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Michael Dunne: I'm Michael Dunne. Here's a riddle: What is not alive but grows surprisingly well in Oregon? Data centers. These huge facilities that are the lifeblood of major corporations like Amazon, Google and OpenAI have certainly found a home in the Beaver State. Today on the show, you'll hear from a longtime business and tech reporter for The Oregonian who has found that our fertile environment is going to help grow enough data centers to occupy the entire acreage of Springfield. But these facilities aren't going to be located in major urban settings like Eugene or Springfield. They're going up in rural areas where land is cheap, and that growth is putting a huge strain on local communities, water and power. And while the centers are huge, their employment needs are not. Mike Rogoway covers business for The Oregonian. Mike, always great to talk to you. Thanks for coming on.
Mike Rogoway: Yeah, thanks for having me back.
Dunne: I enjoyed reading your story about the huge amount of acreage, not square feet but acreage, set aside for data centers in Oregon. Let's start by leveling set for listeners: What constitutes a data center? Does that include AI data centers?
Rogoway: Yes, it can. It's a relatively new industry. Traditionally, we've had various kinds of data centers in Oregon, from small facilities that banks or hospitals operate to really large, hyperscale data centers that are hundreds of thousands of square feet, hosting things like your email, corporate data and streaming services like Netflix or Amazon Prime. The AI data center is something newer. Some older data centers are now doing AI work, but companies are also building a new class of data centers that are much larger and devoted specifically to AI.
Dunne: Why is Oregon such a ripe environment for data centers?
Rogoway: It's a story that's about 20 years old. Google built Oregon's first data center in The Dalles 20 years ago this year. At the time, what Oregon offered was land, a temperate climate, access to renewable power at a moderate price and, above all, tax breaks. We don't have a sales tax in Oregon. If you're spending a billion dollars to equip a data center, that's a big deal. And the state will generally forgive much of your property tax bill for up to 15 years. That can save companies tens or hundreds of millions of dollars over the life of their agreement. That's the big draw for Oregon. By some analysts' estimates, we're the second or third largest data center market nationally. We simply have the best tax environment.
Dunne: This really is a story about rural areas of the state. It seems like a lot of these data centers are not locating in Multnomah County, Eugene or even Bend. It's more rural areas, isn't it? Why is that?
Rogoway: It's rural and suburban, and there are a couple of different phenomena going on. The big one is that data centers don't need a lot of people. Oregon's big industry over the prior 20 or 30 years has been semiconductor manufacturing, which is a pretty labor-intensive business, particularly the way Oregon does it. We have a lot of researchers here involved in that industry. Semiconductors need a lot of people. Data centers need a lot of space for their computers, but not a lot of workers. So they've traditionally gone to places where land is cheap and power is available. Our market is primarily Morrow and Umatilla counties, near the cities of Boardman and Hermiston, Crook County near the city of Prineville northeast of Bend, and Hillsboro, which has a lot of industrial land, big tax breaks and access to trans-Pacific fiber that can connect data centers to technology facilities around the world.
Dunne: Listening to you, I'm thinking: They don't employ a lot of people, and they get tremendous tax breaks. So what are the positives of these large data centers for the Oregon economy?
Rogoway: The big plus shows up in small communities. Take Prineville. A decade or 15 years ago, Prineville was really struggling. It had been a mill town. The mills were moving out. Les Schwab moved its corporate headquarters from Prineville to Bend. So you take a small town and you bring in, in that case, Facebook, now called Meta, and Apple, each of which built large data centers there. By Portland-area metrics, they're not major employers, maybe a few hundred people, but that's a big deal in a small community, and the jobs pay reasonably well. There's some variety there. Junior IT workers who are installing servers and security guards, those jobs don't necessarily pay a lot. But more senior IT people are paid better. So you're taking small communities that didn't have a lot going for them and bringing in a big infusion. Now in a place like Hillsboro, where industrial land is scarce and you're bringing in a small number of employees, TikTok, X (formerly Twitter), LinkedIn and Adobe all have data centers there, employing a handful of people each. There isn't much economic benefit to the data centers in those communities. It just took Hillsboro a long time to catch on to what was happening, and by that time, most of their industrial land was gone.
