Driving a Faustian Bargain with Data

Will eminent domain become a high-stakes bargaining chip?

Photo by Samuele Giglio on Unsplash

When did data become a four-letter word? Nationwide protests are underway today in more than 50 cities in 22 states. That includes New York, where Gov. Kathy Hochul recently signed an executive order for a one-year pause on hyperscale data centers consuming 50 or more megawatts of power annually. New York is the first state to hit the pause button while it learns the hard lessons of other states that handed over precious natural resources in their haste to cut quick deals. Here are a few of these high-profile, cautionary tales:

· Virginia leads the U.S. with a proliferation of about 637 data centers. As much as 45% of Loudon County’s total revenue is derived from its 50 million square feet of data centers. Recently Virginia became the first state to pass a new tax on data center electricity consumption.

· Arizona is fast-pedaling away from its sugar-high data center subsidies, creating a 3-year moratorium. Instead, it will re-direct $57 million saved from subsidies over the next three years to address health care, child care, and food assistance needs.

· Texas holds the dubious distinction of being the state with the second highest number of data centers. However, it also led the way in more than 3 million private residential electrical disconnections in 2024, tied to climbing monthly energy bills. In 2026, new restrictions aim to reduce energy costs by connecting data centers to the power grid and gaining more leverage during emergency disruptions.

· In Newton County, Georgia, residents are looking at a projected water deficit by 2030, and a 33% rate hike over the next two years. Meta uses at least 10% of the county’s water supply. Rural Louisiana is confronting a similar impact from a Meta AI center.

· New Mexico is home to Oracle’s Open AI. Recently the company has been forced to trim back its 1,400-acre Project Jupiter in southern New Mexico to reduce air pollution. Instead of building natural gas turbines and a diesel generator that spew greenhouse gases, it’s pivoting to solid oxide fuel cells that don’t require combustion, and also will reduce water needs. However, critics accuse the company of greenwashing.

Will some data be powered by eminent domain?

More than 70% of the U.S. power grid is 25 years or older. Demand for electricity is outpacing the supply. The Dept. of Energy predicts that data centers will consume as much as 12% of all U.S. electricity by 2028, up from 4.4% in 2023. . Much of this electricity is generated from fossil fuel, and adds to greenhouse gases. Another projection is that $10-$58 billion will be required to upgrade the public water infrastructure by 2030.

Ramping up the new infrastructure to expand the power grid also may require power plants, larger and more powerful transmission lines, and substations.

We know that Palo, Iowa, was attractive to Google because of its proximity to the Duane Arnold Nuclear Plant northwest of Cedar Rapids. Although it was shuttered in 2020, Gov. Reynolds told Iowa legislators it was necessary to restart the plant. It’s scheduled for completion in 2029.

Currently Alliant Energy is seeking rezoning to build the Morgan Valley Energy Center, along with a natural gas powered plant in Linn County. Alliant does not say the plant is being built exclusively to serve data centers, but it’s not hard to connect the dots to the 13 data centers under construction in Cedar Rapids.

Although data centers are sited on purchased land, the essential infrastructure required to support them may involve another type of power: the coercive power of the state. For instance, transmission lines often are the ticket to expanding the power grid. Atlanta-based Georgia Power plans to build a 35-mile transmission line to power four AI data centers.

Photo by Fré Sonneveld on Unsplash

Transmission lines are built on property – primarily private property. They’re regarded as public infrastructure and utilities. As we know in Iowa, a public utility can be granted eminent domain powers by the state. The electricity produced or pipeline oil doesn’t have to serve the public exclusively, and the project can primarily benefit private companies. If landowners don’t agree to sell property or to grant easements, the property can be seized, sometimes with take-it-or-leave-it compensation. Condemnation offers the real-world potential of lower property values.

About 330 residential properties are impacted by Georgia Power’s planned transmission line, and as many as 30 might be torn down in the process. Owners Angela Hall and her daughter Ansley Brown have taken to Tik Tok, to advocate for their home, purchased in 2003. They have until August 1 to find a new home. Other Georgia landowners want to know who will benefit from their land.

I could see this playing out in Iowa– after all Iowa has handed over its eminent domain powers to allow the Dakota Access oil pipeline and the Carbon Summit Solutions pipeline. Will it be used again to fuel AI growth?

In fact, pipelines, transmission lines and other infrastructure are playing an increasingly controversial role in Midwestern agriculture. This power struggle pits farmers, landowners, county and city governments, and communities against one another in a mad scramble to build new motherlodes of power for urban areas, and sometimes out-of-state consumers. These utility-scale industrial energy projects require the same open, level acres highly valued by rural and farm communities.

