Front Burner - Mysterious noise sparks discovery of crypto power plant in Alberta

Episode Date: September 3, 2021

A mysterious noise frustrating an affluent Alberta community sparked the discovery of a secretly set up bitcoin-mining operation. CBC Calgary’s Sarah Rieger explains.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Neighbours told me it sounded a lot like the hum of a plane's engine. Basically this constant buzzing sound they were hearing outside, inside their homes, all times of day and night. And it seemed to be coming from a couple hundred meters away across these farmers' fields from what they thought was a dormant natural gas well.

So this is my colleague Sarah Rieger. She's a reporter in Calgary. And after receiving a tip, she started digging into noise complaints from a wealthy community near Edmonton. Some people thought it was some kind of farm equipment. Some people thought it was some other kind of equipment. We have a hot tub in the back. We'd go sit and go,

hey, what is that airplane landing in our field? What first seemed like a normal neighborhood squabble about keeping the volume down soon involved secretly constructed power plants, big financial technology, and the future of Alberta's energy infrastructure. It all started in the fall of last year, when some residents of Sturgeon County complained about that sound that she was describing. As you can imagine, a constant buzzing noise is pretty frustrating. So they say not only could they really not use their backyards anymore

because it was just such a disruption, multiple people living along this strip of home said it was preventing them from sleeping at night to the point where some of them actually ended up sleeping in their living rooms just to get further away from the sound. It's just like a wave. You hear waves in the ocean, but it's 10 times louder and 100 times more annoying. It's almost like a plane engine warming up on the tarmac. So it would be just running for a little while, and then it goes a little bit higher, and then it goes a little bit higher. What happens when they investigate this source of the sound? What did they discover?

They were pretty desperate to figure out what was going on. So they started driving around trying just to get a sense. Like initially they thought maybe it's farm equipment, maybe it's some construction going on somewhere. And finally, one of the neighbors, Jeff Kasupjak, who's president of the Greystone Manor Community Association, he drove over to that dormant natural gas well. And he was pretty surprised by what he discovered. And so what does he discover at this like dormant gas well? So when he drove up, what he saw were these four shipping containers. And when he spoke to the workers on site, he discovered they were filled with computer servers

to power a cryptocurrency mine, essentially. So they'd set up these computer servers all hooked up to the gas well, and it was powering Bitcoin mining. Wow. Did he say anything about how he reacted when he saw that? He was extremely shocked. And I had no idea what a Bitcoin mining operation looked like. Like, I know what data centers look like. I know what data centers in a box look like. I never imagined ever that there would be a whole bunch of these things 700 meters away from my house.

Like, I don't think you move into a community like this thinking that, you know, a large cryptocurrency mining plant is going to be built just a few hundred meters away from your home. cryptocurrency mining plant is going to be built just a few hundred meters away from your home. We've talked a bit about cryptocurrency mining on the show and its impact on the environment. But can you remind us why do they need so much power to create cryptocurrency? Essentially, what are they doing at the storming gas well? So computers mining Bitcoin or other cryptocurrencies, they're solving these complex computational mathematical equations in order to get payout of these digital coins. And, you know, the faster you're able to do it, the more calculations and numbers you're able to crunch, the larger your payout is. And that has a really huge electrical draw, right? Running all of these computers.

And what do we know about how lucrative mining operation like this could be? There's a reason it's such a booming industry right now. So the price of Bitcoin is pretty volatile. It's gone between $30,000 and $60,000 US this year. Actually, right now it's sitting at a bit over $60,000 Canadian. And the company said for every 10 megawatts of power, it can generate about 1.2 bitcoins per day.

