JOHNSON CITY, Tenn. (WJHL) — Nearly 10 months after nearby residents began complaining about what they said was excessive noise from a Bitcoin mine in rural Washington County, the county will head to court in four days in an effort to force the operation’s shutdown.
A lawsuit in Washington County Chancery Court filed in November pits the county against BrightRidge, which owns the property the mine is on and sells power to its operator — and against that operator, Red Dog Technologies.
Although noise precipitated the initial controversy over the mine and is still neighbors’ main concern, it is essentially irrelevant in the court case.
Instead, the case will hinge on two key elements: whether the mine as currently operated violates the “A-3” (agriculture – business district) designation of Washington County’s zoning ordinance, and if it does, whether the county should be allowed to order it shut down.
‘And similar uses…’
The first element will be decided separately March 14 by Chancellor John Rambo after County Attorney Allyson Wilkinson filed a motion asking for “partial summary judgment.”
BrightRidge initially sought and received the rezoning from A-1 (general agriculture) in February 2020. Public utilities are a permitted use in A-3 and commissioners have said they approved the rezoning with the expectation that the utility would operate the “block chain data center” proposed for the property.
Red Dog and its parent company GRIID are not mentioned in any minutes prior to the rezoning or in BrightRidge’s own request for that rezoning.
But BrightRidge and Red Dog, which has been added as a defendant in the case, argue in court filings that the A-3 designation is fairly broad, enough that a private cryptocurrency mine should be permitted. The ordinance itself states the intent of an A-3 district is “to provide areas for businesses that locate in rural areas” and that it’s “designed for businesses that would normally locate near agriculture activities, natural resources, etc., associated with rural areas.”
Some specific permitted uses include outdoor recreation facilities like amusement parks and racetracks, dog kennels, sawmills, recreational vehicle parks, airports, “and similar uses.” Slaughterhouses, commercial livestock markets and animal hospitals also are specifically mentioned.
Whether a cryptocurrency mine falls under the definition of “and similar uses” will be for Rambo to decide. The ordinance does not contain a section specifying any prohibited uses, but county commissioners have suggested that their unanimous approval with very few questions back in 2020 would have been highly unlikely had they known the planned use.
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What did ‘the county’ know, when did they know it and does it matter
After several months of back and forth with BrightRidge and Red Dog that included significant efforts and expense to try and mitigate the noise, county commissioners turned to talk of a shutdown.
That came a month after they asked County Attorney Allyson Wilkinson in August what additional remedies they might have. She returned in September with an opinion that the usage violated the ordinance. Commissioners opted to send BrightRidge a letter ordering the facility shut down and the utility promptly wrote back saying their issue was not with BrightRidge but with Red Dog.
With no resolution reached in November, the county sued.
If Rambo finds the use violates the zoning, the hearing will move on to a jury trial slated for two days, March 15 and 16. BrightRidge attorney Steve Darden and his Red Dog counterpart Chris Owens will set out to prove that contrary to its claims, the county knew the blockchain data center would be operated by GRIID/Red Dog.
A filing from Red Dog claims that as of Feb. 14, 2020, “Washington County had actual knowledge that the Property would be rezoned for the operation of a block chain verification data center and the the block chain verification data center would be owned and operated by GRIID or a related entity, and not by BrightRidge…”
No documents related to the rezoning request that was approved six days later reference GRIID, though.
But Owens hinted at as much during a motion hearing Feb. 22.
“What the county did is actively participate in giving this rezoning for this as a permitted use, they were an active participant for 19 months, and now after the expenditure of millions of dollars by Red Dog they’ve decided to change their mind and now assert for the first time it’s not a permitted use,” Owens said.
Red Dog’s filing also references meetings several months after the rezoning approval that included GRIID/Red Dog personnel. One was a June 30, 2020 meeting at the county’s zoning and planning office to finalize site plans and another was a July 7, 2020 planning commission meeting to consider those plans’ approval.
The filing says Ed Medford, a GRIID vice president, was at the July 7 meeting.
At least three county officials have been subpoenaed to testify. They are Mayor Joe Grandy, who served on the BrightRidge board until resigning last week; zoning administrator Angie Charles; and Chris Pape, who works for Charles.
If the county is proven to have known about the actual intended use, that could lead a jury to rule against the county’s request for an injunction that would lead to the mine’s shutdown.
Additionally, Rambo could ultimately rule that even if the use isn’t permitted, so much water is under the bridge at this point that the most equitable solution is to allow the use to continue and “estop” the county from exercising its right to order a shutdown.
Even if the final ruling is in favor of the county, an appeal could conceivably be allowed before an actual shutdown order is enacted.
