Data centers will tax Great Lakes water resources, report warns

CHICAGO, IL — Great Lakes states should swiftly adopt new policies to protect freshwater resources from overuse by data centers, a new nonprofit report concludes.

Within five years, huge data centers that power artificial intelligence tools, cloud services and other digital infrastructure could slurp more than 150 billion gallons of water annually from the region, the Alliance for the Great Lakes analysis warns.

That’s a recipe for water shortages, groundwater conflicts and contaminated aquifers when layered on top of significant water needs by mining, manufacturing and irrigated agriculture — which is also increasing here as the climate warms.

“There’s a convergence of these demands all at the same time,” said report author Helena Volzer, a policy analyst with the Chicago-based Alliance for the Great Lakes. “We need better regional planning to inform our demand predictions and economic development decisions.”

According to the report, water rich Great Lakes states are largely unprepared to balance overlapping demand for freshwater even while taking steps to attract data centers and semiconductor chip facilities with tax breaks and other incentives.

In Michigan, Democrats passed sales and use tax exemptions for large data centers last year over environmental objections.

According to the Alliance report, legislatures, economic development agencies and local governments aren’t “strategically, proactively, and comprehensively” evaluating water demand increases or adequately factoring them into siting decisions.

The Great Lakes Compact, a binational agreement that prohibits water diversions outside the basin, largely ensures the region’s water will remain here. But Volzer said it may not totally protect the region from unprecedented internal demand.

However, the compact can serve as a foundation for new solutions.

The report advises states to conduct regional demand studies, map aquifers, develop better water use reporting rules and permitting requirements, set conservation and efficiency standards and revise groundwater laws to address management gaps.

“I think there’s a way to do it sustainably, but it requires proactive, forward-thinking planning,” Volzer said.

In Michigan, large water withdrawals must be registered and permitted. But Volzer said it can be hard to measure how much water data centers use for cooling servers because they can circumvent tracking by purchasing municipal supply. That can mistakenly classify industrial data center use as “public supply.”

That matters because public supply is typically not considered a “consumptive use” which permanently removes water from the ecosystem. Water that goes down household drains largely returns to wastewater systems which then discharge to the basin.

Volzer said half the water going into data centers may be lost to the atmosphere through evaporative cooling.

A data center that 1 million gallons of water per day would use roughly the equivalent of what about 12,000 people use in a year.

A data center doesn’t need to cool servers with treated drinking water, Volzer said. Non-potable water can do that job.

“States need to start looking at what laws need to change to accommodate reuse and recirculation, and to set conservation and efficiency standards for this industry, of which there are none right now,” she said.

Volzer said data center development in rural areas with the large acreage available to accommodate their size threatens to spark groundwater conflicts — not just through direct withdrawal but with indirect spin-off impacts. Homes and businesses that locate nearby in a second development wave can exerts additional pressure on an aquifer that previously may have only supported agricultural fields and some scattered homes.

In Michigan, riparian law allows essentially unlimited groundwater use provided that its withdrawal doesn’t harm the environment or negatively affect neighbors.

Although the region is rich with freshwater, the resource is finite and groundwater aquifers in Michigan have shown signs of strain and overuse. Clay soils can impede precipitation recharge in local areas and overuse can drain deep aquifers.

In Michigan, heavy groundwater use has strained aquifers in Ottawa, Branch, St. Joseph counties in recent years. Housing expansion and irrigation pressure has triggered rising salinity and long-term aquifer decline in the Allendale area. Groundwater depletion has led to conflict between farmers and anglers in the Prairie River basin near Coldwater.

In Kalamazoo County, low-flying helicopters have been mapping aquifers this summer with the goal of evaluating the impacts of new wells in the area.

Data center buildout is still in nascent stages in Michigan. Electric utilities like DTE and Consumers Energy are racing to line up deals, prompting excitement in economic development circles but also concerns about inflated bills on normal ratepayers.

A joint University of Michigan and the U.S. Department of Energy $1.2 billion data center project is generating pushback from potential neighbors in Washtenaw County.

Volzer said Michigan is positioned better than many other states to pivot toward water management that accounts for data center demand due to the existence of regulatory tools such as the Water Withdrawal Assessment Tool, which models the potential impact of large new withdrawals on surrounding rivers and streams.

The state should require rather than simply allow the creation of water user committees in places where it’s likely a water use conflict or impact could occur, the report advises.

Such a process could help avoid litigation, Volzer said.

Now is the time, she said, to make proactive decisions that could help Michigan avoid what’s happening in Indiana, where residents near South Bend say the construction of an Amazon data center and a electric vehicle battery plant are drying up their wells.

“Without those regional planning mechanisms in place — funding for groundwater mapping, a better understanding of demand and supply — we may find ourselves seeing more of those kinds of conflicts,” Volzer said.