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Ep056: The Data Dilemma · 775 Alive

• 0:00
  Crystal: Data centers are the infrastructure for AI in the same way that the road system is the infrastructure for a car.
• 0:06
  Crystal: Scott: I think the bigger issue driving it isn't even really the AI or the data centers. I think it's a frustration with how government policies being set.
• 0:16
  Crystal: a venture fund capitalist that's a strip club owner that's come in and he's demanding that the state give him his damn data center. [upbeat theme music]Welcome to 775 Alive, a podcast focused on Nevada. From Vegas to Reno to Elko, we decode politics, economics, and critical global issues, offering common sense perspectives true to our Nevada roots. I'm Scott Gavorsky, PhD historian. And I'm Crystal Newton, business strategist. Let's get into it.
• 0:45
  Scott: Welcome back here to 775 Alive. Crystal and I are actually on opposite sides of the country right now. I'm in Virginia. But one of the things that's interesting about that is the issue we wanted to talk today, Virginia is actually the state that has the most experience with it, and that's actually the data center issue that's blown up.
• 1:01
  Scott: Crystal: Yeah, the the data center is probably one of the most interesting topics on planet Earth. It's the biggest race going on right now on a national level and on the state level. It couldn't be more controversial. And at the local level, people just don't know what to make of it. and are pretty upset about it. Scott, I think you just came from a meeting in, uh, from Elko, right?
• 1:32
  Scott: party meeting this morning where we had a data center resolution. Had a lot of conversation and going through it because, you know, like a lot of places here in in rural America generally, but particularly in rural Nevada, data centers is generating a a huge backlash and one that is far more, far more intense, I think, than a lot of people expected.
• 1:51
  Scott: Crystal: Yeah. Yeah. We have our most critical resources to staying alive and staying well as a species being utilized by this new industry. So that's a legitimate concern. We have a national security concern in that if another country beats us to final AI, whatever that is, we will become subject to them. So the race couldn't be more dire from that perspective. And then you have to consider culturally what's going to happen when everybody has an AI assistant and we're no longer talking to each other like human beings. So I think a lot of people have a righteous fear in what this means to all of us.
• 2:39
  Scott: Right. And you know unpacking it has been one of the problems. You know that we had spent a lot of time doing is what actually are we talking about here? Some laugh at the stories.
• 2:51
  Scott: You know, one that just came out this week about the Imperial Valley in California. Crystal: Yeah. [laughter] Yeah.
• 2:57
  Scott: There's a California's largest data center that or largest planned data center. They're going through quite a bit of controversy and it's a venture fund capitalist that's a strip club owner that's come in and he's demanding that the state give him his damn data center. And the big, one of the big controversies is they have to fsllow some farmland to free up some water rights for this plan. So . . . .
• 3:21
  Scott: Right in an area, I mean Imperial Valley I mean, you know, this is a huge agricultural region. They're the largest single regional user of Colorado River water. Like 80% of California's Colorado River water allotment goes to the Imperial Valley area, right? A lot of fruits grown there, dates and this type of stuff. But one of the interesting things about it is just watching this guy's odyssey. Because the current lawsuit he just filed was because the local irrigation water department refused them a permit to use water specifically because he wanted to use it for a data center. And he claims that goes against their existing policy. They can't dictate what water is going to be used for, which is one of the issues that's going on with all this. Uh but come to find out he's actually already gone through this step where he approached two of the cities down there with requests to use their wastewater. Their water and both of them turned him down.
• 4:18
  Scott: Crystal: Oh boy.
• 4:25
  Scott: And of course, everybody's focusing on the fact he's a strip club owner, which should have nothing to, nothing to do with this, but it just . . . it explains a good part of this how this is going all over the place. Whenever we bring up data centers, it's just like everything and the
• 4:41
  kitchen sink is getting thrown in. Crystal: Yeah. I did find some awesome captions at every level of this.
• 4:50
  kitchen sink is getting thrown in. Crystal: I wanted to play some videos for you, if you don't mind.
• 4:50
  kitchen sink is getting thrown in. Crystal: Scott: Oh, yeah.
• 4:55
  kitchen sink is getting thrown in. Crystal: the national level US Energy Secretary Christopher Wright and this is his stance on data centers and AI.
• 5:03
  kitchen sink is getting thrown in. Crystal: US Energy Secretary Christopher Wright: Number one, no you don't want China to lead the United States, but AI is critical for national security. The country that leads in AI is going to be the leading power in the coming century.
• 5:15
  kitchen sink is getting thrown in. Crystal: Crystal: And so that's pretty standard, right? That's pretty solid national stance. It's a good prerogative moving forward.
• 5:20
  kitchen sink is getting thrown in. Crystal: Scott: Something we've heard from the president on down that we're in an AI race with China particularly and, yeah.
• 5:26
  kitchen sink is getting thrown in. Crystal: Crystal: Yeah. Yeah. The overall plan. And then we . . . this next video clip illustrates what this looks like in implementation at the state level. We've got Governor Greg Abbott talking about, we want this in Texas, but we don't want it in people's backyards. So interesting look at that perspective.
• 5:51
  Texas Governor Greg Abbott: Pushing back against these AI data centers that are trying to build in our neighborhoods.
• 6:02
  Texas Governor Greg Abbott: I made clear already any AI data center even thinking about coming here, they got to bring their own money, bring their own power, reuse their own water, and do it in a way that reduces the costs of electricity for residents across our state.
