Google Wins Hermantown and Draws a Challenge in Michigan

HERMANTOWN, Minn., Oct. 30 — Hermantown’sHermantown’s City Council unanimously approved a special-use permit for Google’s 1.7 million-square-foot data center late Friday, after more than four hours of public comment, the Duluth News Tribune reported.

Earlier the same day, Michigan’s attorney general, Dana Nessel, asked the state’s Public Service Commission to rehear its approval of DTE Electric’s contracts to power a 1-gigawatt Google data center in Van Buren Township, arguing that their terms leave the utility’s other customers at risk of paying for it. She asked the commission to adopt her recommendations or reject the contracts outright.

Friday’s two moves show the two fronts on which big data centers are now contested: in Hermantown, the site; in Michigan, whose commission says it has no authority over whether and where a data center may locate, the bill.

The Permit

The council also rejected a citizens’ petition for an environmental assessment worksheet and approved a development agreement with Google, a cooperative agreement with St. Louis County and protections for the city should the facility stop operating as a data center.The PlansPlans call for three 375,000-square-foot data buildings, each about 33 feet tall, and three 150,000-square-foot mechanical buildings on a 234-acre site in the city’s southwest corner, the News Tribune reported.

The vote had been set for Monday, until a protest delayed it. For Friday the city let in only the first 85 visitors, “per the Fire Department.” About 200 opponents chanted “Let us speak!” outside, the News Tribune reported.

“I don’t think we should have this data center here or any place close to here,” Cliff Davis, who has lived in Hermantown for 82 years, told the News Tribune. Several people from Minnesota Power and the Duluth Building Trades Council spoke in favor. “You guys had an openness and a willingness to listen to your constituents,” said Dave Lislegard, executive director of Jobs for Minnesotans. Attendees laughed.

Christopher Virta, the city attorney, said that Tribal requests to the city “should be taken seriously and given due weight as sovereign governments … state law does not give them a formal, direct role in the permitting process,” the News Tribune reported. “The treaties are the supreme law of the land, despite what I heard here today,” countered State Representative Liish Kozlowski, a Democratic-Farmer-Labor legislator from Duluth.

Google still needs wetland and construction permits, and its designs could trigger more environmental review, the News Tribune reported. The project faces three lawsuits; on Thursday, opponents sought a temporary restraining order in one of them to keep the city from issuing the permit until the suits are resolved, and the News Tribune reported no ruling. Two council seats are on the ballot on Tuesday.

The Bill

The Michigan commission approved DTE’s contracts with Google on Oct. 1, on conditions it said would keep other customers from bearing any of the project’s costs.The TermsThe contracts run 20 years, against five under DTE’s usual large-load rate, and oblige Google to pay for at least 80 percent of its contracted use. Google is also to pay for DTE to develop up to 1,600 megawatts of renewable energy and 480 megawatts of battery storage, the commission said. DTE contends that the contracts will bring its other customers a $1.7 billion benefit over their 20-year life. The order leaves out of that protection customers who buy their power from another supplier; commission staff found that they would pay more.

Among Ms. Nessel’s most significant concerns, her office said, is the yardstick: weighing costs and benefits to other customers over the full 20 years rather than year by year, as DTE proposed and the commission accepted. The commission’s order, as her petition quotes it, says “there appears to be agreement that the four years of 2035 through 2038 will produce annual net costs to other customers,” but judges the contracts by their effect over the whole term.

“This aggregation standard, on a twenty-year contract, simply swings the doors wide open for customer cost-shifting, and that’s how the data center crash-lands onto your electric bill,” Ms. Nessel said in a statement.

She asks the commission to reconcile costs and benefits every year, to count transmission costs she says DTE left out, and to reject a collateral cap that limits the liability of Google and its parent, Alphabet, for the costs of service.

The order puts the risk of a collateral shortfall on DTE. “All risk associated with the sufficiency of the collateral shall be borne by DTE Electric,” it says, and any unrecovered costs “shall not be borne by ratepayers.” Ms. Nessel asks whether DTE could absorb that risk, arguing that the damage from a large shortfall would reach its customers in the end. The commission called that unresolvable in the case, resting on “many widely speculative assumptions”: Google’s and Alphabet’s bankruptcy, an insufficient letter of credit and no further need for the data center. Her petition notes that Alphabet has recently reported negative free cash flow; on Wednesday, Alphabet reported free cash flow of minus $9.1 billion for the third quarter, its second negative quarter in a row.

“Google will pay its own way, covering the full cost of powering its data center, so customers aren’t left footing the bill,” a DTE spokesperson said in a statement reported by WLNS 6 News in Lansing. Google did not immediately respond to WLNS, and a commission spokesperson declined to comment. The commission may reopen the case at any time if DTE’s claimed benefit fails to materialize, the order says. DTE expects the data center to begin taking service in December 2027, the commission said.