‘Hyperscale Data Center’s Community Benefits: A Major Challenge’

TL/DR –

The rapid construction of hyperscale data centers for AI computing is raising bipartisan concerns in the US, due to their high energy consumption, pollution, and tax breaks that can undermine local economies and services. These data centers, some of which are placed near historically disadvantaged communities, can generate harmful emissions, endanger water supply, and increase local electricity rates. Greg LeRoy, director of Good Jobs First, suggests that data centers should pay all their taxes, be located in racially neutral locations away from residences and public spaces, install state-of-the-art pollution-control equipment, be placed in a separate class by public utility commissions to avoid cost burden on other consumers, and offer community benefits such as local hiring agreements and job quality standards.

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Rising Opposition to Data Center Construction on Concerns Over Community Impact

Protests are snowballing against the boom in the construction of data centers, with concerns spanning from increased residential electricity charges to the threat of water supply contamination. This trend is evident in a recent rally held by rural Michigan residents against a $7 billion Stargate data center proposed for the southeast Michigan farmland. It is alleged that the project is being rapidly advanced by DTE Energy, a significant electric utility company.

Picture it as a bipartisan issue, with President Donald Trump recently stating in his State of the Union address that major tech firms should establish their independent power plants for data centers to prevent an increase in household electricity bills. Furthermore, Sen. Bernie Sanders (I-VT) has openly called for a federal moratorium on the construction of new AI data centers. Bills have been introduced in nine states to halt the building of new data centers.

The Rise of Community Benefits Agreements (CBAs)

To address these concerns, some parties have proposed Community Benefits Agreements (CBAs). These agreements, if properly used, empower community coalitions to influence main development projects, promoting local hiring, affordable housing, and space for local merchants. However, these tools could be misused for corporate-washing purposes, warns the Good Jobs First team who co-published the first CBAs how-to manual 25 years ago.

Hyperscale data centers, used for artificial intelligence (AI) computing, require vast tracts of land, millions of gallons of water daily, and electricity equivalent to that used by tens of thousands of households. They also generate air pollution and often receive substantial tax abatements.

Addressing Economic Development Issues

Consequently, these facilities present significant challenges for economic development: can such large, resource-demanding facilities be modified to create a win-win situation for all involved? The answer lies in addressing a range of issues, including economic, environmental, and social impacts.

Tax and Wealth Transfer Issues

States often find themselves losing between 52 and 91 cents on every dollar of tax breaks they grant to data centers. This loss of revenue, compounded by the granting of local property tax abatements to data centers, undermines the funding of public schools, health, and safety services.

Environmental and Public Health Concerns

Data centers also contribute to air pollution, especially when located near Black and Brown communities that have historically dealt with disproportionate shares of toxic emissions. Moreover, they pose a significant threat to climate change mitigation efforts.

Water Supply and Pollution Issues

Depending on their location and technology, many data centers require huge amounts of water to cool the heat generated by thousands of microchips and servers. As reported by Business Insider, 40% of existing or planned US data centers are in areas with high or extremely high water scarcity.

Land Use Concerns

Data centers need large, level plots, which often results in siting on farmland. The demand for land by data centers has driven up prices, pushing out other uses — particularly those that would host far more jobs.

Working Towards a True Community Benefits Agreement

Addressing these issues requires enacting reforms at the state level and imposing local safeguards. This includes paying taxes, locating in racially neutral locations away from residences and public spaces, and installing state-of-the-art pollution control equipment. States also need to categorize data center companies into a separate class to ensure they cover their own power-capacity costs.

Once these issues are addressed, the discussion can move towards local Community Benefits. This includes Project Labor Agreements, Job Quality Standards, and local hiring agreements to maximize local construction hiring and ensure well-paid permanent jobs for local residents.

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