• 6:13
  Texas Governor Greg Abbott: Crystal: So that's Greg Abbott. What do you think?
• 6:19
  Texas Governor Greg Abbott: Scott: Well, and he hits a lot of the right? Because some of the stuff that's going on here, tax abatements, where do you put these things? Who pays for the water they use? Who pays for the power they use?
• 6:30
  Texas Governor Greg Abbott: Crystal: Yeah.
• 6:35
  Crystal: Yeah. So that's two levels of governance. And then I did want to give voice to an actual rural person on the ground looking at this just to get an idea of how this level is responding to this industry.
• 6:48
  Rural Resident: Washington's saying it's overblown, but here in rural America, we're not buying it. Last week, the US Energy Secretary basically told us all that we're exaggerating our concerns over data centers, that data center proponents should fight back. He called the fears of rural America overblown.
• 7:13
  Rural Resident: But yet across rural America, farmers, ranchers, county commissioners, and even governors, they're all asking a very different question. Let me ask you guys something. If these concerns are overblown, why are so many people pushing back? Why are so many communities pushing back?
• 7:33
  Rural Resident: That guys is the question that's getting harder to ignore, whether you're in DC or sitting in Silicon Valley.
• 7:41
  Rural Resident: Crystal: Yeah. And so, and so there it is, Scott. lot of the the very same concerns coming out of Nevada. So this is if you can make the case this is a really important industry to put out there and implement and interweave into our society, you need to bring us along with you, you know? Scott: Right. And not only the fact that I think, you know, part of what they're identifying is that with all these other issues, the global race for AI, the government's policy, we have a real sense that people are being left out of the discussion. The local population's voice doesn't seem to matter. So, I mean, I think this is why this has emerged as such a poignant issue out of the blue. Of course, you know, last year we talked with Adrienne Marsh with Altum Insights about some of the rural perspectives on AI and you know one of the things that came up is what's the deal with data centers and at that time this wasn't showing up in her research, right? She was looking at rural Nebraska and nobody was talking about data centers. They were talking about AI in terms of teenagers and communications and this type of stuff. But boy, all of a sudden, a couple months later, this whole thing blows up.
• 9:01
  Rural Resident: Crystal: Yeah. And I just want to clearly outline the relationship between data centers and AI. Data centers are the infrastructure for AI in the same way that the road system is the infrastructure for a car. And so, we're building out the infrastructure for this AI to fully flourish. And I do think with most of the owners out there, the AI tech billionaire owners, most of them have some caution about what this may or may not do. So, I really think this is worth talking about.
• 9:28
  Rural Resident: Scott: Well, yeah. And I don't think you're wrong at all cuz that's that's really what's driving what we're seeing now is these data centers dedicated to AI. And I know that sounds pedantic, but I think one of the things to bear in mind is data centers themselves have been around for decades. I mean, the first one in Nevada really was set up in the late 1980s. Uh, so different types of data centers, right? So there's the dedi . . .
• 9:57
  Rural Resident: Crystal: Yeah.
• 10:02
  Rural Resident: been around for decades that are just used by a business for whatever control of processing in the minerals industry or something like that. Then there is these for-rent data centers, right? Where basically they're massive racks of of memory servers and whatnot that you know a company would rent this server and the one next to it would be rented by another company. Again those have been around for 20, 30 years. They're a key part of infrastructure. One of the biggest uses of, users of those type of data centers, hospitals, right? The Obamacare, the Affordable Care Act's emphasis on electronic data records, they're not just sitting on somebody's hard drive back at the hospital. Neither one of those, which is really the origin of a lot of these tax abatements and our current sort of policy arrangements with data centers. These are not places that draw huge amounts of energy. They're not using huge amounts of water. They're not the problem, right? They've played safe with their neighbors for, like again, 10, 20 years. It's these new quote unquote hyper centers that are going on for AI. Those are the ones that are using the new technologies. Those are the ones that are going to be energy expensive and those are the ones that are really causing concern right now.
• 11:19
  Rural Resident: Crystal: Yeah. And you really got to take some time to think about those first iterations of data centers were really servicing goods and services that we really wanted as a taxpayer. Like of course we want our hospitals to be able to administer massive amounts of data and we want to be able to make cell phone calls and we want to be able to go on the internet and do research. These are all things that people wanted. The things that people understood. But you're talking about AI and we're create increasing capacity. This is not something that people are sure they want and they're a little fearful of it. So we're creating a massive expansion to a system that was already there but it's for a different purpose than what we originally wanted.
• 12:09
  Rural Resident: Scott: Yeah, I think that's a good lot of these data centers were geared to service other services, right? These new hyper centers are there for the the AI for the data itself. And I think that is marking a huge difference not just this not just in terms of their use but their size and the infrastructure power and everything that goes into it. And this is why, you know, one of the things we talked about in prepping this episode was the question of misinformation. How much misinformation or poor information has gone wrong? So, here's one that's not misinformation, but you know, there's the statistics. Well, we're competing with with China, but we have, you know, more than 5,000 data centers in the United States. China has 400. Why are we building more? Well, the simple answer is that 5,000 aren't the type of data centers we need. There are those other types that have been in place for decades, right? So already we're talking about two different things just in that, you know, common bit of common knowledge that's around out there.
• 13:22
  Rural Resident: to do a lot on the resource side because I know that's really important to people. That's where they're focused. But before that's the biggest chunk of this conversation. Before we do that, I want to spend just a little bit of time talking about global and national security issues.
