(Source: MIRS.news, Published 03/13/2024) As a Senate committee moves forward in adopting legislation to extend sales and use tax exemptions to Michigan-placed data centers, environmentalists are awaiting guardrails to monitor data centers' water and energy consumption.
According to an October 2023 report by the ING Group, a multinational financial services corporation, a mid-sized data center in the United States can use about 300,000 gallons of water daily to cool its equipment, which the publication states is "equal to the water consumption of 100,000 homes."
When it comes to energy, the C&C Technology Group – an agency founded in 1985 to represent multi-technology data center manufacturers – has relayed findings that data centers based in the U.S. utilized more than 90 kilowatt-hours of electricity in 2017. In an article, the agency publishes "that much energy would require 34 massive coal-powered plants to generate at least 500 megawatts each to meet the power demands of said data centers."
In today's Senate Finance, Insurance and Consumer Protection Committee, the bills providing the data center-focused tax incentives – SB 237, SB 238, HB 4905 and HB 4906 – were each approved 5-1. Sen. Lana Theis (R-Brighton) voted against the legislation and Sen. Rosemary Bayer (D-Keego Harbor) abstained on all the bills.
"Data centers are some of the biggest users of energy and water across the country, and given that we are in a transition to renewable energy, and climate change is putting more and more strain on our water resources, we think it's imperative that we manage them as conservatively as possible as we transition, functionally, the whole system,"Christy McGillivray – the legislative and political director for the Sierra Club Michigan Chapter – told MIRS.
She spotlighted how any stresses on resources have to be accounted for, and "we should absolutely not be giving out massive subsidies to some of the largest corporations in the world without strings attached to them."
Groups like the Sierra Club Michigan Chapter and the Michigan Environmental Council are not opposed to the legislative package, but are pushing for some regulations to be a part of what the Legislature gives its final approval to.
For example, in a letter submitted to the Senate Finance, Insurance and Consumer Protection Committee this afternoon, the Michigan Environmental Council called for data centers to acquire their own renewable energy and storage in order to qualify for tax exemptions, and to seek to minimize or eliminate the use of fossil fuel-powered backup generation facilities.
The group also suggested that a data center, in order to qualify for exemptions, should set up a plan to use the most energy – actively shifting their "load" – to off-peak times for electricity consumption.
McGillivray also highlighted her organization's desire to see data centers report how much water they are using and to be provided with water-based siting considerations to come into account. Moreover, she described "guardrails" for scenarios where an area where a data center is located could be affected by a drought or an ecosystem is negatively impacted by the center's presence.
"There needs to be accounting for like, if they are using groundwater, are they dramatically dropping (a) water cable and impacting agriculture in the area?" McGillivray asked rhetorically. "We're not saying 'don't use water' or 'don't have data centers . . .' (We're saying) we have to know what the impacts are. We have to be able to account for them. We have to be able to require conservation, and we have to have some say over what's happening as they're operating."
The legislation which moved to the Senate floor today would extend the pre-existing sales and use tax exemptions available to certain data center developments and operations from its Dec. 31, 2035 sunset to Dec. 31, 2050. The present-day exemptions apply exclusively to "colocation" data centers, which are community-based structures with multiple tenants operating servers within one facility.
Furthermore, the bills deploy a new proposal for enterprise data centers that are owned and occupied by a single enterprise.
Under the House bills, an enterprise data center development with an aggregate capital investment of at least $250 million into the state could access exemptions until after 2050, and could access exemptions until after 2065 if they are building off of a former electric power plant or brownfield redevelopment area.
But, according to Senate Finance, Insurance and Consumer Protection Chair Mary Cavanagh (D-Redford Twp.), the Senate bills – SB 237 and SB 238 – have more of a focus on job creation, requiring eligible enterprise data centers to deliver at least 30 new jobs that will be maintained throughout the period of exemptions. Through the Senate bills, 50 percent of new jobs must demand a post-high school degree in science, technology, engineering or mathematics (STEM), or a license or certificate under the Michigan's Skilled Trades Regulation Act.
Following the adoption of two substitutes today, both the House and Senate bills will mandate jobs offering 150 percent of the region's medium income.
Cavanagh told MIRS she thinks the package at-hand fits into the economic development equation of us "trying to utilize all the tools that we can in Michigan, and as we see more (artificial intelligence) and more social media . . . and even Google to Facebook needing these data centers, we are as a state not getting that kind of business."
"As we heard in testimony, currently they're only going to states that have this sort of exemption or this sort of assistance," Cavanagh said. "My main objective when we look into economic development: what is the community benefit? What is the wage benefit to help the people that are being hired, (are they being) pulled out of poverty? And, making sure we are advancing in our state rather than just kind of staying at the status quo."
Prior to voting on the legislation, she said the bills are not the final product, and they will continue to be worked on for potential improvements.
