As Data Centers Flock To Michigan Communities, What Protections Exist For Residents?

Michigan Advance

December 3, 2025

As tax incentives have marked Michigan open for business on data centers, an influx of proposals has drawn frustration and concern from residents across the state as landowners and local officials seek to bring these resource-intensive facilities to their communities.

While proponents of these facilities – which house servers, storage devices and other pieces of online infrastructure – point to the role data centers play in the development of technologies like artificial intelligence and the potential economic boons that could come with them, environmental advocates and nearby residents are pointing to the burden the projects could put on their communities.

Chief among the concerns with the projects making their way to the state is the large amount of energy needed to power these facilities, with an analysis from Bloomberg News finding a 267% increase in energy prices in communities located near data centers.

The facilities can also demand large amounts of water in order to cool the computer servers housed within, with some U.S. communities reporting issues accessing water after data centers began operating nearby. There are also concerns about pollution, as the water can be treated with chemicals to prevent corrosion or bacterial growth, making it unsuitable for human consumption or agricultural use.

Even for facilities that do not treat their water with chemicals, returning heated water into nearby bodies of water after it is used for cooling creates concerns for local ecosystems, Molly Kleinman, the managing director for the science, technology and public policy program at the University of Michigan’s Gerald R. Ford School of Public Policy, told Michigan Advance.

Some data centers utilize a closed-loop system, Kleinman said, which uses less water and does not return the water to the source. However, she said those facilities tend to use more energy.

Although water and energy are receiving the most attention, Kleinman said there are also concerns about light pollution and noise pollution from fans and generators at the facilities.

Air pollution is also an issue, with some facilities running diesel generators around the clock to ensure they have enough power, Kleinman said, noting this is often a concern in communities that are already facing environmental injustices.

Breanne Green, a community organizer with Livingston County Residents for Responsible Development, which opposes the development of a data center in Howell Township, said she first started reading about data centers while researching climbing energy rates.

“That’s when I really started to understand about the more ethical implications of using AI and how much water it uses,” Green said.

While water and energy use are prime among her concerns, Green is also wary of the financial risks that come with bringing what is billed as a $9 billion investment into their small community.

“We don’t know what happens when the AI bubble bursts. I know what it’s like to live in a community where one corporation supplies all of the income and then they go out of business. It’s devastating for a community, and I do not want that to happen here,” said Green, who grew up just outside of Flint as the child of two General Motors employees.

When looking at the state’s current regulations on data centers, Katie Duckworth, a senior associate attorney at the Environmental Law and Policy Center pointed to requests from Michigan’s largest energy providers on how to handle the large energy demands stemming from these facilities.

In the case of Consumers Energy, the state’s energy regulators approved the company’s request to modify its rate structure for energy-intensive facilities like data centers to ensure these large energy-load customers do not shift their costs onto other ratepayers.

However, DTE Energy took a different approach, asking the Michigan Public Service Commission to approve contracts to supply power to an OpenAI data center planned in Saline Township.

While the Commission’s order in the Consumers Energy case prioritized protections for other customers and emphasized that other residents and businesses should not have to shoulder the costs of providing power to data centers, Duckworth emphasized that this order only applies to Consumers Energy customers.

Ahead of a public hearing on the Michigan Public Service Commission’s long-term plan for energy reliability and affordability held in late October, the chair of the commission, Dan Scripps, told reporters that consumer concerns about data centers would likely be addressed on a utility by utility basis.

Although DTE has repeatedly asserted that the Saline Township project will not raise rates for customers, its argument that Michigan law bars them from shifting costs onto other ratepayers hinges on a technicality.

Under the laws creating the sales and use tax exemption for data centers, facilities looking to receive the tax break are barred from accepting an energy rate that would require residential customers to subsidize the cost of providing energy to the facility.

But Duckworth said the devil is in the details.

“That’s not necessarily the same as saying that DTE is not allowed to ever serve a customer in a way that is being subsidized by their ratepayers,” Duckworth said.

While the public service commission is taking the lead on regulating energy use from data centers, Duckworth said there’s a gap at the state level when it comes to regulating the water these facilities use for cooling.

Because these decisions are made at the local level, there’s less transparency and scrutiny around how much water these facilities are consuming, Duckworth said.

“One of the things that I think would be really valuable in any legislation, would be a lot of required transparency around environmental and other impacts,” Kleinman said.

Alongside concerns on how large-scale data centers will impact Michigan residents in the present, several environmental organizations and energy consumer advocacy groups have warned that these facilities could also pose a threat to Michigan’s goal of requiring energy providers to meet a 100% clean energy standard by 2040.