• 13:39
  Rural Resident: So, the reason that we're putting all of our money into this thing and the reason we're going at breakneck speed is because supposedly this is to win a battle that's an existential threat. And so, we're trying to get the most dominant AI before our competitors do. And it's being positioned as an argument that this is life or death. So I think the first thing we need to really talk about is what how could this thing possibly harm us? Because I think it is important to understand why this is a valuable thing to do. What do you see, Scott, as where does this place on the national security thing? Is this nuclear level? We gotta to tie this thing down and win this thing the way we did with nuclear or is this overblown?
• 14:27
  Rural Resident: Scott: Well I'd think there's three sort of issues here. One is strictly economics, right? There's a lot of money in AI for various purposes, commercial uses, right? And that, and in that I'm including entertainment.
• 14:48
  Rural Resident: So there's concerns that if the US lags behind its dominant position economically as a leader in global entertainment, a leader in global commercial software and that type of stuff disappears. So that's one aspect of it. The second aspect is direct military, right?
• 15:05
  Rural Resident: I think there's a lot of interest in these data centers. A good example I think is what we're seeing in Iran. And I have no specialized knowledge, but I would imagine, you know, we're hearing these stories of massive drone attacks and you have a system capable of taking out multiple drones at once. Those are being, they're using some sort of AI modeling on the background of that just to handle the logistics of getting, you know, kinetic rounds where they need to be to intercept.
• 15:33
  Rural Resident: Crystal: To your, to your point, Scott, of last year, Ukraine had dumped a few semi-truck load cargo containers on the Russian side of the border that they had left. They're filled with drones and at the push of a button, the tops of these containers open up and these drones come swarming out and they swarmed a Russian city and did extraordinary damage. And it became a news story because we had never seen anything like it. But the assumption was that it was all an AI powered attack.
• 16:07
  Rural Resident: military. And then the third one is the Sputnik syndrome, right? When Sputnik was launched in '57, it caught the Americans offguard. Oh, we need more science. You know, all high schools got new science labs built in, colleges got all this money to do scientific research. I think that's playing a factor in this as well strategically. That the research basis of the future is going to be based in AI and if we don't develop that infrastructure now it's going to it's going to put the US behind in any type of scientific activity going forward.
• 16:43
  Rural Resident: should be pointed out that while the national security argument is extraordinarily valid, it is understated the validity of the comment that this thing could wipe us out. And I can, and that's not hyperbolic language on my part. Every single AI owner has made a statement publicly saying they are not 100% certain they can control this thing. So a lot of caution here as well. This this could save us and it could hurt us.
• 17:11
  Rural Resident: Scott: Well, look at attack using an AI-motivated drone operation, right? That's . . . we're just starting to see some what could be some very dire repercussions.
• 17:23
  Rural Resident: Crystal: Yeah. bear that in mind as we go forward.
• 17:29
  Rural Resident: Crystal: Yeah. So, I
• 17:36
  Scott: Well, that's all, I mean, you know, if you have a strategic interest, identifying the the the strategic goal is only part of the equation. Getting there is the more difficult part, and that's where we're really breaking down right now.
• 17:50
  Scott: resource issue, you're really talking about the the real consequences of this industry. And our most valuable resources are power and water, and that's the most critical right now to our survival as people. And we're going to be allocating these resources which are very strained to this thing. So, we want to make sure it's worthwhile and actually get to the bottom of . . . Just are they water inefficient or are they not? Are they taking up all the electricity or are they not?
• 18:20
  What what is actually going on? Scott: Yeah. And that's that's harder to answer. So the water issue, of course, we were joking about Imperial Valley in California, but you know, there's an example where there's already an increased water usage for agriculture and of course here in the 775, water issues are that old Nevada adage, right? Whisky's for drinking, water's for fighting.
• 18:45
  Scott: Right.
• 18:45
  Scott: Crystal: Well that's goes to my human argument are literally choosing data centers over farmland and that's a serious decision for a society to make.
• 18:58
  Scott: Scott: Right. And one that again you talk about you're taking your farmland out for for what might be a temporary military or scientific advantage.
• 19:14
  Crystal: Well, relying on imports for your food source is an extraordinary national risk.
• 19:21
  Crystal: that said, I mean, one of the things you got to remember is the US is only using something like 25 or 30% of its arable farmland anyway, right? It's not like we're maxing at capacity and trying to max out yields. Not that that shouldn't be part of the discussion, but you know . . .
• 19:41
  Crystal: it is very important though, Scott, because I, you know, a farmer will tell you that it takes them 20 years to develop the soil and it takes them that much time to become a good farmer. So to say that there's farmland available if we need it, it makes it sound like you can just flip a switch and turn on production and that is not how it goes. It's so important to understand once you turn off farmland, it can take 10 to 20 years to turn back on.
• 20:09
  Crystal: to the issue about infrastructure.
• 20:09
  Crystal: Crystal: Yeah.
• 20:14
  Crystal: going to sustain us or do we need to continue old forms of this?
• 20:14
  Crystal: Crystal: And every farmer I tell there they they they're like, you know, there's people out there that believe that they can get AI to farm and every one of them laughs in my face. Scott: Right. Well, and part of the irony we're talking about is actually one of the more interesting uses right now of AI is actually agricultural communities, right? Where you have dedicated AI systems, these smaller data centers that are very, you know, basically you can feed in crop details on a massive field and the AI system will work out the deficiencies in the soil analysis and adjust the fertilizer patterns and the watering patterns to maximize yields. Right? Now, that's not the same as the AI farming, but it's something we couldn't do 20 years ago. And it represents sort of the tension here, right? Here's a benefit to communities because if these farmers can or ranchers can maximize your yields, of course, that means more money coming in for less inputs, which means more profit.
