Are Data Centers Taking Over Oregon’s Industrial Land?

In 1985, Oregon lawmakers passed a bill offering tax breaks to companies looking to plant their roots in Oregon’s “enterprise zones,” generally situated in small, economically distressed towns across Oregon. The hope was that the tax breaks would encourage new job opportunities for locals, aid small businesses in expansion, and help to establish these Oregon towns as crucial sites of industry. There are currently 76 enterprise zones across Oregon; 58 are considered “rural” and 18 “urban,” all of which are managed by local government.  However, the enterprise zones were introduced before lawmakers could have foreseen the explosion of tech corporations like Amazon and Apple, which have monopolized much of zoned industrial land in Oregon.

Oregon is home to 35 colocation centers, seven of which are AWS data centers. Tech companies are drawn to Oregon because of its available industrial land, significant tax breaks, and access to water. The rapid construction doesn’t appear to be slowing anytime soon. Just last year, Amazon announced they plan to spend another 11.8 billion to build five new data centers. This begs the question: what other industries might have flourished if industrial land had not been monopolized by data centers?  

Could Data Centers Encroach on the Semiconductor Industry?

Related:Report: Amazon Gets Tax Breaks to Build More Oregon Data Centers

Oregon is the third largest producer of semiconductors in the world and the number one developer of new technology in the chip industry. This past April, Oregon’s House of Representatives passed the CHIPS bill, which invested 210 million dollars to help bolster Oregon’s Semiconductor industry. While chip manufacturing continues to flourish in Oregon, data centers have become the predominant industry benefiting from enterprise zone tax breaks. While semiconductor companies still thrive in Oregon, prime industrial land has already been taken up by data centers. 

Many residents would like to see a revival of semiconductor factories return to Oregon. Chip manufacturing offers more permanent jobs while also maintaining the attention of tech companies and paying higher wages. Instead, the increased construction of data centers has led some to believe data centers have won out over semiconductors in the fight for usable land. In addition, research conducted by The Oregonian shows that almost none of the state’s tax breaks are going to chipmakers, despite  Oregon remaining a leader in semiconductor manufacturing. 

Oregon’s available industrial land coupled with their attractive tax incentives have made for a rare case of data centers having too much control of industrial areas with very little regulation from local government and scarce competition from other industries. “Data centers in Central and Eastern Oregon are less likely to compete with other uses and come with little or no opportunity cost,” said Jill Miles, Business Development Officer for Business Oregon.  “Data centers in the Portland Metro area necessarily compete with other industrial or commercial uses due to a shortage of available sites.” 

Related:Things to Keep in Mind When Building a Data Center in 2023

Though, according to Miles, it’s not as simple as data centers dominating available land. “Federal CHIPS dollars have recently increased interest in new semiconductor investments and there is a shortage of available sites in the area of the state where these facilities will want to locate,” she said.  “Some have pointed to data centers as driving the land shortage, but others have pointed to distribution centers, driving ranges, and even long-established golf courses.” 

How Do Data Centers Impact the Surrounding Communities?

Residents of towns like Hillsboro, Oregon, which has seen a 84% growth of data center development, are coming to expect data centers in their backyards. While it varies by the community, “In general we hear enthusiasm for the centers from our rural communities, which tend to view these facilities as an asset,” says Representative Pam Marsh, who serves as chair of the House Committee on Climate, Energy, and Environment. 

Data centers have created permanent jobs for residents in these towns, and the construction of the facilities themselves has brought significant work to local construction companies. However, data centers employ less workers than most other manufacturing jobs. 

While locals have come to view data centers as assets to their local economies, the significant impact of data centers on the environment can’t be ignored. A data center uses an average of 30-50 billion gallons of water a day, and many across the U.S. are located in drought-stricken regions. Environmental impacts have led some residents and activists to oppose rapid construction of them and to put pressure on companies to reduce emissions. 

Locals don’t get much of a say in what industries flourish in their towns, however. The tax breaks that attract tech companies are negotiated by the local government. “[Despite the fact that] another kind of industrial development would likely use much less water and energy, and provide equally good jobs using or exporting locally produced raw materials,  data centers dominate because high tech needs so many of them,” said Marsh.  “Local government rarely has the opportunity to choose between two or more good options; instead, big tech brings a proposal forward for a data center and the local government responds — typically with lots of enticements.” 

What Does the Future Hold for Data Center Growth in Oregon?

The future of continued data center growth looks bright.  “At this point, we are just beginning to look critically at the tax benefits these data centers are receiving, as well as the environmental impacts of their operations,” said Marsh.  “I hear increasing discussion about the need to really scrutinize proposals for their benefits and impacts.” However, so far, little legislation around regulating tech companies has been introduced with any success.

Early this year, lawmakers proposed House Bill 2816, which was geared towards placing restrictions on buildings with high energy use and cutting greenhouse gas emissions by 60%, which would predominantly affect data centers. Many feared the bill would jeopardize industry success, but in early April the bill was pulled from the committee floor.
Writer Mike Rogoway has done extensive coverage on the impact of data centers in Oregon. You can read his coverage at Oregon Live.