The issue extends beyond Michigan, as energy demand from data centers within the U.S. outpaces growth from renewable energy. As a result, energy companies are keeping fossil fuel plants online longer than expected and reopening shuttered plants to ensure data centers have enough power, Kleinman said, which will continue to contribute to climate change.

During a roundtable discussing concerns with DTE’s proposed contracts for the Saline Township data center, Charlotte Jameson, the chief policy officer for the Michigan Environmental Council, explained that while the state must rely on renewable energy sources like wind and solar to meet its goals, utilities often rush to build natural gas plants when significant new energy demand is added to the grid.

While natural gas plants are included in the state’s legal definition of clean energy systems, they must utilize 90% effective carbon capture and storage technology. However, the Institute for Energy, Economic and Financial Analysis has questioned the effectiveness of the technology and warned that it could increase carbon dioxide emissions.

Additionally, a policy brief from U of M’s Ford School, created in partnership with the Michigan Environmental Justice Coalition, warns that data centers have derailed energy goals in other states.

There are ways to ensure that increased energy demand from data centers does not jeopardize the state’s energy goals, Duckworth said, but it will take scrutiny from the Michigan Public Service Commission.

Michael Craig, an associate professor in the University of Michigan’s School for Environment and Sustainability and the Department of Industrial and Operations Engineering, said extending the lifespan of fossil fuel plants and building new ones is ultimately a coordination, time scale and willingness problem.

“There’s no physical reason, no engineering reason, why a data center is any different than more homes being built in Michigan, right?” Craig said. “We would not be having this conversation if people were gradually moving into Michigan and increasing our demand over time. That demand is no different than the demand at the data center, really, from the state perspective, except the size of the data center demand is way larger, and it’s concentrated in one place.”

There are many options on how utilities can help meet the demand from these facilities, including renewables, Craig said. Data centers could also supply their own renewable energy generation alongside their facility, addressing the increase for demand, Craig said.

“It takes time to build power plants, so if you don’t build them before you bring that data center online, the energy has to come from somewhere,” Craig said. “So you need a certain long term perspective, so that when you want a data center to come online, you have the energy from renewables available coming online to provide it.”

However, when it comes to meeting the state’s clean energy standard, data centers are not a fundamental game changer at the moment, Craig said.

“There was already lots of load growth that people were aware of. These data centers are another source.” Craig said. “The estimates are so wide nobody knows how much demand growth is actually going to happen from data centers as a whole.”

As more energy demand is placed on the system, more renewables will be needed, and the more clean energy buildout there is, the more difficult it could be to build more, Craig said, noting potential issues with community pushback and energy transmission. However, that doesn’t mean the state needs to scrap its policy and try something new.

“You’re still going to have to work with communities, still deal with resistance and find solutions that work for everybody, still deal with transmission congestion, still deal with scaling up the technology,” Craig said. “All these things are going to happen one way or the other.”

When looking at concerns around data centers, Kleinman noted that these facilities are not new, and that at a smaller scale, they can operate without creating major disruptions.

Part of the new problem stems from how large these facilities can be, and how energy hungry the computers can be, Kleinman said. In turn, she believes part of the answer is to ask whether the large scale of data center projects is necessary.

“Are the products that they’re running – the sort of generative AI general use kinds of tools like ChatGPT – are those serving a purpose in society?” Kleinman said. “Those start to become big questions, but when you think about the trade offs, I think they’re worth asking.”

As far as how these facilities can minimize their impact, Kleinman pointed to requirements for data centers to supply their own energy from renewable sources.

In order to receive the tax break in Michigan, data centers must source 90% of its expected annual energy usage from clean energy sources through either on-site generation, a long-term contract with the electric utility, energy cooperative, or municipal utility serving the geographic area where the facility is located, or participating in a voluntary green energy pricing program.

Another piece would be ensuring the cost of supplying energy to these facilities are not placed on ratepayers, Kleinman said, pointing to the Ford School policy brief, which offers additional recommendations including mandating energy audits, performance standards, renewable energy use and public reporting requirements to ensure a sustainable model for data center growth.

Duckworth said the Environmental Law and Policy Center would also like to see the state take a more proactive approach to clean and renewable energy as data centers come online.

“With the correct incentives and planning and requirements, it’s possible for data centers to be developed in the state while minimizing the environmental impacts and not jeopardizing Michigan’s clean energy goals.” Duckworth said. “But that will just require ensuring that the data centers are paying the full cost of their power needs, and that they’re being powered by the right mix of clean and renewable energy.”

The Michigan Advance, a hard-hitting, nonprofit news site, covers politics and policy across the state of Michigan through in-depth stories, blog posts, and social media updates, as well as top-notch progressive commentary. The Advance is part of States Newsroom, a national 501(c)(3) nonprofit supported by grants and a coalition of donors and readers.