Chapter One: The Mystery

OLATHE — Shiny, undulating rows of solar panels cover acres and acres of land in the midst of neatly furrowed, irrigated farmland outside this Western Slope town of 1,800.

Exactly what they are doing there and what they are going to power is a mystery.

The county economic development director doesn’t know. The county planning director doesn’t know, even though the planning commission had to approve a zoning change. The state senator representing the area doesn’t know. The real estate agent who sold the property is keeping his own counsel.

Mum’s the word.

Circumstantial evidence, with an emphasis on circumstantial, points to the site, the old Louisiana Pacific lumber mill on U.S. 50, being turned into a cryptocurrency mine.

That would fit with the trend of bitcoin miners moving into rural areas — from Upstate New York to Texas to Montana to Washington State — in search of cheap space and power.

This all comes as Gov. Jared Polis is touting Colorado as a future cryptocurrency hub and more than $62.5 billion is invested in cryptocurrencies, up from $2.8 billion in 2019, according to the digital investment firm CoinShares.

More on that later. First the mystery.

Chapter Two: The quiet buyers

The Louisiana Pacific plant, which in its day was the source of a host of environmental violations and the target of hefty fines, closed in 2002. It then had brief lives as a coffee bean warehouse, a prefab-building plant and a hemp-related business.

Last May, CO Mine 1 Landco LLC bought the site for $2.4 million, according to the Montrose County Assessor.

Bryan Walchle, the Montrose real estate agent who handled the sale, said Landco, a group of California-based investors, bought the property because the Louisiana Pacific plant had its own electrical substation and a rail spur.

When asked about the intrigue around the project, all Walchle would say is, “they are pretty quiet. I don’t know why.”

Landco bought two parcels of land adjacent to the plant totaling 74 acres and in July went to the Montrose County Planning Commission to rezone 54 acres from agricultural to light industrial. Final approval from the county commissioners came in September.

Details of what was going on the land, however, were never disclosed.

The company doesn’t have to reveal anything more at this point because they are not producing a product that would require inspection and the land is zoned industrial, Montrose County planning director Steve White said.

“This is unusual in that we don’t know the full details of the end product,” White said, adding that he hadn’t encountered anything like it in his 16 years on the job.

When he asked the site crew what they were doing they told him they were putting in “stacks of equipment.” They told him they need a lot of power to run air conditioners to cool their equipment. 

“That tells you something,” he said. Or it is at least consistent with the bitcoin mining buzz.

Landco was represented in the rezoning hearings by Matthew Kosakowski, a Denver-based solar project consultant. Kosakowski declined to comment, passing a reporter’s contact information on to his client — who did not respond.

Sandy Head, the Montrose Economic Development Corp. executive director, has also been out to the old mill and left her business card without a response. She did get an email address, but again no response.

“We really should find out who is responsible,” Head said. “We might be able to help them.”

Republican state Sen. Don Coram, who represents the area, also tried, to no avail, to discover what is happening out on U.S. 50.

Chapter Three: The facts — that we know — laid out

What we do know, and this is where we wade into the pond of circumstantial bits and pieces, is this:

The address on CO Mine 1 Landco’s incorporation papers is 880 Apollo St., Suite 333, El Segundo, California, and its registered agent is Michael Cohen.

Suite 333 is also home to the Aspen Creek Digital Corp., whose founder is listed by PitchBook as Michael Cohen. Solar developer Aspen Creek, where Michael Cohen is a principal, is in the same office as is Ash Mesa Solar LLC, which has also been linked to the Olathe project.

Telephone and email requests for comment from Aspen Creek (the only entity with a listed phone number and email address) were not returned.

The solar arrays are being constructed by Englewood-based E-Light Electrical Services. Mark Jordan, the project manager, declined to comment but offered to pass along a reporter’s contact information to his client. Walchle, the real estate agent, did the same. There was no response.

The site will be hooked up to the power grid through the Delta-Montrose Electric Association, a rural electric cooperative, but it won’t be using DMEA electricity. The connection allows it to buy electricity if needed, or sell it on the grid if there is excess.

“The project is a private development, and DMEA’s role is to ensure a safe and reliable connection to our local grid,” Becky Mashburn, the association’s member relations manager, said in an email. “For additional details, you will need to contact the owners.”

Lots of luck with that.

Chapter Four: The energy suck

And yet the Olathe mystery would be par for the course when it comes to cryptocurrency operators who are on the hunt for cheap land, cheap power and ample connections to the grid.

The cryptocurrency industry is one of “the most opaque industries in the history of the world,” said Will Aspinwall, CEO of Flaring Solutions, a startup looking to power bitcoin mining using waste gas from oil wells as a fuel for electric generators. 

After the purchase of specialized ASIC computers needed to keep track of bitcoin calculations — $10,000 each and hundreds are needed for a single mine — the biggest operating cost is the power to run them, Aspinwall said.

“The thing that can get you upside down in this business is when bitcoin prices go down or your energy costs go up,” he said.

A single bitcoin transaction uses 2,272 kilowatt-hours of electricity, about the amount of power the average U.S. household consumes in 78 days, according to the analytic web site Digiconomist. That is enough energy to power an average residential Xcel customer in Colorado for more than three months.

In the first week of January, there were about 205,000 bitcoin transactions a day worldwide, according to Statista.

So, the quest for cut-rate energy is always at the forefront.

That is what set off a crypto mining frenzy in the towns around the Coulee Dam, some 80 miles west of Spokane, Washington. The dam on the Columbia River is the largest hydropower producer in the country.

“We have some of the cheapest power in the U.S. and land is less expensive than on the west side of the state,” said Ron Cridlebaugh, director of economic and business development for the Chelan Douglas Regional Port Authority.

