Data Center Development – Public Use or Public Menace?

Data centers are on the rise in the United States, but where are they putting them all? It might just be in your backyard. Data centers were created to be a specialized facility that houses computing infrastructure to process, store, and manage large volumes of digital data, including AI. These centers can use about 5 million gallons of water every day, and can pose serious environmental, health, operational, and community risks. They create instability in the electrical grid and can also create erratic voltage spikes. These two issues can lead to power outages, damaging household appliances, and raise fire risks. The San Diego View and Viewpoint article provides more in-depth commentary on the risk and the expansion. About 70% of Americans oppose construction of data centers, but they might not have a choice as public utility companies may attempt to acquire private property through the exercise of eminent domain.  This may include the possibility of taking private property for the data centers themselves or, at minimum, takings by utility companies to extend utlities such as electricity, water, and/or sewerage service to data center properties.

Exercise of eminent domain has been traditionally limited to governmental entities, but in some States, government can delegate the power to private entities, also known as common carriers.  In New Jersey, public utilities are clothed with the eminent domain power, but it has additional constitutional limitations outside of the Fifth Amendment’s twin guarantee that “private property shall not be taken for public use without just compensation.” The primary use of eminent domain in these data center cases has been by electric companies for construction of additional transmission lines and towers to transmit additional capacity for the data centers.   The stress that the data centers put on the electric grid might turn these power lines into a necessity for keeping the power on in some communities; however, there would be no need if there were no data centers.

Some states already in the process of developing data centers – and the extra generation capacity needed to run them – have been resorting to eminent domain to take private property for data center “public use”.  The Sun Gazette writes about specific takings in Luzerne County, Pennsylvania. Although there have been offers of compensation for the takings, they do not seem to account for potential damages to the remaining property caused by these mammoth data centers.

However, in states like New Jersey, there may be some solace for owners because any taking of private property for an electrical infrastructure project must first be approved by the Board of Public Utilities.  There are also additional constitutional protections where private property is taken for public utility use (whether the taking is by a traditional public agency or a private utility company).  For instance, the Owner must be paid just compensation before the utility company may take title or possession.  These additional protections afforded owners were raised in the PennEast pipeline cases that ultimately were before the United States Supreme Court on a question of sovereign immunity versus the federal takings power. See our posts here and here.

This post was researched and co-authored by MROD summer intern, Morgan Soehnlein, Bachelor of Arts candidate (2028) at the College of New Jersey.