Roger McEowen, a Kansas ag law professor who spent years at ISU’s Center for Ag Law and Taxation, recently wrote that two eminent domain cases involving natural-gas pipelines and water infrastructure “raise broad constitutional questions about the limits of eminent domain authority over privately owned ag land.”

They Will Come, Invited or Not

Here in Iowa, a casual conversation with one of my Boone County supervisors revealed that they’ve been approached by data center developers. However, there were no operators at this time. They’re ubiquitous! Here’s a short list:

· Palo: After a 5-week pause, a 4 to 1 vote was held on the 2nd of three readings of a data center ordinance. More than 100 people showed up to oppose it. If you recall, the original 545-acre Google data center was proposed for unincorporated Linn County. After supervisors set guidelines, seemingly overnight, Google relocated to Palo, population 1,627, with a plan for it to be annexed into city limits. At a recent meeting, City board members admitted a major selling point is tax revenue. Palo officials recently promised residents no property tax abatement would be given. The final reading is set for July 20.

· Salix: Woodbury County Supervisors say the City of Salix may have followed an outdated version of Iowa law when it recently annexed 900 acres They have asked for a judicial review. Woodbury County recently instituted a moratorium on data centers.

· Ames: The Ames City Council has held two public hearings. It voted to temporarily delay any decision while staff develops new regulations. It would be sited on 10 acres, with 1% of the footprint of Googles’ Council Bluffs campus. It’s not expected to house large AI servers.

· Clinton: QTS’s hyperscale data center campus would be one of the largest in Iowa. A draft ordinance has been presented to the City’s planning commission. About 100 people in the audience spent two hours voicing their concerns about water, noise, and air quality. The public hearing will reopen in August. At that time, an ordinance may be sent to the city council for a vote.

· Fairfax: This town of 2,851 already is sandwiched between two data centers under construction to the north, and another in Palo. Its Council has voted 3 to 1 to approve the 1st reading of an ordinance prohibiting large data centers indefinitely. It offers the potential for a future ordinance to reverse this, if economic and environment factors are considered.

AI Gold Rush could be Fool’s Gold

AI has its upsides, and data has a role to play in our economy. I understand some Iowans are attracted by the potential of data centers to keep a lid on their individual taxes during this era of rising property taxes, and diminishing support from state and Federal government. Cash-strapped school districts often can benefit this additional financial support. I know people who worship the convenience and efficiency of AI. I understand it, but I don’t wake up each day terrified we would be catapulted back into the Middle Ages without it.

But a total of 71% of Americans oppose data centers. It may be one issue uniting red and blue state voters and it could be a winning issue for candidates in Iowa in November.

What’s driving this? Beyond the noise, electricity, water, and air pollution, it’s a local control issue. It’s also the unsettling subversion of eminent domain powers to claim AI meets the test of “public convenience and necessity.” It’s the scale, the giant footprint overpowering the landscape.

Superseding all of this, most Americans likely don’t see much value in AI – it’s nothing they couldn’t live without. They argue on Facebook that they already have adequate technology to visit web sites, keep up with family and friends on social media, and take advantage of spell-check. They want their kids and grandkids to write their own essays and research papers.

They don’t necessarily appreciate how Big Tech has degraded our society in many ways, turning us into human automatons staring at hand-held computers, and raising a new generation unable to make eye contact or small talk with their neighbors and family.

They also feel A.I. threatens their livelihoods. After all, A.I. is scraping our human intelligence, creativity, news, and research off the Internet, using it to train its models, and making a mint off it.

Placing a defined moratorium on hyperscale development isn’t hysteria or hyperbole! It’s stopping to ask what is the true cost of becoming a global A.I. data powerhouse?

What we do know is these wealthy tech companies are outsourcing their external costs of doing business on us. Hyperscale data centers also are playing state and local government, taxpayers, utility rate payers, landowners, and water users against one another.

We’re seeing this tsunami of data centers because politicians aren’t listening to their constituents. Local governments aren’t negotiating on behalf of their citizens. Legislators aren’t coming up with smart policies that don’t disadvantage the ordinary people who are most impacted.

Photo by Tanya Barrow on Unsplash

Instead of driving a hard bargain with data companies, they’re blinded by the age-old temptations of wealth and power. Some might call it a Faustian bargain. As German author Johann Wolfgang von Goethe wrote in 1808, Dr. Faustus sold his soul for worldly or material benefits: knowledge, power, and riches.

I’m not saying that data centers are the Devil incarnate, or Mephistopheles, but they are amoral. In this renown work of literature, Dr. Faustus ultimately realizes what he has surrendered is far more valuable than what he gained.

There’s a lesson in this for us today.

I’m a proud member of the Iowa Writers’ Collaborative. Please check out the work of my colleagues and consider subscribing to their newsletters. Thank you!