Tim Steller's column: Demand details before approving Tucson area's data-center deal

Tucson is arriving late to the data-center game.

That makes us lucky. It means we can look on the proposed mega-development on the southeast side with a degree of detachment that other communities couldn’t when offered these apparent opportunities years ago.

We can ask questions like, is this really an opportunity? Or is it a burden? Or some of both?

And we can demand more information and commitments before we decide to approve a project that represents a tempting investment, yes, but also a significant risk that would benefit the wealthiest, most powerful industry — Big Tech.

“Project Blue,” as the local effort has been nicknamed, has been hidden behind non-disclosure agreements for months, but on Tuesday County Administrator Jan Lesher gave her most detailed account of the project so far.

A developer named Beale Infrastructure wants to build somewhere between four and 10 data centers on a 290-acre property near the Pima County Fairgrounds. They would pay the county $20.8 million for the land, and it would cost around $1.2 billion to build the centers, employing thousands during construction.

Still, we don’t know who the end user would be. We also don’t know the terms of their deal with Tucson Electric Power for electricity or the details of their agreement with Tucson Water.

There’s no need for the public or officials to be deferential to this industry, as author Emily Bender told me Thursday.

“In general I would say, no benefit of the doubt to the people building the data centers,” said Bender, co-author of a new book, “The AI Con: How to Fight Big Tech’s Hype and Create the Future We Want.”

“Make them dot their I’s and cross their T’s.”

Probable use is for AI

The Tucson area’s Project Blue is one of many, many such data-center build outs proposed or happening around the world. At present, these buildings filled with servers are mostly used for cloud computing, storing cat videos and that sort of thing, and cryptocurrency mining, but “hyperscaling” for artificial intelligence efforts is driving the growth in new data centers.

McKinsey & Co. said in an April report that globally, there will need to be $6.7 trillion (yes trillion with a T) spent on data center computing by 2030. Of that, $5.7 trillion will be for AI firms’ needs.

So, the odds are that Project Blue will be used by some company or companies attempting to hyperscale their computing power — that is, exponentially increase this power to train their AI models, answer users’ queries and pursue artificial general intelligence — matching or exceeding human brain power. All this to help AI firms stop their losses.

As hyped as AI is, the industry so far is a money pit. David Cahn of the venture capital firm has described it as “AI’s $600 billion Question.“ Major tech companies like Meta, Google and Microsoft have poured hundreds of billions into AI development, including building data centers, but nobody has figured out how to make that money back.

Karen Hao, author of the new book “Empire of AI: Dreams and Nightmares in Sam Altman’s OpenAI,“ said in a recent interview: “They have spent an extraordinary amount of money in developing these technologies. They’re spending hundreds of billions to build these models, and they need to recoup these costs.”

Key information lacking

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We don’t know if Project Blue would consist of AI-serving data centers yet. It’s one of many key pieces of information we haven’t got and that the Pima County Board of Supervisors should have before making their decision on Tuesday.

Take, for example, the question of jobs. The early, vague descriptions of the project estimated that the data centers would create 180 jobs at an average salary of $64,000 per year. That estimate still stands.

But the information provided by Lesher last week shows that the developers are only required to produce 75 full-time-equivalent positions. Those must average $75,000 per year in salary. This is the kind of detail we ought to have about all the deal’s terms, but we don’t.

The biggest questions are about the electricity and water deals. Lesher’s memo says the developer’s “long term power agreement with TEP will protect existing rate payers, promote overall system reliability, and help create a cleaner energy portfolio.”

I asked TEP for the long-term power agreement, but they declined, citing an agreement with the project developer. In an email, TEP spokesman Joseph Barrios pointed to four solar and storage projects slated to begin operation between this year and 2027, as well as new natural gas power generation, that he said would help supply the required power.

But there is no detail offered as to how the deal will “protect existing ratepayers” or “create a cleaner energy portfolio.” This sort of commitment ought to be public and enforceable, or we shouldn’t believe it.

In Virginia, which has the world’s highest concentration of data centers, Dominion Energy just filed for rate increases, a special one for big users like data centers, and another one for regular users. The driver of the increase in costs leading to the rate increases is data centers.

Tucson Electric Power just won rate increases in 2021 and 2023, and the company stands to make a lot more money if this project is built. I doubt they will be shy about asking for another increase if they can justify it due to increases in demand or infrastructure needs. We need assurances.

Tucson Water has been a little more forthcoming about their deal with Project Blue, which centers on the developers building an 18-mile pipeline for reclaimed water to serve the data centers.

In a press release, the city of Tucson said: “This project hinges upon the developer investing significant dollars to expand Tucson’s reclaimed water system and build additional recharge and recovery capacity. These investments would benefit not just Project Blue but also provide access to reclaimed water for existing and future users in Tucson’s southeast area – advancing these potential investments by at least a decade and saving local water rate payers millions of dollars in the process.

The city said Project Blue is even talking about being “water positive,” meaning “a business returns more water to the environment or community than it uses across its operations.”

If true, let’s get it in an enforceable agreement.

Context is important

It would be crazy for a city like Tucson or a county like Pima, not to entertain this sort of proposal. Billion-dollar investments don’t happen often around here. And while the ultimate job creation from data centers is modest, we’re in no place to casually shrug off $75,000-per-year jobs, even if there are only 75 of them.

But it’s important to remember the context. These Big Tech, and specifically AI, companies are scouring the Earth for opportunities. They’ve worn out their welcome in far-flung places like Ireland, Spain, Chile, and are facing opposition across the United States.

Project Blue may well need us more than we need them. We certainly have enough leverage to demand to know the details of the impacts on our electricity and water systems before taking the first crucial vote on the project. And if promises are being made, we should get those commitments in enforceable contracts, dotting the I’s and crossing the T’s.

Beyond that, I’d like to know what realm of Big Tech we are involving ourselves in. Bender, co-author of “The AI Con,” said “There’s the idea that if you refuse this, then you are backwards or you are rejecting technical progress and rejecting modernity. Ceding that framing is already ceding too much ground to the tech companies.”

Yes, the money makes it a tempting opportunity, but we ought to know exactly what we’re getting into before we give in.