Washington County Enters Into Poor Settlement In Bitcoin Lawsuit, Is Johnson City The Next Location?

Image Credit: Axel Castillo / PxHere / Public Domain

Tennessee Stands / Tri-Cities Coalition –

Washington County Tennessee has been embroiled in a years’ long legal battle to have a cryptocurrency manufacturing location shut down.

The operation resides on land owned by BrightRidge, a local electrical utility provider for much of the County, which is leased to GRIID/Red Dog who operate the bitcoin mine facility.

The manufacturer has been operating  since September 2021 in direct defiance of a court order determining the facility was operating  in violation of County zoning regulations.

Despite numerous attempts by the County to have  the facility shut down, as of this writing, they continue to operate in direct violation of the Court.

BrightRidge initially misled the County on the true intent of their proposed use of the  property. The County agreed to rezone the land for electrical utility use. At the time BrightRidge  stated the land would be used for a ‘block chain data center’.

Unfortunately, County Commissioners did not practice due diligence and the true end use was BrightRidge leasing the  land to GRIID/Red Dog, who established a cryptocurrency manufacturing operation which has generated undue noise and affected area residents.

GRIID/Red Dog has quickly become the  largest electrical customer of BrightRidge. A timeline of the situation up to and including recent  events is found within this article.  

The County was recently presented with a second settlement agreement which was publicly  disclosed and then subsequently voted upon at a special County Commission meeting on  October 30, 2023. The meeting was announced on October 25, 2023. This short time frame made any public engagement on the issue difficult since no details of the potential settlement  were made public.

Additionally, County Commissioners were first presented the full details of  the settlement at this meeting and expected to make a judgement in a matter of a few hours,  on an issue which has lingered for years. The short time frame from an announcement of the meeting to the meeting conclusion, with no public comment, is certainly questionable. The  issue and any settlement are complex requiring study for an informed decision.  

At the October 30, 2023 meeting, legal counsel for the County presented the offer and stated  the timing of the offer settlement was important as a November 20, 2023 legal deadline exists pertaining to the March 2024 trial. November 20, 2023 is the deadline for all parties to file  Summary Judgement Motions. These motions ultimately decide which issues will determine the  basis for a trial outcome. They are expensive endeavors for all parties and the idea of a  settlement is to avoid cost , time and bring some certainty to all.  

The settlement offer presented by the defendants contained the following provisions:

• Current location would cease operation by no later than March 28, 2026.

• Upon acceptance defendants pay $25,000 within 30 days plus $200 a day  until the operation closes.  

Acceptance of the offer would mean area residents who have been putting up with undue noise  would continue to be affected potentially up to March 28, 2026. This hardly brings them any  ready relief from the pain and suffering which is being endured. 

Initially, the County had been assessing penalties of $500.00 a day since March 2022. These penalties through October 30, 2023 would be in excess of $290,000.

Using the same $500.00 per day up to March 28, 2026 would have been an additional $439,000, for a potential total of  $729,000 in penalties if the operation continued to March 28, 2026.

The settlement waives all  past penalties and replaces them with a lump sum of $25,000 to be paid within 30 days of  acceptance plus $200.00 per day until the facility ceases operation. If these terms are carried to March 28, 2026, the penalties would be approximately $200,000.

As the settlement has been approved, the County is effectively handing the defendants over $500,000 in potential reduced  penalties. Why the discount?  

In a late 2021 legal suit, GRIID/Red Dog counter-sued the County for $41 million for loss of  income from being forced to shut down.

In the filing, GRIID/Red Dog stated they would lose $2 million per month in profits and would need 18 months to relocate. Since late 2021 to the current time, Bitcoin prices have decreased 44%. Additionally, electrical prices have adjusted,  and inflation has impacted GRIDD/Red Dog profits.

With this factored in, if one estimates  GRIID/Red Dog is currently bringing in $1 Million per month in profits at the location, then a  $200.00 daily penalty, which would total $6,000 per month, is hardly any incentive to move.

At  the October 30, 2023 meeting, when County legal counsel presented the settlement offer, they  touted the $200.00 daily penalty as an incentive for the operation to cease as soon as possible.  Why does GRIID/Red Dog need an additional year to relocate when in 2021 they claimed they  only needed 18 months?

The facts, figures and timelines presented by GRIID/Red Dog should have been the basis to begin a settlement discussion, yet it is obvious the information was  ignored by the County.  

During the presentation of the potential settlement, legal counsel for the County highlighted  that there are no current zoning regulations in the County allowing for legal cryptocurrency  manufacturing operations to exist. Legal counsel was quick to remind all in attendance that  County zoning regulations apply only within unincorporated areas of the County.

While County  zoning applies only in the County, towns within the County such as Jonesborough and Johnson  City could well allow cryptocurrency manufacturing within their jurisdictions. BrightRidge,  which supplies the power to the current GRIID/Red Dog site, could well seek to help them move  to Jonesborough or Johnson City in order to continue selling them power. BrightRidge operates  almost entirely within Washington County. If GRIID/Red Dog relocated the current site outside  of Washington County, then someone other than BrightRidge would be supplying power. As  previously shared, GRIID/Red Dog is the largest customer of BrightRidge.  

