City says Hut 8 proposal was best for the Hat
With at least one company sour about negotiations with the city, local officials stressed both the quality of the accepted Hut 8 deal and the need to cap these types of sales due to power supply
City officials say they will not disclose details of sensitive discussions with companies looking to invest in Medicine Hat, but stress city hall is “fair and equitable” with all businesses it engages.
This week the city and technology firm Hut 8 Mining Corp. announced a land lease and major power supply agreement would lead to a $100-million data processing centre in the city’s north end.
On Thursday, the News revealed that at least one other company is questioning why its similar proposal to set up in two vacant industrial buildings was apparently dismissed in favour of the Hut 8 deal to set up on a bareland site owned by the city.
Shane Cardwell of Modular Blockmining says his firm was in advanced discussions with city business officials since late 2017 when they were suddenly concluded on the city’s end in February as power supply was set to be discussed.
He feels Hut 8 is edging out competition in the highly competitive, rapidly advancing digital currency sector, and the city didn’t properly consider the full effects his plan could have to fill existing but vacant buildings, or add a potentially large workforce.
“We’re trying to salvage something (in Medicine Hat), but there’s no co-operation,” he told the News, stating all communication had ceased.
The city’s general manager of the land and business support office, Grant MacKay, responded to questions early Thursday suggesting the city felt the Hut 8 proposal was best.
“All potential agreements and contracts are individually evaluated based on both value and risk to the city and the community, including revenue opportunities and city investment requirements,” reads a statement from MacKay.
Terms of the Hut 8 power contract will not be disclosed, according to both the company and the city utility division.
It deals with 42-megawatts of electricity — equal to twice what a major chemical plant would use — and accounts for almost the entire production capacity at a new north-end power plant, built just last year at a cost of $55 million.
Cardwell says his plan involved bringing two facilities in the north-end industrial areas on line to use a total of 20 megawatts of power in phases.
Eventually, between 40 to 60 employees would be required at the buildings, and an initial requirement of 2.5 megawatts would be added as physical connections between the sites and the city grid were improved.
That sort of work is done at the city’s expense (it owns the lines) and paid for through capacity fees.
On Tuesday, Hut 8 board member Jeff Mason similarly described line upgrades to its site — adjacent to the city’s power plant on Box Springs Road — as the only cost to the city in the entire Hut 8 project.
The 11-acre Hut 8 site was selected, officials say, because of its proximity to high-voltage lines and a city power facility.
It is also close to a corridor of fibre-optic cable that enters the city in Brier Park area.
Cardwell tells the News he’s already leased to facilities in the Brier Park area, and estimates operating the refitted vacant buildings would create more jobs than Hut 8, along with supporting local private property owners.
Hut 8 interim CEO Sean Clark told reporters earlier this week his site wouldn’t have a traditional building, but would require major site development in order to house an array of 40foot converted seacan shipping containers containing computer banks.
“I want to dispel the idea that these are easy to move,” Clark said on Tuesday.
“We’re investing tens of millions of dollars in (power) infrastructure, transformers, switchgears, clearing fields and electrifying the site.”
The company says 100 construction jobs would be temporarily created as the site is developed over the next six months.
Eventually, 42 employees would be needed to operate the site, which could be fully operational in September.
Making more city-produced power available might not be possible when city economic and operational strategies are considered.
After filling Hut 8’s needs, another 20 megawatt contract would leave the city with less surplus capacity than before the north-end power plant was commissioned four months ago.
“Adding generation capacity to the system takes years of planning and construction,” said MacKay. “To ensure a reliable supply of electricity for our customers, we diligently manage our load demand, including considering how new large-sized customers use power and how that aligns with existing demand.”