Just as he has found himself trying to thread a needle concerning carbon capture and sequestration, Louisiana Gov. Jeff Landry has tried to do the same regarding data center presence in the state.
Last year, under growing popular pressure, Landry issued an executive order that had the effect of slowing down CCS projects in the state. It allowed only a few to go forward, rendered when increasing public and legislative opposition advised that the impact particularly of the sequestration process had not had sufficient study for the application of appropriate safeguards.
This issue has caught Landry between its two aspects of capture and sequestration. With federal tax credits (and, for now, carbon credits paid by foreign concerns) for capture enabling a profitable industry, Louisiana has a competitive advantage only because of its abundance of sequestration options. It has no leverage over capture policy, just sequestration policy, but it precisely is sequestration around which major opposition has coalesced.
Landry’s permitting policy from that order tried to please both sides. It may have slowed capture projects leading to sequestration, but with the competitive advantage this would not discourage demand (as long as the tax and carbon credits remained political realities), yet the delay would give opponents some comfort that slowing down things could lead to prevention.
Now, he must grapple with a similar situation. The mushrooming of data centers nationwide has swept up the state, which once again finds itself with a competitive advantage with suitors’ access to less expensive energy as well as lesser start-up costs. The Hyperion project in northeast Louisiana, for example, will pump tens of billions of dollars into the economy over the next few years.
However, along with others, that project also has stoked worries from residents both nearby and farther away. Principal concerns include whether centers will suck up too much water and whether their considerable electricity demands will cause rates for ratepayers to skyrocket. Hyperion’s developers, for example, along with power provider Entergy Louisiana promised the only additional charges would come from financing power lines that would aid all ratepayers and that even if the Hyperion agreement ended earlier than the lifespans of the additional generating capacity built these would obviate future capacity enhancement needs for the entire service area.
Thus, on the heels of a report to the Public Service Commission that indicated a contemplated purchase by Entergy of a power generation source that could be related to Hyperion that might have costs offloaded onto all consumers, Landry acted. His executive order attempts to leverage tax credits for economic development that centers could enjoy by making these contingent on their recipients fulfilling a series of criteria in aggregate that would elevate benefits above costs, even if this meant increased costs to ratepayers could rise.
While the usual suspects on the political left have dismissed haughtily the order, in reality it creates quite some commitments for data center operators. Not only must they pledge against transferring costs to ratepayers, they also are to have a hand in creating education programs to train their workers, strengthen the local tax base, conserve resources in their operations such water, invest in local communities, give preference to Louisiana entrepreneurial activities, and to maintain transparency and accountability in operations.
Further, the stipulations apply not just to new entrants but also to existing tax credit recipients. In short, no new deployment of credits will happen without showing some attainment of these criteria (to be specified in detail by the end of summer through promulgated rules) and if not delivered sufficiently by current recipients they will lose the credits going forward despite the amount of sunk costs associated with a project. It’s hard not to think the majority of operators and the worried public would be pleased in the main with this compromise.
Naturally, this raises the cost of business for operators, but Landry counts on market forces to continue to drive projects the state’s way even with this. If things turn out that way, once again Landry will have walked successfully a fine line to please most of the people most of the time.
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