Dunne: What are some of the drawbacks of these huge data centers on local communities?
Rogoway: We talked about land in Hillsboro, and that's one. In some communities, land is fairly scarce, and that's the case in Hillsboro and in The Dalles, where Google operates. Other drawbacks are more localized. Water is one example. In The Dalles, Google uses something like 40% of the city's water. Whether that's a drawback depends on whether there's an alternate use for the water and whether the increased usage starts to have an environmental impact. People who are protective of the Dog River, which feeds The Dalles, are very concerned about Google's growing appetite there. The other major drawback is power. Data centers use something like 11% of Oregon's electricity now, and in another three or four years, estimates say that could double. They could be using up to a quarter of the state's electricity. Oregon passed a landmark bill last year designed to protect ratepayers from shouldering the cost of transmission lines and other infrastructure to supply data centers. But power generation is finite and has an environmental impact. If enough new generation needs to be built to feed these data centers, it could affect the climate and rates. So those are the sorts of things people worry about.
Dunne: Am I correct that there was language from the Trump administration that would allow large AI data centers to build their own power plants, so they wouldn't be drawing from the local community grid? Is that in play in Oregon?
Rogoway: People are definitely thinking along those lines. The state is playing catch-up. The industry has been growing here for about 20 years, and the state really took notice only over the last year or so. People are looking at all kinds of options. One approach I've heard called BYOCE, bring your own clean energy, would give companies the latitude to build and power their own facilities. If you're interested in clean energy, data centers could actually be a positive. Some are very committed to clean power, and they could serve as an anchor tenant, providing the capital and a dependable customer base for other clean energy companies. That could help cover the cost of more transmission or clean power from wind farms or solar arrays for both industrial and residential customers. Data centers are also exploring new technologies. Geothermal is one option. Amazon is looking at building small modular nuclear reactors in Richland, Washington, very close to their data centers near Boardman and Hermiston, to power those facilities. That's not going to happen soon, but over the course of a decade or two, it may happen and help incentivize new sources of electricity.
Dunne: Has there been any conversation or public statements from the governor's office or the Legislature about regulating this growth? Can they even regulate it?
Rogoway: Yes. As I said, the state is just catching on to this huge industry that has sort of arisen here. In February, I believe, Gov. Tina Kotek said that the pace and kind of growth taking place in the data center industry is not sustainable. She was pointing to the impact on power and on land use. The state does have some levers to pull. We can regulate how electricity is generated and what kind. We can regulate how water is used. We can pull levers on tax breaks. To date, the state has been very reluctant to rein in data center tax breaks, but there's growing awareness of the issue, and this will be a major topic in next year's legislative session: To what degree do we want to continue enabling these large tax breaks?
Dunne: I would imagine there might be some tension between what Gov. Kotek and some members of the Legislature are looking at versus what local city councils or county commissioners want, since, as you explained, many of them see this as a real positive for their communities.
Rogoway: Yes, the dynamics will be complicated. You could see an urban-rural divide, where the statewide impact of data centers is causing concern to people in Salem and in the Portland area, while people in rural communities in eastern and central Oregon are saying: Wait a minute, these industries are great for us. But even in the smaller communities, sentiment isn't unanimous. I'm not hearing many people say they don't want data centers. But I do think there is concern about the size of the tax incentives and how the money is being distributed within communities. So there may be some common ground on how this can be managed. Over the past several years, there's been a growing voice in rural communities saying they'd like more state help, maybe not more state mandates, but state help in negotiating with the data centers. You have Amazon or Apple, trillion-dollar companies, coming in and negotiating with communities of 10,000 or 12,000 people. There's an enormous power imbalance there. Local governments, in some cases, might want more state assistance in those negotiations, to help determine what the data centers are worth and how communities can get the best deal for themselves.
Dunne: You talked about something called an exascale project. Can you explain the scale of something like that?