This was a five megawatt plant. So you can kind of do the math for yourself of the tens of thousands of dollars this could be potentially bringing in just for having some computers running. Right, a day, essentially. Yeah, exactly. Who is behind all of this? So this Vancouver-based company, Link Global, had partnered with the owners of the natural gas well. It's this Calgary company called Mega Energy or Make Alberta Great Again Energy and set up the cryptocurrency machines on site. So, of course, we know residents are shocked to find this operation. But had this company, Link Global, told anyone that they were doing this? Not really. So the company hadn't notified the neighbors about its plans

or Sturgeon County or the Provincial Utilities Commission. And would they have needed any sort of permission from any of these groups to be there, to set up a bunch of shipping containers with computers and run them? So they do. And I'm going to try and sum this up in a way that's not too boring or in-depth because the legalities of this are actually really interesting. It's kind of shown this whole odd regulatory framework that isn't really prepared to deal with facilities like this. Basically, if you're starting a small power plant in the province, you're totally okay to start one up if you can prove a few conditions first. So the first needs to be that you're only generating

power for your own supply, which there was some contention over, but they were eventually able to prove. But then there are two others. There needs to be no adverse effects on nearby residents and no negative effects on the environment as well. And they hadn't really done the due diligence to prove in advance or to show that they didn't need to prove that, you know, they weren't causing problems for anyone in the area. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people, and I have some startling numbers to share with you.

Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo, 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Cops. I know the company is also saying that they're helping with a very real problem in Alberta. And let's talk about that problem. So as you mentioned, this plant is operating on an inactive

gas well. And so what are these things and why are there so many of them just sitting around Alberta? So when Alberta's oil and gas industry was booming, hundreds of thousands of wells were set up all over the province. The problem right now is that because the price of oil, the price of gas are not doing quite as well as they were at their peak. A lot of wells are just becoming abandoned and aren't being used anymore. That wasn't quite the case at this well in Sturgeon County. It was dormant. But the issue is that once wells move from being

inactive and dormant to abandoned, when that infrastructure just isn't being used anymore, it can create major environmental impacts unless it's cleaned up. And the province has estimated the costs of that cleanup could be up to $30 billion just for how many wells there are sitting unused. And so essentially then Link Global is making this pitch, right? That what they're doing is good for the community and also for the environment? Definitely. So Stephen Jenkins, the CEO of Link Global, has a really interesting environmental background. He's actually been recognized for his work on projects internationally by the United Nations.

I've had two awards at United Nations for environmental initiatives, one in West Africa and one with the cities in BC. So I think, you know, coming at this and looking at it and being obviously opportunistic from a business perspective, but being very conscious of the outcomes. He kind of has been making the case that despite the energy intensiveness of this industry, the cryptocurrency industry, that by using this dormant infrastructure that would potentially, you know, leak emissions otherwise, that he's kind of keeping it active, keeping it maintained. So we wouldn't go in and put a new well in or do anything like that.

We're looking for, you know, things that have been abandoned that require this kind of restoration and retooling. One of the concerns with dormant wells like this is they could leak methane into the atmosphere, which some estimates say could cause about 80 times as much global warming as CO2. So he's kind of saying, let's, you know, let's keep this well active, let's keep it in use. And let's prevent something like that from happening. Okay, but this company is literally still burning a fossil fuel, right, to make energy. So how is that not bad for

the environment? That's a really great point. And that's definitely what critics are concerned about in situations like this. One academic I spoke with, Sarah Hastings Simon, who's an assistant professor at the University of Calgary School of Public Policy, says basically, if something like this becomes popular, it could prolong the use of all of this infrastructure that might otherwise be retired. There's definitely a lot of concern that I think is warranted around the environmental impact of Bitcoin. And, you know, what, if anything, is the benefit of using all of this energy to replace the monetary system that works already with less amounts of energy.

And in particular, the potential for Bitcoin operations to exactly end up extending the lifetime of older energy infrastructure that would otherwise be retired and that, you know, may be higher emitting. No, I understand there's almost 200,000 dormant or abandoned oil and gas wells across Alberta. And there's they have a lot of what these crypto miners need most energy. And so is anyone else trying the same idea right now or are these guys kind of pioneers? This definitely isn't new to Alberta and it's something that appears to be taking off. So I spoke to the Alberta Utilities Commission to try and get an estimate of just how many of these are operating across the province. They weren't able to say. But we do know that one company, Upstream Data, has been pairing flared natural gas with Bitcoin mining data centers across the province since 2017. And

there's potential that a huge project could come here soon as well. So Nevada-based BlackRock Petroleum Company has proposed bringing in up to a million Bitcoin mining machines from China. They've had a crackdown on cryptocurrency infrastructure over there. And that's estimated to be about one third of the world's capacity. They're looking at one site near Millerville, which is just south of Calgary, to potentially bring in hundreds of thousands of these machines. There are some questions about the actual possibility of that, both the company's financials and the actual strength of Alberta's grid to support something like that. But I think it's fair to say that this is something that's going to continue to grow in the province. It's probably worth noting here,

