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Data Centers Love North Dakota.  Should North Dakota Love Them?

News | July 16th, 2023

By Laura Simmons

Governor Doug Burgum is welcoming crypto mining and data center companies into North Dakota, saying in a January 2022 news release that it will diversify the state’s economy and attract high-paying jobs. However, these companies have come under scrutiny for a variety of reasons, including their high energy use.

Although there are likely close to a hundred crypto mining operations in North Dakota, the six largest ones are Applied Digital with locations in Jamestown and Ellendale, Atlas Power Data Center in Williston, Rainbow Energy in Bismarck, Core Scientific in Grand Forks and Bitzero in Nekoma. These places house many servers with high computing power, requiring much energy to run.

“This major investment in North Dakota will further cement our state’s growing reputation as a hub for data centers and cryptocurrency mining, thanks to our incredibly reliable, affordable and redundant power supply and a climate that lowers cooling costs for data center operations,” Burgum said in the same news release.

North Dakota is considered one of the best states for crypto mining because of its low energy prices, stable energy grid, cool winters to keep the machines cold, low taxes and less government regulation. Commerce Commissioner Josh Teigen said these centers benefit North Dakotans by providing jobs, increasing revenue to the state through taxes, and helping the energy grid.

Teigen said energy production is constant while the demand curve of energy fluctuates throughout the day, causing the energy grid to be oversupplied. Instead, he said it's helpful to have a large baseline energy user, like data centers, so power companies can more easily predict demand.

“So having these big power users attached to the grid actually helps smooth that demand curve out and actually can make it more affordable for power production to happen,” Teigen said.

Furthermore, wind towers won’t generate energy if the grid is full. The Department of Energy’s 2022 Land-Based Wind Market Report said wind energy curtailment in 2021 was at 4.8%. Therefore, these data centers will allow more renewables to enter the grid, according to Teigen.

Teigen was unable to provide the High Plains Reader with data on how much energy produced in North Dakota is not used. However, he suggested the High Plains Reader reach out to the Midcontinent Independent System Operator (MISO), a large supplier, although not the only supplier, of energy to North Dakota.

A MISO spokesperson said, “Energy is generally produced on demand and delivered in real-time so energy isn’t necessarily ‘wasted’ on the electrical grid. Energy production may be curtailed in some local areas (before it is created) if there [is] a constraint in being able to export the energy to an area that is in need of electricity.”

A recent New York Times article “The Real-World Costs of the Digital Race for Bitcoin” raised concerns that bitcoin mining facilities were increasing utility prices for residents and highlighted instances in Texas when the facilities continued to run while residents didn’t have power.

Teigen said although energy prices are a matter of supply and demand, it’s not that straightforward, saying he’s seen data suggesting data centers could lower or increase energy prices.

For example, a spokesperson for Montana-Dakota Utilities Company, which is supplying Applied Digital in Ellendale with power, said its customers will see their bills decrease because of its service agreement with the data center.

Applied Digital likely chose a site in Ellendale because the area has many wind farms, which can lead to a surplus of electricity, causing power to be inexpensive, according to Mark Kinzler, the general manager of Dakota Valley Electric Cooperatives, which also supplies energy to the Ellendale area. Kinzler predicts energy prices may go up for Ellendale residents.

“I think there's a lot of other factors there and it's hard to attribute something as complex as price to whether this data center exists or not,” Teigen said.

The top three data centers in North Dakota together consume nearly as much power as every home in the state, according to the New York Times. However, Teigen said these companies are not taking power away from North Dakotans because the state exports over 90% of its electricity.

“We're never going to see a case where a hospital loses power but the data center is still running,” Teigen said. “There's a hierarchy of if curtailing needs to happen, what that priority level looks like and data centers are usually, especially on the crypto mining side, the first ones to get shut off.”

A spokesperson for the crypto mining center Core Scientific said it powers down its computers to conserve energy depending on the needs of the local population.

In Northwest North Dakota, Atlas Power is being built by FX Solutions Inc. and is set to be the largest data center in the world. However, on June 20, the Williams County Commission told Mountrail-Williams Electric Cooperative to cut power to Atlas for not complying with building codes.

The Commission initially requested that power be cut to Atlas on April 28 after noise complaints and building violations. Atlas was running without a certificate of occupancy. Allegedly Atlas had unlicensed contractors after it fired FX Solutions Inc. President Richard Tabish; and the lack of a perimeter fence posed a hazard to life as children could easily enter and be electrocuted, according to the May 2 Williams County meeting minutes.

However, Atlas appealed and Tabish, whom Atlas had brought back, spoke to the Commission, requesting more time. Atlas’s COO Jeff Young spoke to the Commission through WebEX. Other than that appearance, no Atlas representatives have yet appeared at a Williams County Commission meeting. The Commission gave Atlas until June 16 to come into compliance.

In a May 2 meeting, citizens said the noise levels reached 70 to 95 decibels and seemed to get louder at night, making it difficult for one citizen’s child to sleep.