Rogoway: This is something new in Oregon and really new just about everywhere. People are starting to look at really large data center installations to power AI. We're seeing them in Texas and other states. There's a property in Morrow County of about 1,300 acres that was marketed and rezoned by Three-Mile Canyon Farms, a mega dairy operation that had been using it as grazing land. They had it reclassified for industrial use. Thirteen hundred acres is roughly 1,000 football fields. At full capacity, it could use up to 35 million gallons of water a year, about 1,300 gallons per minute at peak, and as much electricity as all the homes in the Portland area. It's a one-gigawatt facility. Amazon just bought this property at the beginning of the month for $37 million from Three-Mile Canyon Farms. They haven't said when or if they'll develop it, but the plans are in place for what could go there. It was described in the planning documents as an exascale data center, which would be a new class of facility for Oregon.
Dunne: You mentioned data centers as an anchor tenant, like the big retailers that once anchored shopping malls and attracted other businesses. Do data centers do that? Does one tend to attract others?
Rogoway: Yes, and that's why we have data centers clustered in a few areas around the state, around Prineville, around Hillsboro, and around Boardman and Hermiston. One reason is shared infrastructure. The data centers want fiber connectivity and electrical capacity built to serve them, and there's a network of electricians, pipefitters, welders and other vendors and contractors who serve them. There's also another important factor: Even information takes time to travel from place to place. A large cluster of data centers allows the computers inside them to communicate almost as if they were side by side. Amazon, for example, leases its data centers out to other customers through a division called Amazon Web Services, which is a very large portion of Amazon's overall business. We think of them as an e-retailer, but they're a data hosting company to an even greater degree. They want their data centers clustered together so that their customers' systems can communicate with minimal lag. If facilities were hundreds or thousands of miles apart, there would be a time delay and they wouldn't operate as effectively. So there's a strong incentive to cluster.
Dunne: My last question: I've talked to many business people and municipalities that have always hoped the next big industry would replace what Oregon lost when it was no longer the timber-producing force it once was. Could data centers be that next big thing?
Rogoway: We are already known for this in the data center industry. Oregon is a destination for the industry. But I would say yes and no. It's more localized than the timber industry was. Timber touched many communities all up and down the Willamette Valley and across the Cascades. People were harvesting, transporting and milling trees throughout the state. The data center industry is more concentrated. The benefits are accruing to just a few places: Morrow County, Umatilla County. They're not spilling over to neighboring communities. And even within, say, Morrow County, which has a small population of about 12,000 people but is very large geographically, the benefits are primarily going to the Boardman area and not to the county seat in Heppner. There's growing awareness of that. So yes, data centers are making a big difference in a few small communities, but not providing much benefit to the broader region. Could other communities eventually attract them? Yes. But they like to cluster, so you're unlikely to see a standalone facility pop up in, say, Roseburg. Could they emerge there over time? Maybe. I'm not speaking specifically to Roseburg. I don't know enough about the land or power situation there. But places like that could eventually attract them. There is some concern among economists that the data center boom nationally and globally may be a little overheated, and things could ease up. But right now, in Oregon, communities are preparing for a lot of growth. We have about 2,900 acres of data centers now, and communities are preparing for 9,100 acres of new ones. The companies and the communities that have data centers are thinking big.
Dunne: And 9,100 acres. Tell people what that represents.
Rogoway: We put that as roughly equal to the land area of the entire city of Springfield. And that one exascale data center alone, at 1,300 acres, is triple the size of Washington Square Mall in Tigard. It's a lot by any measure. If you drive I-84 heading east or coming west from Idaho, as you pass through Boardman, you can already see it changing the physical landscape. These are huge, very visible facilities. If you go through Hillsboro on Highway 26, that's what you see: lots and lots of data centers. That's what's happening in Oregon right now. This is our growing industry.
Dunne: He's Mike Rogoway, reporter at The Oregonian. Mike, always appreciate your knowledge and insight. Thanks so much for joining us.
Rogoway: Yeah, thanks for having me on.
Dunne: That's the show for today. All episodes of Oregon on the Record are available as a podcast at KLCC.org. Monday on the show, award-winning filmmakers will join the show to talk about their heralded documentary 'Follow the Rain,' about the vital importance of mushrooms. It will be screened in Eugene later this month at the Eugene Art House. I'm Michael Dunne, host of Oregon on the Record. Thanks for listening.
