Two companies — Texas-based B&D Power Solutions and local company Clough Properties, owned by Brainerd residents Steve and Cindy Clough — have submitted proposals to the city to buy land in the industrial park to build facilities for cryptocurrency mining operations. The Clough Properties proposal also includes space in the industrial park for the company’s existing businesses, Just for Kix and The Teehive, both of which currently operate in Baxter.
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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.
Representatives from both companies presented their proposals to the EDA Thursday.
B&D Power Solutions, together with affiliate companies CTM and Fontalcloud, are professional service providers for data center and mining sites, specializing in mining site design, development, operation and management. Headquartered in Addison, Texas, the company has supported dozens of data centers and mining sites in Asia, North America, Central America and South America.
The company’s proposal is to buy two lots of land in Brainerd’s industrial park for $65,000 per acre, at a total price of $189,410 for the 2.914 acres. This facility for cryptocurrency mining operations would require 50 megawatts of power.
Representatives Fred Du and Andrew Bushman said the company does not necessarily need the exact two parcels of land requested but chose those two because they were ideal in terms of construction and getting power there.
“But land is land,” Bushman said.
B&D Power Solutions is currently building a mining facility in Ohio that is not yet operational and previously had operations in China before the company banned cryptocurrency mining.
Fred Du, of B&D Power Solutions, tells members of the Brainerd Economic Development Authority Thursday, Dec. 9, 2021, of his company's proposal to purchase land in the industrial park for cryptocurrency mining operations.
Theresa Bourke / Brainerd Dispatch
WATCH THE ENTIRE MEETING HERE
Familiar to many lakes area residents as the owners of Just for Kix and The Teehive, Clough Properties has also undertaken Just For Krypto, a cryptocurrency mining business with operations currently running at The Teehive.
Clough Properties has submitted three letters of intent to the city with requests to purchase property in the industrial park and power from Brainerd for Just for Krypto.
Located on Cypress Drive in Baxter, the TeeHive is a custom apparel business founded by Steve and Cindy Clough. The Cloughs are currently operating a cryptocurrency mining operation called Just For Krypto in the building. Steve Kohls / Brainerd Dispatch file photo
The first letter of intent, dated Nov. 24, offered $260,000 for two plots of land in the industrial park and requested 20 megawatts of power from Brainerd Public Utilities — 10 megawatts right away and another 10 before the end of 2022. The proposal went before the EDA during its meeting at 7:30 a.m. Dec. 2.
Clough Properties submitted a subsequent letter of intent with updated conditions to the city the afternoon of Dec. 1, after the agenda and packet for the next morning’s meeting had already been assembled.
Clough Properties sent out a final updated letter of intent and proposal to the city Dec. 3.
The final letter offers $500,000 for four plots of land in the industrial park and requests 60 megawatts of power for Just for Krypto and for facilities for The Teehive and Just for Kix. The letter of intent also requires first right of refusal on the rest of the lots in the industrial park, which currently has 13 lots available. Two of the four lots requested, however, are the same two lots B&D Power Solutions wants to buy.
The updated proposal also includes an offering of $500,000 to BPU to cover the cost of getting power to the lots and a commitment of $5 million to the Brainerd Family YMCA’s capital campaign.
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The EDA met Dec. 2 to recommend the city council convey the property requested in the proposals from both companies to the EDA for the possibility of future sale. The Clough proposal on the table at that meeting was the one dated Nov. 24.
The city council also referenced that proposal Monday, Dec. 6, when members voted to convey the industrial park lots to the EDA. The specifics of the proposals, however, were not up for discussion.
Cindy and Steve Clough pose together in this 2016 photo.
Steve Kohls / Brainerd Dispatch
Steve Clough and representative Ian Ulrich both attempted to address the most recent proposal during the public hearing portion of the council meeting, but Council President Kelly Bevans said they were not allowed to speak on agenda items, per city policy. Clough, instead, spoke about the multi-generational ties he and his wife have to Brainerd.
