(Source: MIRS.news, Published 05/13/2024) A coalition of clean water advocates Monday called on legislators to "slow down" and do some additional work on SB 237 and SB 238, which provide use and sales tax exemptions for mega-sized data centers, and which advocates say should be amended to require full reliance on renewable energy sources.
Denise Keele, director of the Michigan Climate Action Network, said the "sweetheart tax incentive" policy for these large data centers, which would attract companies like Microsoft or Google, is not bold or equitable.
Instead, she called it "business as usual, the same business-as-usual type of policies that got us into the climate crisis in the first place.
"We stand as an ally to our colleagues on this call today that are in opposition to the sweetheart tax incentive deals overall," she said, "but mostly, if our legislature wants to continue to give these kinds of breaks to big corporations, then we need to at least use this moment as leverage to demand renewables as their energy sources."
While Michigan doesn't yet have many mega data centers, with notable examples being the Switch data center in Grand Rapids and a proposed $3 billion data center project in Benton Harbor, advocates are concerned the legislation could open Michigan up to a flood of new projects and concerning environmental impacts.
Sen. Kevin Hertel (D-St. Clair Shores)'s SB 237, which was voted out of the Senate last week, provides use tax exemptions for large corporations' data centers if they sink at least $250 million in capital investment into the state and bring 30 new jobs with them, a trade that would allow exemptions on equipment purchases and facility upgrades through 2050.
Sen. Roger Victory (R-Hudsonville)'s SB 238, which has not yet been voted out of the chamber, would provide similar sales tax exemptions for these corporations.
While SB 237 was amended to provide some environmental protection provisions, including a requirement that data centers earn at least one energy efficiency certificate within three years of starting service, and a requirement that data centers must use municipal water within five years of beginning operations, advocates like Clean Water Action's State Director Sean McBrearty said it's not enough.
He said if the legislation does as intended and incentivizes big data centers to come to Michigan, they will quickly "become some of the largest water and energy users in our state, threatening both our publicly entrusted water (and) Michigan's climate goals, through … Governor Gretchen Whitmer's clean energy plan as well as the energy legislation passed last fall."
Last week in the Senate, Hertel said he doesn't believe "one bit" that the bills undermine the state's energy efficiency and environmental preservation efforts.
"I think we need to be a leader here in Michigan, to show that we can pass clean energy legislation and also attract these types of jobs here to our state," he said. "And when we're talking about these data center developers like Microsoft and Google that are investing massive amounts of money into clean energy, and trying to be water positive across the world, it's important that as a state we show that we can lead in this area, and I think that's what we're doing here today."
Hertel said amendments to the legislation, like a 2029 sunset on enterprise data centers and the energy efficiency certifications, make the legislation "the most environmentally friendly language of any state in the country that has done this so far, and 30 other states currently have this policy."
But McBrearty said data center water and energy use are both big concerns that should be further addressed, specifically when evaporating cooling technology, which is often used in data centers due to its lower cost, takes between 1 and 2.5 million gallons of water daily.
For reference, he said that the proposed Nestle withdrawal back in 2016, which received thousands of public comments from Michiganders in opposition, would have pulled out 576,000 gallons a day, meaning one large Michigan data center could take between two and five times that amount of water.
"The state Senate last week said that that water has to come from municipal water sources … but the problem exists that water withdrawals this large are often harmful water withdrawals," McBrearty said.
Pontiac City Councilmember Mikal Goodman added that incentivizing companies that require such large withdrawals is a bigger problem when so many average Michiganders are struggling to keep access to clean water and afford it when they have it.
"We have people who are in need, who are in our communities who can't afford water, but yet we're willing to privately just throw it at any large corporation that has money," Goodman said, calling it "deeply problematic."
Keele spoke about data center energy use, referencing numbers that data centers typically consume 10 to 50 times more energy than a typical commercial office building, and what "they're failing to take into account with these giveaways is the impact of a demand and electricity surge that will occur from these data centers.
"We've seen in other states that these (surges) are then used … to excuse our climate goals," she said, "and to continue to rely on carbon polluting sources like oil and gas, just when we need to move and end the era of fossil fuels."
Keele said, "if we're to continue to give tax breaks, we ought to link not just job creation and other kinds of qualifications, but we should require renewable energy sources as their form.
"It's our state's commitment to renewable energy and protection of our air and water in the first place that makes us attractive to these companies and to our workforce," she said.
McBrearty said that could look like not only a requirement that facilities use renewable energy, but also a plan to build their own.
"There's a lot of room on rooftops of data centers for solar, and there's a lot of opportunity to use this to build out our renewable infrastructure," he said.
Other suggestions included increasing transparency around which companies are benefiting from tax breaks and how many jobs they're creating in return.
Keele said many states have already instituted tax break policies for data centers without additional environmental protection provisions or renewable energy requirements, and "we do have evidence from Virginia, Georgia and a couple other states that have those electricity surge demands that are then again used as essentially an excuse to go back to fossil fuel production."
Other states, like Indiana and Illinois, are pursuing legislation that would keep renewable energy goals in place, she said, but Keele added that she believes Michigan could be a leader when it comes to data center environmental policy.
The challenge with putting too many requirements into Michigan's policy, which Hertel reiterated already has more environmental protections than other existing legislation, is that you could run into the same situation that exists today in Michigan, where the tax incentive is rendered obsolete, and companies don't want to risk coming and then losing it on some sort of technicality or regulation.
Hertel said he's had this conversation with climate advocacy groups, and believes the best course of action is to focus on the tax bill first, "and then, when there's a reality that these will locate in the state, we can get the regulation right."
He said he believes all data centers should be regulated, not just those seeking tax exemptions.