At the October 30, 2023 meeting, after legal counsel for the County presented the settlement offer, public comments were made.

Five area residents made comments, but they had little  impact, as they did not know the terms of the settlement until minutes before the public  comment section of the meeting. After these comments were made, the Commissioners made  various remarks and ultimately, late in the meeting, decided to go into executive session where  the public could not hear discussion. This late move to executive session largely took away any  voice county citizens could have. This did not serve County citizens well. After the executive  session ended, the County Commission publicly re-assembled. There were a few additional remarks, including a few Commissioners who made passionate statements about the  settlement being poor. Ultimately, the County Commission voted 13-2 to accept the offer.  

Why anyone in Washington County should care: 

The bitcoin mine seems poised to try and move to Jonesborough or Johnson City. Indeed, Johnson City itself is specifically mentioned in the agreed settlement. BrightRidge certainly  wants to continue supplying electrical services to their largest customer. Since no County  zoning allows for bitcoin mining, and the current operation will cease in 2026, the only  alternative is to relocate to some location where County zoning does not apply, Jonesborough  or Johnson City.  

Residents near the current mine have to continue to endure noise potentially up to March  2026. Life, liberty and the pursuit of happiness? Apparently, if you live near the current  operation, you cannot expect this anytime soon. How did your County Commissioners fare  representing your best interests? Washington County and BrightRidge together allowed this  bitcoin mine to start operations, despite it being preventable.  

BrightRidge recruited GRIID/Red Dog to Washington County and misrepresented their  intentions from the start. A local utility designed to provide service for citizens precipitated the  building of the operation.  

Washington County, along with the defendants, clearly used the November 20, 2023 deadline  for Summary Judgement Motions as an artificial problem to create urgency to compress the  timeframe for a settlement, so the public could not be energized to influence the County  Commission vote. County citizens came together on the previously defeated November 2022  settlement offer. It is obvious neither the County nor defendants wanted a repeat of County  citizens actively working to defeat a settlement offer.  

Jonesborough and Johnson City residents, if you don’t want a mess like this in your community,  you should get involved and ensure GRIID/Red Dog does not relocate to your city.  

Why anyone in Tennessee should care:  

Since there is no direct regulation of cryptocurrency manufacturing, this same scenario could occur in any of the other 94 counties and numerous communities in Tennessee. These  operations employ few people, pay little in taxes, and provide little direct economic impact.  They use up resources and provide little public benefit.  

Tennessee residents should lobby state legislators to debate the issue of cryptocurrency  manufacturing and to enact common sense legislation.  

Tennessee Valley Authority (TVA) provides the vast majority of electricity in Tennessee, through  local retransmission providers such as BrightRidge.

Given some aging facilities, growth of  electrical usage such as electric cars and a growing population, the electrical grid will be experiencing increasing stress.

Power for people or for bitcoin mining, which is more  important? TVA could discourage their retransmission partners from actively seeking to provide  power for bitcoin mining operations. Given TVA is a federal entity the federal government has  direct impact and oversight of them.  

Why any American should care:

 

TVA is owned by the federal government. TVA has encouraged their retransmission partners to  seek out entities who use power as a way to grow sales. TVA does not operate just within  Tennessee; they cover a wide swath of the Southeastern USA.  

China actively removed bitcoin companies from operating within their country. China stated  they could not be easily regulated, and criminal activity occurred with some operations. China  looked at them as entities which consumed resources and contributed little to the public.  Imagine that China does want this industry, but not in their own country. This should be a  wake-up call to all.  

The United States power grid has issues. Texas and California in particular have had rolling  blackouts and outright power outages connected to the national power grid. Our country is  seeing more demand for electrical power and this demand is expected to increase as more  citizens drive electric cars, population growth continues, and fossil fuels are de-emphasized.  BitCoin mining takes a lot of electricity which impacts our national power grid. Cryptocurrency  manufacturing provides few public benefits. Why use electrical power for a questionable, at  best, use which impacts availability of electrical power for average citizens?  

Summary:

Washington County has entered into a poor settlement agreement. This agreement does not  serve the County nor its citizens well. The County has been far too lenient by allowing  additional years for the facility to continue operation and the waiving of significant penalties in doing so. The County is also ‘passing the buck’ by potentially allowing the facility to relocate to Jonesborough or Johnson City.

The County is not being a good neighbor to Cities within the  County in not forcing a quick closure of the current location. Washington County Commission  members have ignored the will of the majority of residents. Anyone within Tennessee should  be concerned and work to ensure a bitcoin operation does not appear where you live.  

Washington County should have provided details of the settlement prior to October 25, 2023,  allowing for County Commissioners to have had more time to consider the settlement, as well  as for public engagement. The November 20, 2023 deadline cited still provided more time for  consideration. Washington County should have rejected the settlement, if warranted provide a  counteroffer for a revised settlement, or if needed, go to court in March 2024.  

Accepting a poor offer is no way to serve the best interests of County citizens.