How to regulate data centers in Illinois at the center of latest proposal

Even as a political backlash against data centers mushrooms across the U.S., a broad consensus on how to regulate them is emerging in Springfield, according to key corporate, labor and environmental lobbyists.

Marc Poulos, a Springfield labor quarterback, is circulating a three-page proposal that would require data centers to use closed-loop cooling to preserve water, speed up grid connections for data centers that use renewable power, roll back some biometric privacy protections and restore data center tax incentives that Gov. JB Pritzker suspended in July.

Jen Walling, executive director of the Illinois Environmental Council, said her group is likely to support or not oppose several provisions in the Poulos document.

Broadly speaking, she said, they resemble proposals already circulating among the governor’s office and data center operators. They contain several important elements, including requiring data centers to bring their own power, which she said her coalition supported in a bill introduced this year called the POWER Act.

No formal bill-writing negotiations have occurred, although Pritzker representatives and top legislative officials are scheduled to hold a second meeting of their data center task force this month.

Around the country, more than 530 counties and municipalities have blocked or severely restricted data centers, according to Heatmap Pro, a clean energy news service. More than 200 additional towns are considering similar restrictions, Heatmap reported on July 30, as they seek to protect their land, water, electricity supplies and clean air.

These include six Illinois towns where data centers have been canceled since last year, and 13 which have enacted moratoriums or restrictive ordinances, according to Robinson Meyer, Heatmap’s executive editor. Four other Illinois towns are still debating how to proceed, he said.

Legislators return for their fall session on Nov. 17, just one day after the Illinois Commerce Commission and other agencies will formally release a plan aimed at preventing electricity shortages and even higher prices they say could plague the state by 2030.

As things stand now, the agencies reported in December, neither the Commonwealth Edison service territory in northern Illinois nor the Ameren area downstate “has sufficient … resources to reliably meet 2030 requirements,” largely due to rising demand from data centers.

In an interview last week, Poulos said he hasn’t abandoned his concern that artificial intelligence will concentrate too much political and economic power in the hands of a few wealthy tech executives.

“I was one of the first to ask, ‘should we be doing this in the first place?’ But we as a country and as a world have blown right past that question,” said Poulos, executive director of labor management operations for International Union of Operating Engineers Local 150.

“There’s absolutely nothing we can do to stop the proliferation of artificial intelligence and the loss of jobs,” he said. “All we can do is figure out how to do it, and how to do it responsibly.”

Poulos said he’s circulating his proposals not just on behalf of the operating engineers but also for a coalition of other building trade unions. His proposals would:

• Require the state to cancel non-disclosure agreements once a data center has signed a binding purchase agreement.

• Require data centers to bring their own power to protect existing ratepayers from higher prices caused by their electricity demands. The Poulos plan would include natural gas as one of the power sources data centers can bring.

• Require data centers to sign community benefit agreements that include the promotion of labor peace.

• Weaken some aspects of the Biometric Information Privacy Act, which the General Assembly passed unanimously in 2008. For instance, under the Poulos plan, Illinois would require plaintiffs to show real harm to sue, not just that their fingerprints or facial imagery were used in ways they hadn’t pre-approved. As in other states, the plan would require additional notifications after biometric data security breaches.

• Restore data center tax incentives. Freezing the incentives “does not make data centers more responsible,” according to the Poulos document. “It sends them and their construction payrolls and tax base to neighboring states.”

Biometric privacy protections in Illinois are among the toughest in the country. They’re enough to prevent the biggest data centers from being built in Illinois, said Brad Tietz, Midwest government affairs director for the Data Center Coalition, in an interview Wednesday.

These include AI data centers or hyperscalers such as a $26 billion complex Amazon is building near South Bend, Indiana. These behemoths don’t just store information like traditional data centers. They mine it around the clock to train their algorithms to mimic and perhaps surpass human intelligence.

Tietz’s Virginia-based lobbying group includes Google, Microsoft and Meta.