continue to grow in the province. It's probably worth noting here, when you talk to these guys at Link Global, they also talk about jobs, right? They say they're doing a good thing here because they're also bringing jobs to the province. Absolutely. And not just jobs, but retraining people. So the lead supervisor or the manager of the plant at Sturgeon County was a former oil and gas pipe fitter. And he was retrained, you know, to be able to manage these crypto machines. So the argument is kind of, you know, they're taking an industry that's not doing so hot in the province, oil and gas, and reskilling people to be able to work in, you know, a more growing digital industry. Going back to where we started for a minute, those 10 households at Greystone Manor,

they complained to the Alberta Utilities Commission. And so what's happening now with this company and what they're doing? So in August, the AFC ended up ruling that the Sturgeon County plant was in contravention of the rules. And they actually realized the company was operating another plant over by Kirkwall that it had also set up without consultation. So both plants can only resume operations once Link Global has actually proven that it's either obtained permission under Alberta's Environmental Protection Act to operate or that they've confirmed that permission isn't required. That means the plant in Sturgeon County will be closing down like the neighbours wanted. And sadly, that also means layoffs of the workers there.

Right. And so is this settled? Like you mentioned before, the company was being investigated. So the company will for sure be leaving Sturgeon County. It's going to continue operations at two other sites, but the investigation isn't over. So along with this decision, the AUC did issue some penalties. It's going to be a $50,000 to $75,000 fine reduced by up to 50% because Link Loadable did eventually admit to breaking the rules. But now a second part of the investigation is being launched, and that will consider whether there should be further sanctions for operating without approval. further sanctions for operating without approval. Right. And this, this is such a complex story. You know, it doesn't seem like that. When you first hear about it, at first,

I thought this was kind of like a weird NIMBY issue, but it's so much more than that. And I know that there's a counselor in the area who has really mixed feelings about all this, right, about Link Global going, going elsewhere. And so can you tell me a little bit about what she told you? Yeah. So I chatted with Sturgeon County Councillor Kristen Toms before the AUC's decision. And she told me that when she first heard about this situation at all, she really had to dive in and do a ton of research just about what cryptocurrency was, what are the rules around a plant like this. Let me tell you, there was certainly a flurry of research on my behalf,

having never really paid attention to what Bitcoin mining was prior to that. So I had to do a lot of homework right off the cuff to get up to speed with what we then had at the county. But once she started reading up on it, she had really mixed feelings. You know, she'd love to see a new industry brought into the area, but she also wants to see residents and businesses work harmoniously together. We want to be open for business, but we want those businesses located in a spot that works within the community and the structure and isn't invasive. It's really important to make sure that we're able to manage our businesses, our agriculture and our community

so that they're having a symbiotic relationship as opposed to, you know, unfortunately friction created between them due to wrong places, wrong locations, and obviously lack of notifications. And what is that CEO that you talked about, Jenkins, what does he say he's doing next with Link Global? So Jenkins has said all along that he's found the AUC investigation to be really fair and that this has just been a new issue to deal with kind of for both sides. But he doesn't plan on letting this shutdown order or these penalties slow him down. He's going to move the Sturgeon County plant to another site. It hasn't been decided where yet.

And he says he sees this as a business model that can keep growing. These shipping containers are really easy to move and really easy to set up anywhere. And with those hundreds of thousands of orphaned wells, there's a lot of options for him. Wow. Sarah, this was super interesting. Thank you. Thank you so much for this. Thanks, Jamie. All right, that is all for this week. Front Burner is brought to you by CBC News and CBC Podcast. The show is produced this week by Simi Bassi, Elaine Chao,

Allie Janes, Katie Toth, and Derek Van Der Wijk. Our sound design was by Mackenzie Cameron, Austin Pomeroy, and Julia Whitman, with help from Laura Antonelli. Our music is by Joseph Shabison of Boombox Sound. The executive producer of Frontburner this week is Imogen Burchard. I'm Jamie Poisson. Thanks so much for listening and talk to you next week.