However, Tabish, whom Atlas rehired, said he measured the sound levels to be 50 to 70 decibels and the noise should be less at night. But, he said they were determined to reduce the noise levels, eventually bringing in a third party, Urban Solution Group, to help.

At this same meeting, Commissioner David Montgomery scolded Tabish for operating without a certificate of occupancy, which is the final approval issued when a place meets the building codes required for use and occupancy.

“Any structure that is built in Williams County; residential, commercial or industrial property; cannot be occupied until a certificate of occupancy is permitted,” Montgomery said. “It’s not our fault that you guys did this in that facility. You knew ahead of time, or you should have known, that as a contractor you can’t start the facility until a certificate is issued.”

Tabish said the center needed to run to bring in revenue, saying that if the revenue goes away, the project goes away. He said financing became more difficult after Bitcoin’s value dropped and Core Scientific filed for bankruptcy. He said he didn’t know if Atlas could recover from a potential shutdown.

By the June 20 commission meeting, although Atlas had added security and signed a general release and waiver form of liability, it still had not yet had final inspections, the sound levels had not been reduced, it did not have a certificate of occupancy and Atlas owed $224,000 in fines for running without a certificate of occupancy.

The Williams County Commission voted to have Mountrail-Williams cut power to Phase 2 of the project.

However, Mountrail-Williams, which, according to the court documents, is receiving an excess of $3 million per month from Atlas, has refused to cut power.

“Because of the severe damages that would be caused by disconnecting services, it is Mountrail-Williams position that Williams County request/demand should be decided by the court,” the court documents said. Both parties were awaiting the court’s decision.

“Based on status updates delivered by the Development Services Department and FX Solutions at the June 29, 2023, regular meeting of the Board of County Commissioners, issuance of a standard 60-day Temporary Certificate of Occupancy (TCO) to Atlas Power Holdings ND, LLC was unanimously approved by motion of the County Commission.

“During the meeting, officials confirmed that Atlas Power Holdings ND, LLC had rectified building code violations, met State and County requirements for building inspections and paid the fines levied against them for previous building code violations totaling $232,000. In addition, a representative from the project’s general contractor, FX Solutions, updated the Board on the scheduled installation of acoustical panels and security fencing, anticipated to be complete by mid-July, which will serve as a sight and sound barrier for the site. Issuance of a Certificate of Occupancy will be considered once a required emergency access road is fully completed following acoustical panel installation.”

HPR attempted to contact FX President Richard Tabish and COO Jeff Young but did not hear back by the writing of this article.

Some 400 miles away in Ellendale, Mark Bobbe, who is on the board of a local oil company, the Farmers Union Oil Co., said he thinks Applied Digital, located in Ellendale, could exacerbate the current worker shortage.

“You're not going to get a family to move to Ellendale, North Dakota for a $20-an-hour job,” Bobbe said. “So what they're going to have to do to get employees is try to steal employees.”

Applied Digital has 29 employees, but they might need up to 60 in the future, according to the Jamestown Sun,

Applied Digital had a ribbon-cutting ceremony on June 16. The company provides computing power for its customers to mine Bitcoin. However, it is hoping to expand into artificial intelligence. Applied Digital’s CEO Wes Cummins said he thinks North Dakota could be the center of the AI revolution, according to an article by the Dickey County Leader.

Given Applied Digital’s high energy usage, Montanta-Dakota Utilities Company (MDU) and Dakota Valley Electric Cooperative were interested in supplying Applied Digital with power, which uses up to 180 megawatts. For perspective, MDU’s peak demand is 611 megawatts. The two energy companies entered into a regulatory process through the North Dakota Public Service Commission.

Dakota Valley referred to the 1965 Territorial Integrity Act, which outlined the boundaries between investor-owned energy suppliers (like MDU) and cooperatives to reduce friction between them, according to Kinzler.

The case ended when MDU and Dakota Valley entered into a confidential settlement agreement. Kinzler said Dakota Valley is hoping for more communication in the future.

“It was more just a territorial dispute on how it was handled,” Kinzler said. “It was an opportunity for us to talk through what made sense and go forward. We’re good with MDU. We work closely with them.”

However, Bobbe said he is concerned about the precedent this case could set, saying the investor-owned energy companies like MDU don’t want to supply to small loads like his farm, which is why he said it’s important for the cooperatives to supply energy to rural areas.

Bitcoin’s volatility also has people concerned. In late December 2022, Bitcoin’s value dropped and Core Scientific, headquartered in Texas, filed bankruptcy after beginning operations at the end of 2021 and receiving the “Project of the Year Award” in the Urban Community Division by Governor Doug Burgum in October 2021 for its contribution to the economic health of the community. However, Core Scientific said its day-to-day operations would remain the same.

Core Scientific said North Dakota continues to be conducive to sustainable long-term growth.

“Our roadmap showcases continued market leadership with significant growth and expansion,” a spokesperson for Core Scientific said.

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