LIMESTONE, Tenn. (WJHL) — Bitcoin mining company GRIID, which operates a facility in Limestone that has become the target of a lawsuit, has agreed to merge with a larger and more profitable Bitcoin mining company, CleanSpark.

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The deal would breathe new life into GRIID, which has lost millions of dollars over the past two years, and could boost the chances that it will invest in a replacement bitcoin mine in Johnson City. A court settlement requires the 25-megawatt (MW) Limestone mine, which opened in 2021, to close by March 2026.

The Las Vegas-based company and GRIID announced the news on June 27. GRIID, which went public in January but has continued to lose millions of dollars, will have about $55 million of its current debt under CleanSpark, which has been aggressively growing its Bitcoin mining portfolio this year. The deal, which was unanimously approved by the boards of both companies, is expected to close before the end of September.

GRIID is the parent company of Red Dog Technologies, which operates a Bitcoin mine near BrightRidge’s Bailey Bridge Road power substation in the New Salem community of Limestone. BrightRidge said in 2021 that Red Dog would be its largest energy consumer.

A Bitcoin mine is actually a collection of high-powered computers that perform complex calculations to “search” for new Bitcoins, each with a unique digital ID. The noise from the fans used to cool the computers at Limestone sparked a public outcry, eventually resulting in Washington County suing Red Dog and BrightRidge.

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A deal struck last fall requires Red Dog to dismantle the Limestone mine by 2026, but GRIID CEO Trey Kelly told Washington County commissioners that the company hoped to move even sooner if it could find a new site and build a new facility.

But that could have been difficult to accomplish before the CleanSpark merger announcement. GRIID’s financial statements show it lost $18.6 million in 2023, after losing $61.6 million in 2022. The company lost $4 million from operations in the first quarter of 2024 and $6.5 million overall, and listed $75 million in debt and $21.6 million in notes payable as of March 31.

CleanSpark, on the other hand, reported a net profit of $127 million in Q1 2024, with almost no debt and over $650 million in cash and Bitcoin on hand.

Judging by the press release announcing the proposed merger, CleanSpark is looking to grow in Tennessee, where the Limestone facility is currently GRIID’s largest, with 55 MW of current capacity. GRIID also reported 80 MW of expansion plans announced in Tennessee.

“This acquisition would give us a clear and solid path forward over the next three years to accomplish in Tennessee what we have proudly achieved in Georgia over the past three years,” CleanSpark CEO Zach Bradford said in the statement. “That achievement was building over 400 MW of infrastructure backed by valuable, long-term power contracts.”

He said CleanSpark should be able to grow the GRIID portfolio in Tennessee to more than 100 MW by the end of the year.

Next stop Johnson City?

The GRIID-Washington County deal costs GRIID $100 per day as long as it operates at its current location. The company has agreed to close the Limestone site once it begins operating elsewhere in Washington County, “including within the Johnson City limits…”

BrightRidge purchased 7 acres in the Buffalo Mountain Industrial Park on Jan. 31. Minutes from a BrightRidge board meeting stated that the property “is located within 1,100 feet of a TVA 161 (kilovolt) transmission line and an adjacent BrightRidge 69kV transmission line.”

BrightRidge told News Channel 11 in a statement that it purchased the land “for future uses, including infrastructure to improve system safety, reliability and quality. Additionally, the acquisition secures an industrially zoned parcel that is uniquely located in close proximity to TVA and BrightRidge transmission lines.”

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The concessionaire declined to comment on the possibility of relocating the Bitcoin Limestone mine.

GRIID CEO Trey Kelly responded to an emailed question and said the pending acquisition does not change the company’s commitment to the terms of the deal.

“We are exploring options to relocate the Limestone facility as agreed in the agreement,” Kelly wrote. “It is premature to identify any specific location at this time. This commitment remains unchanged as we work to close the merger.”

The recently acquired property, for which BrightRidge paid $525,000, sits in an I-2 (heavy industrial) zoning designation, Johnson City Planning and Development Services Director Will Righter told News Channel 11.

He said the city has been working on a “textual amendment” to its zoning ordinance that would put some logical parameters around Bitcoin mines and other “blockchain data centers.”

Righter said the city is trying to figure out where “would be the best place for one of these processing centers” and hopes to add blockchain data centers as an allowed use in the I-2 zone.

“These data centers were not thought of when the zoning code was written,” Righter said. “They’re popping up all over the country, and obviously with the issues that have happened in Washington County, we want to make sure that we have clearly stated where these things can be allowed in the city limits.”

Righter said that when a zoning code “is silent on something,” a local government can’t simply deny a use. “You’re tasked with finding a place that in the zoning code would best accommodate that use.”

He said the city has decided that I-2 is the most appropriate zone, adding that any Bitcoin mine would be subject to the city’s noise ordinance and also, according to the manufacturing process code, that it would not cause “obnoxious noise.”

The Buffalo Mountain property is less than a half-mile from the Garland Acres subdivision on South Roan Street and a large mobile home park. Johnson City’s noise ordinance sets maximum decibel levels in residential districts at 55 decibels between 11 p.m. and 7 a.m. and 75 decibels at other times.

GRIID officials told Washington County in 2022, while a previous deal was being discussed, that an anticipated replacement facility would use a more advanced cooling system that would create significantly less noise than the fan-cooled system at Limestone.

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