• 21:22
  Crystal: I'm lucky that I have decades of different types of growing experience enough to say that the idea that AI could grow at scale and it not be completely a wreck. It's . . . people always think gardening is so much easier than it is. And to be able to ook at a straight face, look at me and say, "We can program this thing to farm perfectly." Again, it just makes me want to laugh.
• 21:53
  Scott: Yeah. And that's a fair enough point, but water is another issue because that's not something that's just related to farming, right? You know, the question here is you have agencies that want to cut back on farm allotments for agriculture to be sent to the mines.
• 22:09
  Scott: That's been an argument that's been going on back to the late 19th century here in the 775. But now you add AI into this equation, these data centers, and it's really people are perking up like why are we spending our water supplies when you say we can't bring in new residents because we don't have the water. You can't, you know, we're have to take water back from ranchers. They're going have to cut back the size of their herds because we don't have water. And oh, by the way, data center here's you, you know, 180 acre feet to get started, right?
• 22:33
  Scott: Crystal: So I just want to lay this out like from an industrial technical perspective and the reason why people are up in arms about this. I think a lot of people have heard about the evaporative cooling technology which loses upwards of 80% of the water. It's the most efficient technology because if you don't evaporate off heat, what happens is you have to use a closed loop system and then you have to interface that water with thermal conductive plates. It takes a ton of surface area. They're very expensive and they're very big. But data centers have moved towards the closed loop systems specifically in response to people's concern about water use. And so when people hear about the water consumption of data centers, they're more of anecdotal and older versions of data center technology. That's moving forward, these centers won't be using evaporative technology. But I did talk to one state official that pointed out to me that Raider Stadium uses evaporative cooling technology and nobody has anything to say about that water being lost to the atmosphere.
• 23:57
  Scott: this is this is one of the issues we see, right? Another part of this information floating around on the pro-data center side is, well, if you total up all the golf courses in the US, they use tons more water a year. Um, yeah, but a lot of that water is going back into the ground and eventually reaching the aquifer. It's not being taken out. These closed loop systems have some problems because it's not just, you know, the plating and whatnot you're talking about. Yeah.
• 24:24
  Scott: They're expensive. They also take a lot of power to run, right? So, now you're adding pumps and everything else.
• 24:29
  Scott: Crystal: Yeah, that is the trade-off.
• 24:35
  Scott: water to increase their cooling efficiency. And again, that creates another environmental hazard.
• 24:41
  Scott: What happens? Some of these stories we're starting to hear about the effluent from data centers being contaminated seems to be from this. Is that these chemical compounds are adding to increased efficiency in the water starting to show up in their wastewater and municipality systems and the natural environment and plan to take account of this.
• 25:02
  Scott: Scott, it's antifreeze. [laughter] Scott: Yeah. Well, in . . . Yeah.
• 25:11
  Scott: claim to be, but, yeah.
• 25:11
  Scott: Crystal: No, no, but you know, when they say they reclaim it and they I'm like, but at the end of the day, you've got some really contaminated water and I almost . . . I'm almost afraid to ask what do you do with that water when you're done with it? Wait, don't answer that question. I don't think I want to know.
• 25:28
  Scott: Scott: Right. Well, and this discussion that needs to be had, particularly given this country's less than stellar history, shall we say, of water waste. I mean, you know, I grew up close to Cleveland, Ohio, where back in the '60s the river caught fire, right? Because of the pollution in it.
• 25:50
  Scott: So . . . And again, the water issue I think impacts some core questions about communities.
• 26:00
  Scott: It's also very unclear, again, you pointed out these low older evaporative systems that you know probably aren't going to be used going forward as much that are really water intensive.
• 26:14
  Scott: But I think there's also some real questions that these new systems nobody we don't have clear data on how much water to use. I mean, I'm hearing some that like, oh yeah, we got a closed loop system that's been operating for four or five years and we just put 8,000 gallons of water in it. Well, that's nothing, right? If you're doing that and topping off 40 gallons a year, there's no water impact, right? But if that's not the case, we need to know.
• 26:37
  Scott: Crystal: You know, again, I don't know enough about it, but just thinking about it from a common sense perspective, the evaporative cooling might at . . . it might lose 80% of the water, but what is the actual loss?
• 26:59
  Scott: Because that's going to go into the atmosphere and come back down as rain back into the aquifer.
• 27:06
  Scott: So it's not entirely certain that you would lose that water. It would enter into the the natural cycle. But for sure the closed loop system is going to introduce some pretty caustic chemicals and cost quite a bit electrically. So I'm on the fence at the end of the day on this one.
• 27:26
  Scott: Scott: Particularly point out in an evaporative system, one of the problems is it might enter the ecosystem but not where you are. So for the 775 . . .
• 27:31
  Scott: Crystal: That's the risk. I don't want to go water Wyoming. I get you.
• 27:40
  Scott: Yeah.