In a seven-page document he said is now circulating in Springfield, the coalition urged Pritzker to restore data center tax incentives. The governor paused them in July “to understand whether these incentives are driving development that is insensitive to consumer costs and environmental impact.”

The incentives can be restored now, according to the Data Center Coalition, if they’re tied to requirements for clean energy, sustainable water usage and labor agreements.

In the document provided to the Tribune, the coalition noted that the ICC is already boosting electricity rates for large users, including data centers, to protect other consumers. If the state adds requirements for data centers to bring their own power, the coalition wants to be able to satisfy them in part by investing in new and existing nuclear plants.

However, the coalition asked Pritzker not to impose a blanket requirement that data centers temporarily “go dark” during peak electricity demand in hot summer months.

“Nuance is essential,” the coalition document says. “Some workloads may have the ability to be curtailed, while others require continuous operation or are governed by hundreds of customer contracts guaranteeing 24/7 availability.”

In any case, Illinois should wait to see how federal regulators and regional transmission operators resolve these same questions around regulating data center demand on peak summer days before adopting its own rules, Tietz said. He also said it’s too soon to say whether the biometric privacy changes proposed by Poulos would be enough to unlock hyperscaler investment in Illinois.

But in general, Tietz described the discussions he’s been having with Springfield’s legislative leaders as productive. “There’s some level of agreement that we’re all working in the same direction, but the details of this are going to be tricky,” Tietz said.

“Whether or not we get there remains to be seen,” he said.

Jim Zouras, a Chicago attorney who’s represented people in hundreds of Illinois privacy lawsuits, said the state has constructed many new data centers since enacting its privacy laws. He said hyperscalers aren’t any more likely to run afoul of privacy laws than traditional data centers. But he said they have angered many Illinoisians by using so much electricity and water.

Zouras rejected the idea that a consensus is forming in which big Democratic Party constituencies could back changes to the state’s privacy laws.

“I assume the governor wants to protect consumers and wants to ensure their biometric privacy rights are protected,” Zouras said. “This is the most sensitive piece of data a human being could possibly have, and protecting it is certainly more important than having a couple of new data centers built in Illinois.”

In the face of the data center backlash, Pritzker defended his rollback of tax incentives at the Aspen Ideas climate conference in Chicago on July 21, according to a New York Times report.

“The large tech companies have the resources to bring energy with them,” Pritzker said. “How about if we say, ‘We’re not going to incentivize you. We’re going to tell you that you’ve got to bring energy with you if you’re going to come, and you’ve got to have closed-loop systems that make sure that you’re not contaminating our water, or taking too much of our water, and costing people in your utility bills, water and electricity.’”

Asked whether the tax incentives could be reinstated, a Pritzker spokesperson said the governor supports “a comprehensive framework to ensure the industry’s long-term growth does not compromise affordability or reliability for Illinois working families and businesses.”

State Sen. Bill Cunningham, a Chicago Democrat who has worked on energy-related issues in the General Assembly, acknowledged there’s a pathway for tax incentives to be reinstated, especially to help with construction costs.

“Policymakers are going to have to find a middle ground and figure out a way to get regulation in place that protects ratepayers but allows for this technology to move forward,” Cunningham said in an interview Tuesday.

Plenty of other tough decisions await Illinois lawmakers and regulators as the debate unfolds.

For instance, when the ICC and other agencies release their Integrated Resource Plan in November, they may call for a delay of a legislative mandate to close all natural gas power plants by 2045 to clean the state’s air. Some of these plants are located in Black and brown neighborhoods where pollution is already high.

To highlight how Illinois can do more to boost its own electricity generation, Walling is sponsoring a trip for lawmakers and labor leaders to inspect geothermal energy projects in Vancouver, British Columbia, starting Monday. Poulos is one of the labor leaders who’ll make the trip. They and the lawmakers will pay their own way.

Geothermal energy can heat and cool buildings by tapping the steady, year-round temperatures of about 55 degrees that exist a few hundred feet beneath the earth’s surface. The Illinois legislature authorized subsidies for geothermal pilot projects last fall.

jgorner@chicagotribune.com