The combination sparked not a gold, but a bitcoin rush starting in 2015. “Back in the early days it was kind of the Wild West,” Cridlebaugh said.

One miner just moved into a house, turned it into a crypto mine full of computers and blew the transformer for the area. Douglas County, Washington, with a population of 43,000, saw its electricity demand double in two years.

“It was a major stress and strain on the power grid,” Cridlebaugh said. “It maxed out our power infrastructure, stations and lines were running close to capacity.”

Zoning ordinances were enacted to keep miners in industrial areas and new policies put in place by the public utility districts, such as requiring any load of more than 1 megawatt to provide its own infrastructure and buy its own power on the open market.

“That’s cooled the development in mining,” Cridlebaugh said.

Chapter Five: The coin rush

While the experience of Chelan and Douglas counties is a cautionary tale it isn’t unique.

On the other side of the country, things are heating up in Massena, New York, a town of 12,000 on the Canadian border.

The first miner, Coinmint, turned up in 2018 transforming the old Alcoa Aluminum smelter into a “digital currency data center” — actually, shipping containers stacked on shipping containers filled with computers.

Like the Louisiana Pacific mill in Olathe, the aluminum plant had an industrial-size hook-up to the grid, and like Chelan County, Massena has access to inexpensive hydropower from the Saunders Power Dam on the St. Lawrence River.

But when word came last July that three more cryptocurrency miners were looking to set up shop in Massena, the town imposed a moratorium that was recently extended, while it works on bitcoin regulations.

The decision by China, which had been home to an estimated three-quarters of the world’s crypto mines, to ban the activity has sent miners scrambling to find new homes, particularly in the U.S.

“We don’t want Massena to be filled up with these sea boxes throughout the town,” Steve O’Shaughnessy, a town supervisor at the time the moratorium was enacted, told a local TV station. “We don’t want it littered with these trailers that are pumping out bitcoin.”

Residents filed a petition calling the container-pack bitcoin mines “very noisy and unsightly.”

Noisy indeed. A company named Project Spokane quietly moved into an old lumber mill in Bonner, Montana, in 2017 but things didn’t stay hushed for long.  By early 2018 residents in the town of 1,500 at the confluence of the Clark Fork and Big Blackfoot rivers were up in arms.

“First there were the noise complaints, about the loud buzzing noise,” said Diana Maneta, the Missoula County sustainability program manager. The mines use air cooling and large fans to keep the computers from overheating.

“People said it was worse than the lumber mill,” Maneta said. “It was described as a jet that never lands.”

Other concerns arose such as the operation’s “extraordinarily high energy consumption.” The mine was using electricity equal to a third of what all the households in the county were using.

While the mine had a contract for its electricity from a hydropower dam operated by Energy Keepers, a utility owned and operated by the Confederated Salish and Kootenai Tribes, Maneta said the county has climate change goals that were challenged by the crypto operation.

The fact that there were reports of more cryptocurrency mines coming was also a worry.  In 2021, the county adopted an ordinance limiting the location of mining operations and requiring that facilities either develop or purchase renewable energy to offset 100% of their electricity consumption.

“In Missoula County we just didn’t anticipate the local impacts,” Maneta said. “If we had known more upfront, we could have avoided significant disruption by putting rules in place in advance.”

Chapter Six: The preparation

Still, bitcoin mines can inject needed dollars into rural economies, Aspinwall said. “Look at a town like Rockdale, Texas. When it lost its Alcoa Aluminum plant it was a big blow, but bitcoin mines filled the gap.”

Rockdale, about 58 miles northeast of Austin, is now home to Riot Blockchain’s Whinestone mine, the largest in the world. Whinestone and Bitdeer, a spinoff from a Chinese bitcoin miner, are both located on the old Alcoa site.

The two make Rockdale, population 5,300, one of the world’s major crypto mining centers.

That said, the voices of experience say it makes sense to be prepared. “My advice to other communities and local governments would be to educate themselves on the cryptocurrency mining industry prior to the industry establishing itself in their area,” Maneta said.

“You’ve got to anticipate it,” Cridlebaugh said. “You’ve got to have your codes and policies in place early on.”

For the moment there doesn’t appear to be any such activity in Colorado. There are no local initiatives, according to the Colorado Municipal League, which represents 270 cities and towns in the state.

The Colorado Energy Office is “not aware of specific discussions or plans to evaluate or regulate” bitcoin mining in the state, according to Dominique Gomez, the agency’s deputy director.

None of the 404 bills filed in the legislature this session deal with cryptocurrency mining.

Gov. Polis, however, has emerged as a big booster of a cryptocurrency future for Colorado and the use of blockchain technology to keep track of transactions – including payments of state taxes.

“Colorado was an early adopter of policies that ensure crypto transactions have broad exemption from state securities laws, and the very first state to hire a dedicated Chief Blockchain Architect under our Office of Information Technology,” Kara Powell, a Polis spokeswoman, said in an email. 

“As a next logical step on the path to digital statehood, the governor will be directing the Department of Revenue along with the state blockchain architect to allow people to pay taxes in cryptocurrency,” she said. “The Department of Revenue and the Department of Treasury are working to allow the payment of taxes and other state services using cryptocurrencies by the end of the summer.”

And what about all the energy generating cryptocurrency uses? How will that impact the Polis administration’s Greenhouse Gas Reduction Roadmap with its goal of cutting the state’s climate-altering emissions in half by 2030?

“We hope that any private company that does decide to mine any cryptocurrency in Colorado chooses to use a system that runs on renewable energy sources,” Powell said.

Well, whatever is happening out on U.S. 50 in Olathe would appear to coincide with the governor’s hope, if, of course, it is a bitcoin mine. We’ll just have to wait and see.