• 27:40
  Scott: Crystal: Or god forbid have northern Nevada rain go Right. And that's been one of the big issues. I think a far more interesting one though, and one that's emerging because I think the water arguments are tamping down a bit as people get a better understanding. But power usage is ramping up drastically. I mean, we just had the president, who's been promoting an AI thing for these strategic purposes, promote this Ratepayer Protection Pledge to try to force AI companies, that to pay for their power usage without increasing people's power bills. Crystal: I think that's a great news that people should be happy about that, that you know they're actually being looked after and considered by the states in that way. I think they're doing a great job. And this is one of those things when you have an emerging industry, there's a lot of fits and starts and there's technological advances that happen on the fly. There's regulatory changes that happen on the fly. And so your perspective on this industry at any one moment is going to quickly become obsolete. So I think people need to keep that in mind when they think about this industry. But when it comes to electricity, here's the lay of the land. 80% of these data centers are going to be hyper centers, which means they're wholly owned by people like Amazon or Microsoft or Tesla or these big guys.
• 29:18
  Scott: And their number one cost input is electricity. Now, if they hook up to our public grid system, they're going to be subject to the free market and they're going to be paying much higher rates than if they just create their own source of power. So 80% of this market is going to be strongly incentivized to make their own power. Now there are pockets around the country where you hear people scream about increases in electric electricity costes a much of like two to three times like their electricity bills gone up. That's horrifying. But these are cases where small data centers have plugged into an already exacerbated grid. So it's going to be pockets where this happens but it's going to happen less and less. And I think people can feel pretty well insulated that both the state is demanding this and the industry itself is naturally incentivized to create their own power source. So I think this is going to be okay.
• 30:19
  Scott: because I think that . . . No, no, no. I think this is issues where you're right on the small data centers, right? That's where a lot of this information is coming from. And requiring data centers to have their own power generation seems like it makes sense, but right now that that opens up a whole another permitting. I mean, you know, basically to power a data center that might require 2 gigawatts of power, that's building a massive power plant, right? And you know, we can't . . . We're struggling to get power plants built. And I do think it's complicated because you mentioned this two or 300% increase in prices for electricity.
• 31:03
  Scott: That's absolutely true. But this is not the first time we're seeing those increases. I mean, going back to California, California's rates are exorbitant and a large part of it is so much of you have a regulatory environment that's forcing power companies to invest in less than optimal and methods, solar, wind, this other stuff.
• 31:23
  Scott: Crystal: Green, green energy products.
• 31:29
  Scott: for green energy products, but you know, well, Nevada Energy, right, which services most of the 775, for instance, they're in the process of this 20-year update plan they have to do for the Public Utilities Commission every 20 years. And they're planning over the next 20 years of adding 10 gigawatts of power, which would basically double Nevada's generation capacity, right? But they probably have 20, 30 gigawatt of potential demand. So how's that going to be met?
• 32:02
  Scott: But the big problem is out of that 10 gigawatts, by Nevada statute like a lot of states have, have to be renewable resources that so far haven't been proven to meet demands.
• 32:09
  Scott: Crystal: Yeah.
• 32:19
  Scott: system that's being built on to they can't support it to begin with, right?
• 32:19
  Scott: Crystal: Yeah. And I'd just like to take this moment to point out that, you know, one of our bigger umbrella ideas as conservatives is you want to keep government small. And the reason why green energy has interjected itself into all of this and kind of gunked up the energy sector is because the federal government decided under, mostly under the Biden administration that they wanted to invest a bunch of money into this energy and states that committed to making a certain percentage of their energy green. There was a grant available and they took the grant. But this is a perfect example of how when the federal government gets bigger, it can gunk up the free market.
• 33:04
  Scott: Scott: Right. And it's not just the federal I mean the states have been doing this for much longer and as has the federal government. I mean certainly the Biden administration didn't just create this idea of green energy. We've seen that for a quarter century already. And you also seen efforts to permit I mean there's a lot of talk here right now about modular nuclear. Certainly, we've had a lot of talk up here. You know, the question is, could a modular nuclear reactor potentially power data centers? Well, look at the number of states that are taking nuclear, that just have basically ban nuclear power. And again, to be honest, these modular reactors, I mean, just the first real production series of them got turned on when? Right before July 4th up in Idaho National Laboratories. So, you know, they're an emerging technology as well. So, you know, we're building a big infrastructure that's going to be based on power we might not be able to provide.
• 34:02
  Scott: Crystal: Yeah. And the nuclear thing has always been very interesting because that's one of those highly political things where the science and the infrastructure value is really great on nuclear, but the public opinion is not there.
• 34:22
  Scott: And what's interesting to me is when you have grid failures and people can't get cool enough in hot weather or warm enough in cold weather, you have actual deaths. So it's just interesting because nuclear power could give you the energy to prevent those deaths, but we're not using nuclear power because we're afraid of potential deaths that might come from it. And that's just an interesting pinch point. It's one of the things that makes politics so interesting.
• 34:47
  Scott: Scott: Right. And I think if we're talking resources, there's one other one we need to talk about too, and that is mental impact and that includes impact on humans. There's increasing concern that these hyperdata centers are producing not radiation in the sense of hard radiation like a nuclear plant, but not only audible radiation.
• 35:12
  Scott: Crystal: Sound radiation.
• 35:19
  Scott: problem. It's also this low frequency, I guess that'd be sub audio sound that you measure in dBcs. That's that's actually seems to be . . . we've got a lot of evidence now that this is damaging. And right, we don't have the way to monitor this. This is really not something that's heavily embedded within environmental codes and policies, certainly not at the local level. And it's something else that's sparking a lot of argument around these data centers is, oh, you know they put in a data center and the farmer's cows next door giving birth to stillborns, right?
