The owners of a cryptocurrency operation announced Tuesday a plan to rehire as many as 150 workers to restart operations this fall at the Ponderay Newsprint mill in Usk. But the announcement isn’t worth the paper the mill isn’t printing, according to a power official.

Todd Behrend, who formerly worked at Ponderay Newsprint and then was hired by California-based Allrise Capital Inc. as CEO of Ponderay Industries, announced the plan to restart the mill that was shuttered in 2020 after the previous owners filed for bankruptcy.

But that’s only if Pend Oreille County Public Utility District can provide another 70 megawatts of power.

“A lot of hard work and diligent business planning has gotten us to this point in the process,” Behrend said in a news release. “We can essentially begin mill operations as soon as additional power can be made available to the site.”

However, Colin Willenbrock, general manager of the public utility district that supplies power to the mill that had been Pend Oreille County’s largest employer, called Behrend’s news release “disingenuous” and “misleading.”

The cryptocurrency mining operation, under a company called Merkle Standard, recently was given the green light after months of study and contract negotiations to have as much as 100 megawatts of power under an agreement that starts on Thursday.

However, that power allocation is predicated for use only for crypto mining, which is what Merkle Standard officials specifically requested, Willenbrock said.

According to the Bonneville Power Administration report, Merkle Standard earlier had ditched plans to request power to restart the plant because it would have cost millions for facility upgrades.

“I have friends who lost their jobs” when the mill closed, Willenbrock said. “There is no better prospect for the community than to restart the mill. But we don’t appreciate the misleading statements about what could be done. Don’t tell the community you can do both when we haven’t even studied that.”

Power struggle

The troubled saga of the paper mill, located on the 972-acre property that includes 29 buildings, began in 2020 when it fell into bankruptcy proceedings. As a result, about 140 local workers lost their jobs.

At auction, Allrise Capital, which is based in Irvine, California, outbid the Kalispel Tribe and bought the plant for $18.1 million. At the time, bankruptcy officials said Allrise expressed interest in restarting mill operations and possibly adding cryptocurrency mining.

In March, the naturalized-Russian investor told cryptocurrency publication Cointelegraph that he had formed a partnership with a Chinese tech firm, Bitmain, to provide crypto mining equipment that will “catapult our growth plan of building one of North America’s largest sustainable digital asset mining platforms.”

Zinurov stated plans to obtain as much as 500 megawatts for the crypto operation, under the business name Merkle Standard. He made no mention of using the site for its traditional use as a paper mill.

Asked why Zinurov didn’t mention if the plan all along was to restart the mill, Merkle Standard spokeswoman Laura Verity said it was a matter of semantics.

“Those quotes were about Merkle Standard,” she said. “Ponderay Industries is a separate entity. I think the context is a little different.”

Behrend, the CEO, told The Spokesman-Review earlier this year that Merkle initially sought 300 megawatts of a “blended load” that would include about 85 megawatts for the mill and the rest for crypto mining.

Willenbrock explained that power loads are different for a mill, which has big machines turning on and off, versus cryptocurrency mining, which uses a steady stream of power to constantly run the banks of computers.

But the PUD sent the company a letter on April 1 that referenced the BPA studies, which said Merkle Standard could have 100 megawatts for the paper mill or crypto mining, but not both without system modifications.

“We were shocked when the BPA came back and said we could get 100 megawatts but we could not run the paper manufacturing business without modifications to the grid,” Behrend told The Spokesman-Review in April.

But BPA documents show Merkle pivoted its request and earlier had asked power only for crypto mining.

“During this study, the customer modified its request to a 100 MW load at near unity power factor,” BPA documents state.

Asked why Behrend would say one thing and the BPA documents another, Verity said: “It’s interesting.”

“There is no arguing that the final study says ‘just for crypto,’ ” she said. “But the original study asked for both.”

The BPA study noted that for Merkle Standard to bump its electricity use to 145 megawatts, it would require about $40 million in facility upgrades.

But Willenbrock also noted something else. Had Allrise Capital wanted to restart the mill as they stated to bankruptcy officials, they had BPA approval to do it a year ago.

And Willenbrock questioned whether the mill could hire 150 people in a month.

He also noted the parking lot once used by trucks to load paper rolls is now filled with metal shipping containers that are being used as modular-mining platforms.

Asked about how the company could start operations of the mill in as early as a month as Behrend predicted in the release, Verity said a lot of details would have to be worked out.

“Everything is interdependent,” she said. “Our goal would be to have all of the pieces in place.”

Hours after the re-opening release came out, several Merkle Standard officials, including Behrend, attended a public meeting by the PUD and asked them to provide the 70 extra megawatts needed to restart the mill, Willenbrock said.

Verity said the officials were just there to show PUD officials how their assistance was needed.

“Mostly it was to request that they support the effort as much as they possibly can,” she said. “We know it can be done.”

Willenbrock questioned the timing, noting that Merkle Standard officials know it takes 60 or 90 days for BPA to complete a load study of the magnitude they requested.

“Now, in the 11th hour, they say, ‘Oh by the way, we are restarting the mill,’ when they’ve already been told they can’t do that by the BPA without a facility upgrade, is a disappointment,” he said. “That is misleading for the people waiting with bated breath to restart the mill.”