Conifex challenges BC policy swerve disallowing data farms

Written By Rob Shaw

“BC Hydro identified those two locations for us … and suddenly the door was shut.”

––Ken Shields

A northern B.C. forestry company is taking the provincial government to court for approval to run data farms that it says could help subsidize its existing sawmill and keep hundreds of people employed during turbulent times in the forest industry.

Conifex Timber is readying for an October court hearing against BC Hydro and the government over a moratorium the administration of Premier David Eby placed on new cryptocurrency mining projects, citing their heavy demand on the power grid.

Conifex argues not only is the power available but that Hydro helped identify where the server farms could go before the new premier’s office yanked the rug out from the industry.

“The forestry sector in the interior of B.C. is a melting iceberg of a business and we view this new business as something that provides hope and opportunity for people being displaced in the forest sector contraction,” Conifex CEO Ken Shields said in an interview.

“The forestry sector in the interior of B.C. is a melting iceberg of a business.”

Ken Shields

Conifex currently employs around 300 people at its Mackenzie sawmill, as well as another 100 jobs through logging contractors. 

In June, it curtailed its Mackenzie mill for four weeks, citing a drop in lumber demand and a lower-than-expected water forecast for its local reservoir — part of several mill closures and curtailments in B.C.’s interior and north as the forest industry wrestles with a lack of access to fibre. Hundreds of workers have lost their jobs.

Conifex also runs a bioenergy plant at its Mackenzie mill site, which uses waste sawdust, chips and bark to not only heat the mill but also generate electricity sold back to BC Hydro’s grid. The facility generates almost $5 million per fiscal quarter for the small forest company.

Data mining could ‘stabilize’ forestry operations

Shields said two proposed high-performance computer data centres could generate more than $100 million per year in revenue — double Conifex’s total revenue from all lumber and bioenergy in 2022. The amount could even reach as high as $250 million annually, Conifex estimates.

The money would ensure the company never has to curtail its sawmill again, said Shields.

“We want to develop this complementary revenue stream,” he said.

“Those revenue streams in effect when lumber prices are low can justify continuous operations. So from Conifex’s point of view, we’re looking at this new business to stabilize our forestry employment and production.”

Proposed $100 million investment in two server farms

Confiex is proposing to spend $100 million to develop two large computer server farms in Ashton Creek near Enderby, and Salmon Valley near Prince George. They’d at first be used for cryptocurrency mining, which is a power and data intensive computer process that creates digital currency.

However, Shields said the goal is to sell the computing power to companies that need it to run things like artificial intelligence operations and autonomous driving services. The proposal would generate 100 full-time jobs, he said.

Both locations are near existing BC Hydro facilities, and could tap into the power generated from the WAC Bennett Dam’s Williston Lake Reservoir, as well as Site C.

“BC Hydro identified those two locations for us and encouraged us to develop them, and suddenly the door was shut,” said Shields, adding Conifex has already given BC Hydro $252,000 worth of deposits, fees and studies for its applications at both sites.

BC Hydro retools policy per new political directive

Hydro is currently in the middle of retooling its energy policy after being yanked in a new direction by Eby after he took power in late 2022. The premier has instructed the Crown corporation to develop new power lines to serve the mining and liquified natural gas industries in BC’s northwest, so that the province can hit its ambitious climate change pollution reduction targets.

The political directive has forced Hydro to scrap its 20-year energy forecasts. As part of that, it ordered the BC Utilities Commission to suspend the energy-intensive crypto industry for 18 months.

“Cryptocurrency projects require very large amounts of electricity,” the corporation said in its statement of defence to Conifex’s lawsuit. 

“Without the temporary pause … BC Hydro may be unable to fulfil its committed support of the government’s climate action goals.”

BC Hydro statement of defence

“Without the temporary pause provided through the BCUC’s order, BC Hydro would become committed to supplying substantial amounts of electricity, which would have implications for province-wide electrification and carbon reduction goals and the rates paid by other customers.

“Further BC Hydro may be unable to fulfil its committed support of the government’s climate action goals.”

Conifex contends crypto power moritorium unfair, unlawful

Both sides disagree on how much power high-performance computer server farms actually require.

Conifex contends the power is surplus and available

Hydro CEO Chris O’Riley argued in a court a

Affidavit that the Conifex’s proposal would eat up “almost half the output of the Site C project” and is more than double the power currently used by Hydro’s largest electrical customer. Then again, Hydro has been consistently wrong on almost all its electricity demand-side forecasting for years.

Conifex contends the Eby government’s cabinet order to implement the crypto power moratorium was unfair, unlawful and failed to follow the Declaration on the Rights of Indigenous Peoples law to consult with the Tsay Keh Dene Nation, which is partner with Conifex on the data farms.

It’s not clear who has the correct numbers in the ever-shifting landscape of B.C. power policy, especially at a time when Hydro is under fire for botching its generation and load demand forecasts for the next two decades.

Conifex has attacked a five-page report Hydro authored in 2022 called the “Crypto Conundrum” saying it uses out-of-date international data and is both inaccurate and misleading.

The Ministry of Energy declined to comment, saying the matter is before the courts.

BC could learn from US investment recruitment strategy

Oregon and Washington State are attempting to attract data farms using the same type of cheap renewable power that B.C. helps provide via its control of upstream dams through the Columbia River Treaty.

For example, Oregon encouraged Google to build high-performance computing facilities in its state more than 15 years ago, bringing with it jobs and millions of dollars in investment.

“That’s the route we were proceeding before this sea change.”

Ken Shields

Conifex appears to be proposing something similar — but with the added benefit of using the money to backstop its ailing forestry operations.

“The forest ministry and premier are saying get into value-added businesses — these are value-added businesses for Conifex,” said Shields. “And that’s the route we were proceeding before this sea change.”

Shields said he hopes to be victorious in court this fall to get access to Hydro’s power, before the government consultation on crypto mining concludes next summer.

“We’re doing our best to have our small company paint on a bigger canvas.”