A proposed multibillion-dollar data center in southeast Salem has developed into a major economic and infrastructure issue for Oregon as city officials consider new restrictions on data center development while additional information emerges about the amount of municipal water the facility could require during periods of extreme heat.
The proposed Oakline at Mill Creek project is being developed by Verrus at the Mill Creek Corporate Center, an industrial and employment area in southeast Salem. Plans have called for three data center buildings and an electrical substation supporting large-scale computing operations, including cloud computing, artificial intelligence and other digital services.
The proposed investment has been estimated at more than $5 billion, placing the project among the largest potential private developments in Salem. The developer has projected approximately 75 permanent jobs once the facility becomes operational.
The economic scale of the proposal, however, is now being examined alongside its potential demands on Salem’s water system, electrical infrastructure and public services.
Engineering information associated with the project indicates that the facility was designed around potential municipal water consumption reaching approximately 3 million gallons during a single day under the hottest operating conditions. Projected annual consumption was approximately 39 million gallons.
The two figures represent substantially different measurements and are not interchangeable. The facility was not projected to consume 3 million gallons every day throughout the year. The higher figure represents potential peak demand during particularly hot weather, when additional water could be required for cooling.
Spread across an entire year, 39 million gallons represents an average of approximately 107,000 gallons per day, although actual daily consumption could fluctuate significantly according to weather and operating conditions.
Peak demand nevertheless presents a separate infrastructure consideration because municipal water systems must maintain enough capacity to meet periods of elevated consumption. Salem currently uses approximately 25 million gallons of water per day citywide, making a potential 3-million-gallon peak requirement a significant component of overall demand if it occurred.
The proposed cooling system is expected to operate primarily through a closed-loop process, with greater reliance on municipal water for evaporative cooling during particularly hot conditions. Water consumption associated with data center cooling has become an increasingly significant infrastructure issue nationally as construction of large computing facilities expands to accommodate growing demand for artificial intelligence, cloud services and digital storage.
The Salem City Council has responded by beginning the process toward a temporary moratorium on additional data center applications while the city examines its development regulations.
Council members voted unanimously Aug. 3 to move the process forward following a special meeting. City officials are required to follow Oregon’s land-use procedures before a moratorium can become effective, including notice to the Oregon Department of Land Conservation and Development.
The action therefore does not amount to an immediate permanent prohibition on data centers, nor does it automatically establish that the Oakline project has been stopped. The timing of development applications and the effective date and language of any eventual moratorium will help determine which projects are affected.
The proposed development has encountered another significant complication involving state-owned property. Approximately 32 acres of state property had been associated with the planned development. Gov. Tina Kotek directed state officials in late July to terminate the state’s contract for the sale of that land. Oregon’s Department of State Lands administers state-owned lands under the oversight of the State Land Board, which consists of the governor, secretary of state and state treasurer.
Loss of the state parcel does not by itself establish that the entire development cannot proceed, but it could require changes to the project’s configuration or overall development strategy.
The financial questions surrounding Oakline extend beyond its construction cost. Verrus submitted an enterprise-zone application to the Marion County Assessor in May seeking a property-tax exemption available to qualifying investments under Oregon law. The project received approval for the standard three-year exemption.
Oregon’s enterprise-zone program is intended to encourage private investment and economic development by temporarily exempting qualifying new property from local property taxation. With a development valued in the billions of dollars, the treatment of data centers under those incentives has become increasingly significant to state and local governments.
The project also places Salem within a broader economic discussion underway across Oregon. Large data centers can bring substantial capital investment into communities while employing considerably fewer permanent workers than traditional industrial projects of comparable construction value. At the same time, their operations can require significant electrical capacity, cooling infrastructure and municipal services. Those characteristics have prompted Oregon policymakers to examine how existing tax incentives and development regulations apply to an industry expanding rapidly with the growth of artificial intelligence and cloud computing.
Transparency surrounding the Salem proposal has also become part of the city’s review. City officials had communicated with the developer while operating under a nondisclosure agreement before information about the project became public. Salem was released from that agreement July 8, and the project was subsequently presented publicly to the City Council.
No determination by the Oregon Department of Justice or Secretary of State has established that the project or negotiations violated Oregon law. The Oakline proposal also remains a developing project rather than a completed facility with established operating consumption. The 3-million-gallon figure represents projected maximum water demand under certain conditions, not confirmed year-round consumption.
For Salem and Oregon, the immediate issue is now considerably broader than the construction of three buildings at an industrial park. State and local officials are confronting how a multibillion-dollar generation of computing infrastructure fits within existing systems governing water, electricity, land use, state property and economic-development incentives.
The decisions made in Salem could also contribute to Oregon’s developing approach toward an industry whose physical footprint is expanding alongside the nation’s rapidly growing demand for computing capacity.