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Permits propel crypto operations in Brainerd forward

The Brainerd City Council approved two interim use permits that will allow VCV Digital Solutions to build storage facilities in the industrial park to run its cryptocurrency mining operations.

Thiesse Drive on Wednesday, Oct. 5, 2022.
Two lots on Thiesse Drive in Brainerd's industrial park, seen here Wednesday, Oct. 5, 2022, will serve as locations for a cryptocurrency mining operation by VCV Digital Infrastructure Minnesota.
Kelly Humphrey / Brainerd Dispatch
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BRAINERD — Brainerd city officials issued two permits Monday, Oct. 3, that will move forward proposed cryptocurrency mining operations in the industrial park.

Despite a split vote from the Planning Commission, City Council members approved two interim use permits, allowing VCV Digital Infrastructure Minnesota LLC to build storage containers at 1911 and 1918 Thiesse Drive, with outdoor storage designated as the primary use for the properties.

VCV Digital will operate the crypto mining facilities after working with B&D Power Solutions — the company that originally approached the city — to acquire the land for the operations. The permits are contingent on final sale of the properties to VCV Digital, and they would be voided if crypto mining operations discontinue at the sites.

Cryptocurrency is a form of digital money that is decentralized and can be used to buy goods over the internet and exchange money without a bank being involved. While there are thousands of cryptocurrencies and counting, Bitcoin has emerged as the most popular one. Cryptocurrency mining is the energy-intensive process of extracting digital money by solving complex puzzles via supercomputers.

While council members unanimously approved the permits Monday, the Planning Commission’s vote on the items was split at 3-3 during its September meeting, when some members voiced their opposition to the cryptocurrency mining operation in general.

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“I think it’s a horrible project for our city, and I think it compromises our future energy independence and sustainability,” said Mike Duval, Planning Commission chair, on Sept. 21. “When I look at 16 employees for combined 50 megawatts of power, that’s a tremendous amount of energy.”

Brainerd Public Utilities approved a purchase power agreement with VCV Digital in March, allotting the company 50 megawatts of power per month once the operations are up and running. The approved purchase agreement states the power is interruptible, meaning if power had to be shut off for any reason, the power to the cryptocurrency facility would be the first to go before the rest of the city.

Brainerd’s extra power capacity made the city an attractive location for cryptocurrency mining. When a new BPU substation was built in 2008, its capacity was based on future growth projections for the city, leading to three transformers each capable of handling 47 megawatts of power. The peak energy use for BPU’s coverage area during the year is 40 megawatts, roughly 100 megawatts less than the total capacity.

In March, BPU commissioners approved an agreement with American Electric Power — BPU’s energy supplier — to purchase the necessary power when needed. Once the cryptocurrency operations are up and running, American Electric Power will provide BPU with the cost for the energy, and BPU will in turn bill the company.

BPU is working on a similar agreement with Clough Properties and its subsidiary Just for Krypto for 20 megawatts of power.

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The idea of cryptocurrency operations in Brainerd was highly contested late last year, when both Texas-based B&D Power Solutions and local Clough Properties expressed interest in purchasing the same lots in Brainerd’s industrial park for their cryptocurrency facilities. There were also concerns over the city having the capacity to fulfill the power requests from both companies.

During an Economic Development Authority meeting last December, commissioners addressed misinformation that had spread on social media regarding the issue, including accusations that the city was choosing to work with an out-of-state company rather than a local one. B&D Power Solutions previously had operations in China before cryptocurrency mining was banned in the country.

The City Council’s actions up until that point did not accept or reject proposals from either company but conveyed land in the industrial park to the EDA, giving the EDA authority to enter into negotiations with either company. EDA members agreed to move into those negotiations in December, but Clough Properties has since opted to buy an existing building in the industrial park for its cryptocurrency operations.

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The EDA agreed in March to sell two parcels in the industrial park to VCV Digital for $277,815, with the sale contingent on the company submitting a construction plan and securing financing. The EDA found those conditions to be met in September and conveyed the lots to VCV Digital.

CryptoRendering.JPG
A Crow Wing County map shows the parcels of land VCV Digital Infrastructure Minnesota purchased for its cryptocurrency mining facilities.
Contributed

Planning Commission response

A 3-3 vote saw planning commissioners split on approving VCV Digital’s interim use permits in September. Chair Duval, along with commissioners Don Gorham and Chuck Marohn, opposed the measures, while commissioners Tad Erickson, Kevin Yeager and Theresa Woodward supported them. Commissioner Matt Kallroos was absent from the meeting.