• 35:55
  Scott: You know this is something that really probably needs to be investigated particularly since, and this relates to the other two issues, a lot of these data centers are being placed next to residential housing you heard Greg Abbott talk about neighborhoods, right, they're they're putting data centers in rural Texas neighborhoods, right? People would have far less sense if this was 40 miles away in the middle of of nowhere, right? But the problem is you can't afford to build the power lines, the power generations to that remote facility and get the data back out. I mean, one of the reasons Nevada is so attractive to data center companies is the lag time to Silicon Valley is reduced, right? The response back and forth goes quick.
• 36:39
  Scott: I mean you can kind of predict that if there are going to be problematic data centers, it'll be the smaller level ones that are plugging into local grid systems and straining them and finding these little spots. It like they can't afford to build their own data cable and you need to have a data cable to hook up to your data center and connect it to the main infrastructure line. And you know, if you're 20, 40 miles away from that, that's you know, you could it could be upwards of a million dollars a mile, probably even more or probably I don't know what the number is, but it would be extraordinarily expensive to hook up to. So, I think the the problem children of the data center industry are going to be your smaller level ones that can't afford to be outside of neighborhoods, that can't afford to not hook up to the grid. I think that's where we're going to get most of our problems with this industry.
• 37:31
  Scott: Scott: I'm going data centers aren't the ones that are doing the volume of traffic that cause problems, nor are they the ones that are generating the waste heat. They're not generating the massive amounts. I mean, you know, we're talking about these big like that Box Canyon, Box Elder Canyon data center that's so controversial next door in Utah. It's really these big data centers that are serving AI because remember part of it when when AI companies are talking efficiency, it's not just processing the data, it's getting data back in and back out to the end user. And so you start putting 40 miles on, yeah, it's traveling the speed of light, but there's actually going to be a lag time. And the the longer those cables are, the more the lag time is. So, it's not just the cost of putting in the infrastructure, it's the fact that you're going to have a massive amount of data slower.
• 38:26
  Scott: Crystal: Yeah. centers again that's causing the, going to be causing the real issue because that's the one they're wanting to put like next door to cities, right?
• 38:39
  Scott: Crystal: Okay. Well, we'll see how that plays out.
• 38:45
  Scott: Yeah.
• 38:45
  Scott: Crystal: But there is actually one more resource
• 38:52
  Crystal: That is the resource of taxpayer dollars.
• 38:52
  Crystal: Scott: Oh yeah. sticking point that I think people are centering around right now is you have this idea that you you're going to invest $10 billion into a data center and only get, you know, 10 jobs out of it. And is this a good investment for Nevada? Are we really putting in a million dollars to get one job?
• 39:22
  Crystal: Scott: Well, and I think it's twofold. jobs front, this is the interesting thing about data centers. They don't actually require a lot of people to operate.
• 39:33
  Crystal: Crystal: No, they do not.
• 39:38
  Crystal: some of these data centers, I mean, a good-sized one might need a staff of 20 on a day-to-day basis.
• 39:44
  Crystal: Crystal: Yeah.
• 39:49
  Crystal: Right? And that's one of the things that . . . traditionally that type of dynamic has been very attractive to small rural towns. And I think that's one of the things that accidentally triggered this, right? Cuz small rural towns, so you get a big construction project, you get a new hotel, you get some fast food places, you get some extra sales tax that you can use to fix the sidewalks. But you don't have to have all of a sudden 800 residents. Once the construction's done, they leave. You get 20 new people, which you could easily handle, and you go back to being a small town, right?
• 40:23
  Crystal: Crystal: Yeah.
• 40:32
  Scott: Right. Well, what generates the boom is the construction, right? And that's one of the things.
• 40:37
  Scott: Crystal: But the construction I don't see anyone investing for 2 years of profits. Who's going to open a new coffee shop because there's going to be construction workers for two years?
• 40:55
  Scott: of places do. No, I've seen it. A good example of this actually, if we can get outside the US, St. John's, British Columbia in Canada on the Alaska Highway, that's where those Alberta oil sands, it turned into a refinery issue. And you know, over the course of 3 years, all of a sudden, they have every fast food restaurant. What they're depending on is like any business, it's the capital infrastructure that's expensive. And that two years of construction can get you that capital infrastructure to build the McDonald's or whatever, right? And then you'll probably have enough business to keep it going. It's not going to turn a huge profit. That's the game that's been played traditionally. Now the question of tax abatements, particularly property tax abatements, is far more damaging. I mean you know there's a general argument, should governments be doing this and this a lot of people would argue has been a very effective tool to encourage development. I mean that's one of the reasons Nevada since 2015 has had this data center tax abatement plan, right, to encourage these data centers to come in.
• 42:04
  Scott: And it's based on how many employees you use during its construction that are Nevada residents.
• 42:10
  Scott: It's how many employees you're going to employ at the end that are Nevada residents. And there's requirements, right? They just don't give you the abatements. But the two problems this does is a who the heck's tracking this. And that's something that goed, the governor's office of economic development has really not been able to answer. I mean, it's self-reported, but is anybody at the state verifying when you say that 80% of your construction force is Nevada residents that really 80% of your workforce is Nevada residents? But for local communities . . .
• 42:36
  Scott: Crystal: I mean I just want to point out that we were, in Winnemucca, was promised 3,000 jobs at that work camp and the Winnemucca residents can tell you that the people at those jobs are all imported from California and most of them are part of an ex-convict program out of California. And you can be damn sure nobody expected that to happen.