Bevans then gave a representative from B&D Power Solutions — who attended virtually — a chance to speak about his company.
Ulrich began his presentation Thursday by telling the EDA this process has not gone the way Clough Properties envisioned, partially because they did not fully understand the process of city government.
— Ian Ulrich, representing Clough Properties
“I just really want to start over. You know, we live here; we see you guys everywhere,” Ulrich told EDA members, adding he knows they are committed to the community.
“... As a former volunteer firefighter, first responder — I sit on my church council — I’m passionate about the community as well, and I think that we are a really good fit for each other, not to mention the Clough family and their existing businesses in this community.”
“We really aren’t asking for any favors,” Ulrich continued. “You know, we’re asking you to consider the fact that we have a reputation in this community for treating people fairly. I really believe we’ve earned the opportunity to take on this project as a whole.”
Ian Ulrich, of Clough Properties, tells the Brainerd Economic Development Authority Thursday, Dec. 9, 2021, of his company's proposal to purchase land in the industrial park for cryptocurrency mining operations.
Theresa Bourke / Brainerd Dispatch
EDA member Mike O’Day, who also sits on the city council, asked Ulrich why the proposal had changed so much. Ulrich said the original scope was for 20 megawatts, but after presenting the plan to community members, several investors stepped in to help fund the project, growing the scope significantly.
While it may seem like there would be room for the city to move forward with proposals from both companies, Ulrich said that ultimately would not work, as he believes the two would get into a bidding war for any future power made available. Essentially, Ulrich said EDA members must choose a company, and he hopes they decide to shop local.
Brainerd is especially appealing for cryptocurrency mining companies, as its extra available capacity electricity is rare, BPU officials said.
When a new Brainerd Public Utilities 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.
The proposals would require installing additional power lines to be run directly from a nearby substation.
BPU Superintendent Scott Magnuson said Thursday the city would not have the capacity to fulfill the 110 megawatts requested by both parties right away, but BPU is beginning to undergo a feasibility study to see how much additional power could be added in the future.
If the city were to sell land to either company, sales would be contingent on power agreements with BPU. The power routed to the facilities, Magnuson said previously, would be interruptible, meaning if power had to be shut off for any reason, the power to the cryptocurrency mining facilities would be the first to go.
Council President Bevans, who also sits on the EDA, mentioned online posts over the past week from people outside Clough Properties sharing the proposals and “all kinds of various information.” He said online negotiations are not the way to go.
Kelly Bevans.
Local realtor Chad Schwendeman posted about the issue several times in the last week, incorrectly asserting the city council turned down the most recent Clough Properties proposal in favor of an out-of-state company.
Gabe Johnson, who sits on both the city council and the EDA, also engaged in social media commentary concerning Schwendeman’s claims, eliciting rebukes from Schwendeman.
The city council’s actions Monday night did not include support or opposition to proposals from either company but allowed conveyance of the properties requested to the EDA, giving the EDA authority to enter into negotiations with either company if they so choose.
Ulrich, who did not speak to any specific social media posts as they did not come from his company, said he shared information with investors and other community members making them aware of the final proposal, as he did not feel company representatives got their chance to tell their story Monday.
Gabe Johnson
Johnson reiterated Thursday that the council’s actions pertained to the original proposal, as that was the one provided to the EDA before the Dec. 2 meeting. He said he wanted to clarify, since the Cloughs have “so many different amounts and offers out there.”
Steve Clough then spoke, saying something feels odd about the city’s willingness to give 50 megawatts of power to B&D Power Solutions but only 20 megawatts to Clough Properties, based on the first proposal. Clough said he has not received an answer from city staff as to why that seems to be the case.
— Steve Clough, representing Clough Properties
“My wife and I have been business people in this community for 40-some years. Forty-some years. And we’re being treated like this,” Clough said, beginning to raise his voice. “You’re sitting there — Gabe (Johnson) just said there’s been ‘so many proposals.’ So many proposals. There’s been three proposals, Gabe, three proposals in two weeks, but this has been a fast-moving project.
