will be replaced by proof-of-stake currencies in the very near future.  This change is happening quickly in the cryptocurrency industry right now - the proposed facility may only operate for a year or two.

My attempt at a summary:

Proof of work:

• Uses cryptomines, like the proposed facility.  Many computers crunch away at complex mathematical problems, and finding the "answer" is rewarded with cryptocurrency.  But this is like a race - in that many (ie, 100,000 computer clusters) are competing and only the winner gets the cryptocurrency
• Effectively, the process is electricity->computational power->cryptocurrency - for the winner.  Many other computers have just converted electricity into calculations, with no result or reward.
• "Baked into the code is a reduction of the reward over time, and there is a fixed supply of Bitcoin that will ever exist, so the mining becomes likely more difficult over time depending on how many computers are competing at any given moment."
• Environmental impacts are due to the large computational power and equipment needed.
• This is the older method; it is criticized for the poor energy efficiency.  Newer cryptocurrencies use proof of stake and some older cryptocurrencies are moving to proof of stake.
• China banned cryptomining in 2021

Proof of stake:

• Instead of racing to solve a mathematical problem, the verifiers have an investment stake (ie, money) - in a way, a bond for good behavior.  There is a lottery, based on the size of the stake, for who verifies a transaction and is rewarded.  
• "Proof of stake is expected to reduce the electrical consumption of crypto-mining by well over 99%." and "Proof of stake offers a way to set up such a network without requiring so much energy. And if all goes as planned, Ethereum, which runs all sorts of applications in addition to the world’s second-largest cryptocurrency, will transition to it in the first half of 2022. The shift has been projected to cut energy use by 99.95%."
• One of the biggest cryptocurrencies, Ethereum, is planning to fully convert to proof of stake this year
• This model is much faster than proof-of-work and more scalable.

Editors Note: For a description of "Proof of Work," see our previous blog post "Once you realize what Proof of Work is really about, you'll get even more angry" - PROTECT PEND OREILLE

Here are some articles:
https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/5-questions-crypto-mining/

https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/what-is-staking/

https://www.pymnts.com/cryptocurrency/2022/can-proof-of-stake-solve-cryptos-esg-problem/

https://www.cnbc.com/2022/03/09/heres-whats-in-bidens-executive-order-on-crypto.html

https://www.forbes.com/advisor/investing/cryptocurrency/proof-of-stake/

Ms. Becker is a resident of Pend Oreille County who loves the beauty of our county and wants to ensure this pristine place that is our home is preserved for generations to come.

In presentations to the public Merkle Standard representatives have repeatedly advertised that they are looking for someone to use the excess hot water from cooling their cryptocurrency mining machines. This so-far unanswered advertisement is a mea culpa confession that Bitmain/Merkle Standard will produce substantial amounts of hot water that it does not currently have a plan to dispose of. 

Where is all of this hot water coming from? The Conditional Use Permit (CUP)/ State Environmental Protection Act (SEPA) Checklist application CUP-2021-012 submitted by Ponderay Data LLC on behalf of Bitmain and Merkle Standard is incomplete, ambiguous and sometimes contradicts itself. 

So what do we know? 

CUP-2021-012 describes two types of systems that use water. 
1) 150 Modular Data Centers  (MDC -- these are the white shipping containers in the parking area of the former PNC Mill site in Usk). 
CUP.F.4 of the CUP application states: "process water lines will be extended to the MDC's."
CUP.E specifies "process water from the Pend Oreille River" which is differentiated from "two wells for potable water."
SEPA.B.3.b.1. states: "The MDCs are fitted with evaporative coolers that will be operated when the ambient temperature exceeds 95F. It is anticipated that no water will be discharged to groundwater in their operation. The water supply will be from the existing mill ffreshwatersystem."

Base on press releases by Merkle Standard, the 65-120 of their MDCs, and the ones described in CUP-2021-012, are Bitmain-produced Antbox N5 containers (pictured below) each holding 207 S19 XP and S19J Pro air-cooled computers inside. These containers use a supplemental evaporative water-cooling system (circled in red) that MUST be engaged when the air temperature at the air intake is 95F. It is important to note that exhaust air of a single mining computer produces so much hot exhaust that it can heat a townhome, so 13,500 to 25,000 of these computers densely packed together will make the air intake temperature much higher than the air temperature at the local weather station. Furthermore, unless the system has 100 percent evaporative efficiency, there will be hot water left over.

2) "A small Data Center in the former construction office building will require two cooling towers 8'x16'x16' high." (SEPA.A.11)
SEPA.A.10. "An operating permit may be required for the cooling towers."
SEPA.B.2.a. "Water vapor will be evaporated from the cooling towers."
SEPA.A.7 "The cooling towers will not be commissioned until May 2022 or later."

No other specific information is reported about these cooling towers.

However, we know from Merkle Standard press releases and public statements that Bitmain/Merkle Standard will deploy a third type of water using system at the site that is not mentioned in CUP-2021-012. This system is the Bitmain-produced Antspace HK3 container holding the S19 Pro + Hydro mining computer. The key difference between this type of MDC and the ones described in the CUP/SEPA application is that this type uses water as the primary cooling system for its specially built, water-cooled mining machines with a secondary air-cooling system. The mining computers used in each type of MDC are not mutually compatible-- each type requires its own specialized type of MDC. 

The Antspace HK3 (pictured below) actually comes with two containers: one to hold the mining computers, the second to hold a container-sized cooling tower. The mining computers in the first container are cooled by a closed-loop water system with each of the 210 computers requiring more than two gallons of cooled water each minute. After passing through the computers the water in the closed-loop system is pumped over to the cooling tower where a combination of a large cooling fans and a water spray cool the water down to 95F before pumping it back to the computing container. Altogether the system holds over five tons of water at any moment. 

​The water spray system is designed to spray 61,500 gallons per hour to cool the closed-loop system. Some of this water is converted into water vapor (SEPA B.2.a "Water vapor will be evaporated from the cooling towers.") while some water drips back into collecting tanks at the bottom of the cooling tower where it is pumped back into the spray system. In total each container consumes 265 to 400 gallons of water per hour. Just the 23-26 known cooling towers would consume 220,800 - 250,000 gallons of water each day excluding water required by the evaporative cooling systems for the other 65-120 MDCs. The spray cooling system appears to be optional once air intake temperatures drop below 50F. Bitmain/Merkle Standard reps have publicly stated that they will going with more water-cooled machines (which are the most power efficient) and cooling towers in the future. 

Given that the dimensions for the cooling towers for the "small data center" are approximately the size of a container and that the Antspace HK3 equipment was not slated to arrive until May, it is possible that these cooling towers are also the Bitmain-produced towers used with the Hk3 MDC.

A few additional points: 

A closed loop cooling system requires antifreeze and may require either chemical treatment or regular replacement due to minerals and biotics in the "process" river water used which would degrade the cooling system. Where will that water go? None of this is addressed in CUP-2021-012.

There are several contradictions as well:
1) The MDCs use evaporative cooling (SEPA.B.3.b.1.) but have no emission (SEPA B.2.a). 
2) The MDC use process water from the river (CUP.F.4) but there will be no surface water diversion (SEPA 3.a.4).

So there is a lot of hot water. Where is it all going?

Sources on Antspace HK3 cooling tower specifications:
https://shop.bitmain.com/product/detail?pid=0002021123118285350583K2a0P505EF
https://minefarmbuy.com/product/antbox-hk3-complete/