• 43:03
  Scott: Scott: This is with that Lithium the type of stuff people were worried about with data centers. Not so much on the ex-convict. I think that's an interesting program, but we don't need to go on to it here.
• 43:18
  Scott: it didn't employ our people and that was what we were led to believe.
• 43:24
  Scott: and that's been an argument up here for years with the mining industry. They don't hire local people and that's why a lot of people don't like them up here. So that's part of it. But I think the more important issue on taxes is local governments actually depend on that property tax revenue. And if the the state sort of steps in and takes that property tax issue off the table, or what we seen just happening in Boulder City where Boulder City sort of turned down a data center and the federal government let them go next door on some federal land and open up. Now, you know, the Boulder City gets all the expenses of the problems of a data center, doesn't get any tax revenue because it's federal land. And I think . . .
• 44:07
  Scott: Crystal: Isn't that also it moved Right. Which gets back to these environmental issues, right?
• 44:15
  Scott: Crystal: Yeah.
• 44:21
  Scott: issue I think that's going on here. And actually, I think . . . thanks for bringing up this tax issue because I think this is one that that links to at least what I think is probably a bigger reason why data centers are blown up is that the these are good examples of where local government authorization and higher levels of government and the population are not on the same page.
• 44:42
  Scott: Crystal: Yeah.
• 44:49
  Scott: Right. And I think . . .
• 44:49
  Scott: Crystal: But that shouldn't be the dynamic of an emerging industry. It moves so fast and you're racing against your competitors so quickly that it is hard to bring the public along. Not to excuse it. I think they should do better.
• 45:05
  Scott: But I mean on our side we should really take a moment to understand just how fast this race goes.
• 45:11
  Scott: Well, that's . . . the race is one thing and I don't think you're necessarily wrong, but we do have some real problems with these data centers. I mean, we've got some examples of these data centers where they force local county commissioners to sign non-disclosure agreements.
• 45:30
  Crystal: Yeah.
• 45:30
  Crystal: Scott: To not talk about what they were approving. I mean,
• 45:37
  Scott: Right. There are claims of eminent domain. I'm not familiar with an actual case of eminent domain where the government seized the land for a data center, but we're doing this in the shadow of Kelo versus New London, right, which is a 2005 Supreme Court case where basically they were building a shopping center and the town of New London seizes this person's house, arguing the economic benefits of the tax center, the sales taxes, the construction taxes, the employed workforce was a public use that justified seizing the land and the Supreme Court in a 5-4 decision agreed to that. And this is the exact same dynamic. And in that case, you know, early 2000s, shopping malls weren't new technology.
• 46:18
  Scott: Crystal: Yeah. And that that NDA thing really does disturb me.
• 46:25
  Scott: I know that after Lithium Americas got their permit approved by the Humboldt County Commission, they then had them sign an NDA. And from that point forward, we don't know what's being talked about between commissioners and Lithium America in that county. And it really disturbs the people that are in that city. They're very, very smart people. They dig into everything.
• 46:51
  Scott: They watch everything. And they were just left in the dark after the permit was issued and that they're not happy about that.
• 46:57
  Scott: Scott: Right. And that's one of the things is also. I think you have local governments. I mean, this leads to the conspiratorial thinking and, you know, I could see very limited uses of NDAs. If you're debating on setting up a KFC and they force you to sign an NDA so you don't release their, you know, 11 secret herbs and spices, that's okay.
• 47:20
  Crystal: Yeah. A proprietary information. Totally.
• 47:20
  Crystal: Scott: Right. But the idea you can't talk about the project at all is just totally antithetical to any idea of transparent government.
• 47:25
  Crystal: Crystal: Certainly undemocratic.
• 47:32
  Scott: Right. And I think that's irritating a lot of people. And remember, I mean, you know, most of the viewers probably know I currently sit on the Elko County Planning Commission, right?
• 47:45
  Scott: Which is a, you know, it's a volunteer community position. And, you know, the truth is is that trying to explain planning decision making to people in the best of circumstances often tends to be difficult, right? And trying to explain something that's special . . . For instance, one of the things that has a, that's being talked about in these data centers is well, you know, they're using those lithium ion batteries for backup storage. You know, the same things that they won't let you carry on airplanes cuz they're afraid they're going to catch fire and blow up, right? And that's the type of stuff that needs to be openly discussed at local governments. They need that information if no other reason to develop a response plan if a fire breaks out.
• 48:27
  Scott: So this is a very nasty and complex issue and, you know, just saying well, we need to get it done now doesn't justify side stepping a process that people are saying is already we don't really know what we're doing and rushing into it.
• 48:41
  Scott: Crystal: Yeah. I have to say, though, the the numbers for Nevada for this industry really look solid to me in terms of an investment. We have a Governor's Office of Economic Development. They are investing $457 million and that's represented by various cuts and and tax credits. And so the taxpayers investing $450 million and they there was a lot of things waived for this industry. And I think a lot of people focused on the things that were waived but nobody has really given any thought or attention to the things that were not waived. One of the things that was not waived was a 2% tax that goes into the general education fund. the state couldn't constitutionally waive that and so these data centers actually have to pay that and that is a tax on their equipment. So right now there's $40 billion worth of data center projects going into the state of Nevada. 2% of that is approximately 800 million. We're not going to get all of that because some of that's building costs, construction costs, but every seven years once, or not every seven years, but starting seven years from the original investment, uh these data centers replace their servers 1/7th of their servers every year thereafter. And so that's going to generate between 50 and a hundred million a year in tax revenue. So all in all, the first 10 years, we're going to break a billion dollars back for that $450 million we put in. So that's solid, you know. Absolutely solid.