“... I am very disappointed in this community — very disappointed right now. I have, since a young child, I listened to my father tell me this community will never bring industry in here. And here we are still today. I can sit here and tell you businesses that have left our community because they couldn’t work with the city council and couldn’t work with the EDA. What is going on? I don’t get it. Don’t you guys want to develop this community? It doesn’t make sense, guys. It does not make sense. And I’m very disappointed in all of you. Thank you for listening to me.”
Clough then left the meeting.
Steve Clough speaks during Brainerd EDA meeting on cryptocurrency mining proposal
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EDA and staff members then clarified they have and are considering the most recent proposal from the Cloughs, during which time Johnson called the commitment of funds to the YMCA a bribe.
“It’s illegal for me to accept an offer where there is a promise of benefits to organizations I support to try to sway my opinion. And you have that right here,” Johnson said, noting his kids go to day care there, his wife is involved with the YMCA’s capital campaign, Brainerd’s city administrator is on the YMCA Board of Directors and the past chair of the parks board is involved in the organization’s capital campaign. The YMCA is a private nonprofit organization and is not directly funded by city of Brainerd taxes.
“You’re going to give them $5 million and think that’s not swaying the vote?” Johnson said, starting to raise his voice. “I can’t vote — it’s illegal for me to vote for this proposal.”
Gabe Johnson calls proposed YMCA donation a "bribe"
Bevans said he has known the Cloughs for 30 years and believes them to be phenomenal people and business owners and does not think there was any ill intent.
The EDA did not vote to accept or deny either company’s proposal Thursday but authorized city staff to enter into negotiations with both. After the meeting, City Attorney Joe Langel said he would not speak to the legality of a promised donation to the YMCA, as it was a statement that had no bearing on the EDA’s ultimate vote, but said the action the EDA took to enter into negotiations was not illegal.
— Gabe Johnson, member of Brainerd Economic Development Authority and Brainerd City Council
Tyler Glynn, executive director of the Brainerd Lakes Area Economic Development Corp. — the city’s contracted economic development service provider — reminded the EDA of the goal of the industrial park, which is to create jobs and increase the community’s tax base. Power aside, he asked each company how many jobs they would be bringing to Brainerd.
Tyler Glynn. Submitted Photo
Ulrich said there will be at least 10 new jobs at Just For Krypto, along with the relocation of many Just For Kix and Teehive jobs from Baxter to Brainerd. Clough Properties has also promised to use 100% local labor to build all of its new facilities.
Du said B&D Power Solutions would need seven people for all three shifts, equating to 21, though they would not necessarily be able to hire all local people, as the jobs would require highly specialized engineers. Another three or four people would be needed to maintain the buildings, he said. Du said his company would also use local contractors for construction.
EDA members had the option Thursday of moving into negotiations with either or both companies to further the projects.
Though it may not be possible to ultimately execute both proposals, Bevans said he believes there is at least room for discussion.
“Maybe we can work something out; maybe we can’t,” he said. “Maybe in the end we can only choose one. Maybe we’ll get one presenter so upset that they’ll withdraw. I don’t know. It seemed like there was a lot of emotion on the purchase of industrial park lots. However, I think we should try.”
O’Day said he thinks this could be a win/win opportunity for both groups but is not sure if that is possible.
The EDA voted 4-1 to begin negotiations with B&D Power Solutions, with Johnson, Bevans, Wayne Erickson and Marie Kirsch in favor, and Mike O’Day opposed.
Bevans, Erickson, Kirsch and O’Day voted in favor of entering into negotiations with Clough Properties, while Johnson abstained. Johnson said he hopes the city can work out a deal with the Cloughs but is not comfortable with how the process has gone.
EDA member Toni Bieser abstained from voting on both matters due to conflict of interest, as she works for Hy-Tec Construction, which Clough Properties has indicated would be one of the contractors and the new facilities.
THERESA BOURKE may be reached at theresa.bourke@brainerddispatch.com or 218-855-5860. Follow her on Twitter at www.twitter.com/DispatchTheresa.
