This story was first reported by the Kansas Reflector.
OSKALOOSA, Kansas — The Jefferson County Commission’s decision to place a one-year moratorium on the application process for cryptocurrency data centers has been prompted by a flurry of complaints concerning threats to rural quality of life, unresolved land issues and an oil tank eruption that destroyed a truck loaded with ammunition. The outcry has come from a former white-collar criminal, Sierra ClubMcLouth City Council, residents, and others.
Crypto Colo Center Corp. had intended to build a crypto-mine just a third of a mile from the town of McLouth, Kansas, in an effort to bolster the local economy. However, the proposal was met with resistance from citizens and environmental organizations, who were shocked that anyone would bring in so many 40-foot shipping containers stuffed with energy-intensive servers. These servers were powered by eight large natural gas generators.
The idea of validating anonymous transactions through cryptocurrency has been met with controversy due to the potential for illegal activities, like human trafficking or drug smuggling. In addition, outsiders pitching the idea to locals had neglected to pronounce the town’s name correctly, a major faux pas.
Bob and Joy Thayer, who spoke on behalf of four other people, expressed their disapproval of the project to the Jefferson County Planning and Zoning Commission. Bob Thayer remarked, “We don’t beat around the bush. But I can guarantee you, if this project is allowed to move forward, there will be consequences for many. We can’t allow this to ruin the peaceful town we once knew.” Edith Williams, 65, echoed the same sentiment, adding, “There may be places where people are willing to sacrifice their heritage for a quick buck, but I believe Jefferson County isn’t one of them. If this isn’t halted, I will have to move away.”
Cory Van Nostrand, who lived close to the proposed data center, noted that having such a business in the county didn’t make sense. He pointed out that it could be heard from miles away, undermining the peace and quiet of the area.
The Russell, Wood, Vaught, Pope, Chrisman, Kingsolver, Zule and Rollins families all submitted written objections to Crypto Colo Center’s project. Just several hours before the scheduled public comment meeting, the company’s request was withdrawn and the county commission issued the moratorium.
‘Stop Order’ and City Vote
Crypto Colo Center had applied for a conditional use permit to convert an 81-acre parcel of agricultural land situated by Kansas Highway 92 into a commercial enterprise. The data center would be located on a 15-acre portion of the land, which had previously been used for oil and gas extraction.
On February 21, the Jefferson County Community Development office sent the company’s legal counsel a ‘stop order’ since they had begun constructing structures on the site without a permit. The next day, the McLouth City Council all voted to recommend that the county planning commission reject the conditional use permit.
Kathy Ewert, a veterinarian, voiced her objections to the project in a lengthy memorandum. She noted that it was hard to identify the people involved in the project and who owned and leased the land. She also expressed concern about potential property value decline, taxes not covering the cost of extending public services, the amount of electricity needed and the potential for noise pollution.
Ewert was quoted as saying, “This is like something from a soap opera. It’s so dramatic. We can’t let this happen to our town.” Eventually, her words and those of other Jefferson County residents were heard, and Crypto Colo Center’s request was denied.
The Property was Changed to a Wichita Rental for the Crypto Center.
“Disagreement over this proposed conditional use permit has been at the root of the dispute,” Ewert said. “It has nothing to do with agriculture.”
Elaine Giessel, chairwoman of the Kansas chapter of the Sierra Club, said the project’s sustainability was uncertain and its energy source was misguided. She argued that it would increase healthcare costs due to environmental health risks and would place an unfair burden on Jefferson County citizens.
Rueben Burton, who along with his wife Susan owns Dei Vitae Enterprises, also spoke out against the Crypto Colo Center. According to the federal court, he plead guilty to mail fraud and money laundering in 2002. He argued that the company couldn’t be trusted to responsibly manage the property.
“My wife and I had a difference of opinion on how to use the land and the role the company should play in the community,” Burton stated. At the time of his remarks, he was still paying back $2.7 million in restitution to victims of his fraud.
Meanwhile, Anthony Melikhov, chairman of Crypto Colo Center, filed a lawsuit in Illinois against Natan Holdings, which he controls. He accused the Burtons and Dei Vitae of engaging in fraud against Natan for years.
When the Crypto Colo Center project was still in its infancy, an explosion rocked the area on December 10 2022. Phil Hook, ARC Energy’s representative, submitted a document to the county’s planning commission detailing the disaster. Rock Capital had originally purchased the property, but went bankrupt. ARC Energy acquired it and found that it had an oil and gas lease in the same area as the Crypto Colo Center.
Hook warned of the potential dangers of the facility, citing the high levels of hydrogen sulfide gas and the fact that the project would need more gas than the underground supplies could provide. He also noted the proximity of the data center and generators to the oil and gas operations, as well as the questionable track record of the operators.
He suggested that Crypto Colo Center was responsible for the tank battery that exploded, causing two tanks, a water truck, and a nearby vehicle to be destroyed in the ensuing fire. First responders from both townships had to be called in to put out the flames.
Max Smetannikov, co-founder and CEO of Crypto Colo Center, commented that “fires are, unfortunately, not uncommon on oil leases.” Hook disagreed, saying that the explosion was likely due to operator negligence and could have been prevented had Crypto Colo Center practiced good oilfield management.
Brandy Jones, who had recently bought a farm in McLouth with her husband, an Army Command and Staff College instructor in Fort Leavenworth, spoke out against the project. She said that they could hear the loud noises coming from the center, and that the backup alarms could be heard on their property. She also recalled the smoke, ground shaking, and subsequent explosions from the incident.
“I looked into it and all I found were negatives,” Jones said. “Every community that had one of these centers had nothing but problems.”