• 50:26
  Scott: Scott: Yeah. If it pans out.
• 50:35
  Scott: a real thing. So there's two things, one positive, one negative. One, I remain much leeryer than you are that AI has a viable future at the scale they're planning. Yeah. Right. I I think we're going to find some you Crystal: Yeah. I am as well. but the promise it's going to do all this stuff isn't going to happen. So what happens if you do these tax abatements and put in a 10 acre data center 100,000 square ft building that's 20 foot high concrete walls and 3 years from now they're out of business, right? So, and you don't get the education benefits. There's no property taxes to collect because the company's bankrupt and now these counties are on the hook for a brownfield that's going to have to be restored somehow. Now, on the other hand, one thing you did point out where the education comes in is some of the hope for this is that if these data centers come in it's they do require an educated workforce.
• 51:40
  Scott: Not a large one, but the hope is if Nevada has these data centers then it can start attracting a new educated workforce to do stuff like develop AI projects and be in close connection to these data centers. Right? So, one of the things that this potentially does, and again, if I don't know the last time you've been to Salt Lake City, that I-15 corridor from Salt Lake down to Provo, right, where Adobe and all these tech firms, it's like a mini Silicon Valley right now.
• 52:10
  Scott: And, you know, that's what they hope to do and that's why you put the money into education where you can hopefully increase STEM programs, encourage entrepreneurs like Elon Musk, next generation Elon Musk to set up or Steve Jobs to set up here in Nevada and draw off of that. But again both of these are really speculative projects. They don't guarantee you're gonna you're gonna actually achieve these goals. And if they don't, it's a lot of public money that's been dangling.
• 52:47
  Crystal: Well, and you know, the complaint has been that the only thing that Nevada's going to get out of this is the construction boom. And I would say that is your one, um, what do you call it? That's hedging your bets with that investment because I do think we will get a lot of upfront capital with the construction boom and so in a way we are going to get something out of this for sure. But you're right the long-term playoff for this. It's, this industry is, I mean the richest most powerful people in the world want this to work but at the end of the day can humans really build something that's smarter than them? I remain skeptical. Scott: Well, no, I think it's an interesting issue because one of the things we've been arguing about and putting this together is what's our conclusion on data centers? And we've sort of come, you know, not only not so much are they good or bad, but why why is this exploded now, right? Why in the first half of 2026 is all of a sudden something that was on nobody's radar last fall blowing up, right? And your take is a little different of mine, so I'll defer and let you go first. What do you think is actually driving it?
• 53:58
  Crystal: What is the root of a lot of this anger at data centers?
• 53:58
  Crystal: Crystal: I think human beings are we're built for common sense and we're built to adopt and absorb things at a certain speed. And I think this is just too much of a change too fast without people having that collaborative feeling of being brought along in the conversation and being listened to. I think it all just happened way too fast.
• 54:26
  Crystal: I don't like it either. I don't feel good about it. But I do recognize that if we're not first in the world, we will become subject to whoever is first. So, I'm not enthusiastic, but I recognize the value and I recognize that this fight's a worthwhile one to have.
• 54:41
  Crystal: Scott: But do you think that, I mean do you think that people who are upset, who oppose data centers it's because they don't see this future or do you think it's something deeper that's driving and put . . .
• 54:54
  Crystal: Crystal: Well as I'm saying is I think we're just grappling with that deeper psychological need to fully understand something before we engage with it at full speed.
• 55:04
  Crystal: Scott: Okay. Yeah. So that's an interesting take.
• 55:10
  Crystal: My take on this is that a lot of this anger is actually being driven less by data centers than I think we're at an inflection point in politics. I think what we're seeing is that data centers have become a lightning rod because it it easily expresses a lot of frustrations people are having with government, right? In some ways I see this as an extension of the COVID anti-government turn, if one will. People who are already upset that you know why is the planning commission approving this, why is the planning commission not stopping this, why is county commission even talking to these people, and then they find out that there's some of this sketchy stuff going over three states and they start wondering, well, geez, you know they're talking about this big industrial plant what that's going to be and nobody can answer me. And you know I think that's why we're seeing this bubbling up. I think I think the bigger issue driving it isn't even really the AI or the data centers. I think it's a frustration with how government policy's being set.
• 56:16
  Crystal: Crystal: Yeah. And we've already felt like we've feels like we're going to lose so much more and we're just it's not feeling good.
• 56:29
  Crystal: issue. I know we're, we're in the process . . .
• 56:29
  Crystal: Crystal, you're reaching out to some people to talk about water. You know, we've done a lot of episodes on AI, so I imagine this is going to be an issue we're going to be coming back to quite a bit here over the next couple months.
• 56:45
  Crystal: Yeah, I guess this issue is kind of the pre-fight to the water episode because that's the big fight. [laughter]
• 56:50
  Scott: Yeah. And a lot of interesting things going on there. So anyway, until next time, I'm Scott Gavorsky.
• 56:57
  Scott: Crystal: And I'm Crystal Newton. Scott: And we'll [upbeat theme music] Thank you for listening to 775 Alive. Nevada roots, global issues. Subscribe on YouTuber X and on most podcast streaming services.
• 57:11
  Scott: You can email us at info@775alive.com or send us a message via carrier pigeon.