Gorham asked several questions about the city’s power supply, how much of its energy is renewable and the ethics of using so much power to promote wealth by mining cryptocurrency.

Jerry Tang, who attended the meeting virtually on behalf of VCV Digital, compared crypto mining to any other activities people use power for, like playing video games or streaming videos on YouTube, and said the productivity of such is subjective to the user.

Duval argued against the business by using the city’s comprehensive plan, which states the city aims to ensure adequate water and power supply to meet long-term needs of the city and steer city development toward energy conservation. He also said he did not believe the proposed 16 full-time jobs that would result from the facility were not enough to warrant the project.

“I am just blown away at the amount of energy that this project would consume,” Duval said. “It’s in direct contradiction to the goals of our comprehensive plan.”

Tang reminded the commission the operations would not be taking energy away from the city but only using the city’s infrastructure to use the power, which would be bought through American Electric Power. He added the company will pay BPU well over $1 million a year for the energy it uses, which will in turn finance BPU’s solar power project, providing more renewable energy for the city.

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BPU Superintendent Scott Magnuson said during a phone interview Thursday, Oct. 6, VCV Digital purchased solar renewable energy credit for five years. The city will use those credits to pay down the cost of the solar field, which in turn makes the purchase power price lower for BPU.

Marohn suggested a reclamation clause be included with the permit, requiring VCV Digital to reimburse the city for work that would have to be done on the site for other business ventures if the crypto mining operations failed within a certain amount of time.

Erickson, who sits on both the Planning Commission and City Council, advocated for the permits, telling commissioners it was not their place to question the business plan of someone proposing to do business in the city. The business, he said, is the one taking the risk upon themselves.

CryptoRendering2.JPG
A design rendering shows one of the cryptocurrency mining facilities planned for Brainerd's industrial park by VCV Digital Infrastructure Minnesota.
Contributed

“How long have we sat with empty lots in this industrial park? And now we have an opportunity to at least put it to some use,” Erickson said.

Yeager agreed, noting BPU officials already stated they did not have concerns about the amount of power requested by both companies proposing cryptocurrency operations. Yeager said the city’s energy capacity is a unique asset, and he fully supports a business coming in to make use of that asset.

“We have an applicant in front of us who wants to do something with a bare lot that is sitting there doing nothing. We don’t have anything in front of us right now. So I just believe that if you have somebody who wants to go, you let them go,” Yeager said.

When it came time to vote on the first permit for 1911 Thiesse Drive, Duval said there was too much confusion on how everything would work in terms of the power supply, and Gorham said he had too many unanswered questions.

City Council response

Council members unanimously approved both permits during their meeting Monday, as was staff’s recommendation.

Council member Mike O’Day said while he was against this project to begin with, he would vote in favor of the permits because of all of the work into it, including the power agreement and the land sale.

Erickson reiterated his comments about the city’s role in questioning business plans and the information about BPU officials already addressing the availability of power.

During the council comments portion at the end of Monday’s meeting, Mayor Dave Badeaux spoke about city officials’ duty to be stewards of the city and hold themselves to the highest possible standards, saying there were a few recent happenings that have been “a little squirrely” and gotten the city off track.

One of the items he mentioned was the last Planning Commission meeting, saying those who sit on all city commissions should make a point of asking relevant questions related to issues ahead of time and come to meetings prepared. In the case of the crypto mining operations, Badeaux said some of the questions asked at the Planning Commission meeting were answered at previous meetings of other bodies, and if commissioners still had questions, they could have arranged for BPU officials to be present to answer those.

“Even if we are commissioners, if we have questions, attend those meetings and ask those questions, or send an email addressing those questions so that we can actually address those things rather than … potentially attacking someone’s business plan,” Badeaux said. “We just can’t have that type of stuff.”

He said his speech was not meant as a direct attack at anyone but as a reminder that people are interested in what the city’s doing and are prepared to keep city officials accountable if things are not done correctly.

Brainerd’s committees and commissions are made up of unpaid volunteer citizens and property owners.

There is not yet a set timeline on when the cryptocurrency mining facilities will be up and running.

THERESA BOURKE may be reached at theresa.bourke@brainerddispatch.com or 218-855-5860. Follow her on Twitter at www.twitter.com/DispatchTheresa.

Theresa Bourke started working at the Dispatch in July 2018, covering Brainerd city government and area education, including Brainerd Public Schools and Central Lakes College.
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