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Officials question plan to use Ponderay mill for cryptocurrency mining and box production

USK, Wash. (From news reports) -- Before a federal judge could approve a proposed sale of the closed Ponderay Newsprint Mill to a California-based venture capital company, concerns were raised during a court hearing Thursday about potential plans to use power allotted to the mill for cryptocurrency mining.

U.S. Bankruptcy Judge Frederick Corbit conducted a hearing Thursday to accept the results of an April 23 auction in which three parties put forward $350,000 to bid to purchase the plant in Usk. Its previous owners filed for bankruptcy protection last year and the closure resulted in the layoffs of about 150 workers.

Allrise Capital Inc., of Irvine, Calif., submitted the winning bid of $18.1 million, which bested a $17.5 million bid by the Kalispel Tribe of Indians.

However, Seattle attorney Deborah Crabbe, who represents Public Utility District No. 1 of Pend Oreille County, said comments published Thursday in were the first time that PUD officials learned Allrise may use the plant's available power to develop a blockchain-infrastructure data center for cryptocurrency mining.

Crabbe noted several other prospective buyers had spoken to representatives from the PUD. However, last week was the first time she had heard about Allrise Capital Inc.

"We are not objecting to the sale," Crabbe said. "We look forward to the opportunity to work with Allrise. I don't want to say we are alarmed, but we are concerned that there hasn't been any conversation with the PUD."

She noted comments by Chris Bell, managing broker for NAI Black who helped market the site, that Allrise's initial plans call for retooling the plant to make corrugated cardboard for shipping and that any excess power could be used for the complicated computer process of mining cryptocurrency.

"That indicates significant power usage," Crabbe said. "The PUD cannot simply flip a switch to meet those needs. We think there may be a misunderstanding about the availability of power."

Calls to Allrise Capital seeking comment were not returned.

During the court hearing, Corbit asked Crabbe if concerns over the power use misunderstanding would rise to PUD objecting to the sale.

"Is it fair to say that even though you have concerns that ... your client has some optimism and is prepared to provide power to this purchaser?" Corbit said.

Crabbe said the PUD will work with Allrise.

"We want to be part of the solution," she said. "We just want to balance everybody's expectation when it comes to power."

Corbit set a hearing for 10 a.m. May 13 at which he could approve a motion by Munding to complete the sale to Allrise free of any liens.

Colin Willenbrock, PUD general manager, said the mill previously used about 85 megawatts of electricity a year. That's enough juice to power about 70,000 homes.

"They paid $35 million a year for power. That's a big deal," Willenbrock said. "We have to procure those volumes of power. It's complicated."

Willenbrock said it sometimes takes years to work out the deals for a contract to provide that much power.

"We are eager to work with them," he said, "but it seems a little bid peculiar that we haven't heard from them yet."

Prior to the plant closure in June, the mill had been one of Pend Oreille County's largest employers. It previously was owned jointly by Lake Superior Forest Products, a subsidiary of Quebec-based Resolute Forest Products, and five major U.S. publishers.

Before the auction process last week, negotiations failed to find a new owner for the 927-acre property, which consists of 29 buildings and storage facilities and is adjacent to the Pend Oreille Valley Railroad and Pend Oreille River.

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