New data center to provide economic, environmental benefits, supporters say

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The recent announcement of the creation of a data center at the Cayuga Operating Station and the subsequent closing of one of the last two remaining coal power plants in New York state has generated much conversation about transforming a site that relies on old technology into one that will be more environmentally friendly, create a stable tax base and be the biggest industrial project with the largest private investment in the history of Tompkins County.

While all of the final details are still in development, the new data center is estimated to create 30 permanent jobs with the salary range of $40,000 - $60,000 and 100 temporary construction jobs.

Tompkins County Area Development President Heather McDaniel explained the scope of what the data center means for Tompkins County.

“The data center will bring $100 million in private investment for the reuse of that site,” McDaniel said. “This project represents the best and highest use this site could be repurposed for. The reuse of this site, new tax revenue and long-term job opportunities are top on the list.”

To better understand the significance of this project, it is important to review the plant’s history.

The New York State Electric and Gas Corporation built and owned what was originally known as Milliken Station in the late 1950s, and the plant operated without a change until the early 1990s. At this time, major renovations to the site and a flue-gas desulfurization system, which was partially funded through a Department of Energy grant, was installed to help reduce SO2 emissions.

In 1999, New York state sought to deregulate utilities and ordered NYSEG to sell off its generation assets. NYSEG sold off its fleet of power plants, and the plant was sold to AES and renamedAES Cayuga. In 2011, AES Cayuga declared bankruptcy. In June of 2012, the shareholders took ownership under the name, Upstate New York Power Producers, and operated as the Cayuga Operating Company. Upstate sold the assets to Beowulf Energy in May of 2016, and the company is the current owner of the power plant. Even though it is now operating under a new company, the plant is still referred to as the Cayuga Operating Company.

As initial news about the data center spread, it was initially unclear if the new business would be located in the existing power plant or if a new building would be constructed on the site. The plan for the data center involves building a new facility. The current plant will close, and the owners are looking at long-term plans for the site. While the fate of the current plant is yet to be determined, the company has set aside funds to accomplish this in addition to ensuring any environmental clean-up needs to occur.

According to County Legislator Martha Robertson, it is a good thing to see that the coal plant will be shuttered and the site will be re-used.

“We are very pleased that we can bring in a new business to the county that can provide jobs, a new tax base, and use the assets up at the plant, up at that site—the land uses the interconnections into the grid,” Robertson said. “We think this is a very smart proposal that we’re happy to support.”

A compelling part of the news of the data center coming and the power plant shutting down is the broad spectrum of support it has gathered from both major political parties, environmental groups, organized labor and community members.

“I give this company a lot of credit for taking a hard look at it and trying to not leave this as a stranded asset, and they came up with this idea,” said Mike Sigler, Lansing’s representative in the county legislature. “All the elements are there, and they’ve figured out how to utilize those elements to make a profitable business going forward.”

Organized labor has also voiced its strong support of the conversion of the power plant to a data center. Greg Lancette, president of the NYS Pipe trades and president of the Central & Northern NY Building Trades Council, said the proposed project is the perfect scenario of the public-private partnerships that everybody in the government has been discussing.

“You have a great business partner that is willing to invest a tremendous amount of money in our communities and that will give the trades an opportunity here to continue the pathways to prosperity with our apprenticeship programs where they can learn while they earn building this project,” Lancette said. “We really encourage the smart growth and the smart energy policy, and we welcome this opportunity to continue a great relationship with Beowulf and the community.”

In addition to the wide range of support, closing the power plant and creating the data center will be very environmentally beneficial. As County Legislator Anna Kelles explained, one of the issues is the powerplant emissions, which is why the powerplant will be shut down.

“The infrastructure already exists—meaning the electrical wiring and all that infrastructure, which would allow the data center to plug in without the construction of new infrastructure,” Kelles said.

Another issue, Kelles said, is its position close to the water, which was used as the coolant system. The data center will use the same coolant system, but the impact will be significantly less.

“The other thing is they will be using a technology, which is a filtration system on the pipes so that it will prevent damage to flora and fauna life in the lake, which was really important to me,” she said. “And while it won’t be down to zero, it will be a notable reduction.”

The Sierra Club has also voiced its support for this project, especially given the use of onsite solar that will be constructed and utilizing hydropower to meet the energy needs of the facility. Lisa Dix of the Sierra Club said New York has adopted regulations to permanently phase out coal by 2020, and the owners of the plant came up with a proposal that works well from an environmental standpoint.

“Getting those plants to move away from coal just from an environmental health, air quality and water quality standpoint is really important,” Dix said. “The proposal that the company came up with was to take these plants, these sites, into the next century where there would be high tech data centers.”

In addition to positive environmental impacts the closing of the power plant will have, there are also very important economic impacts.

The power plant has been operating on a Payment In Lieu of Taxes (PILOT) agreement, which is a payment made to compensate a government for some or all of the property tax revenue lost due to tax-exempt ownership or use of real property. The payments under the existing PILOT agreement have been decreasing every year. Sigler explained that good leadership in Lansing has allowed them to adjust it.

“Our last county administrator and some other people were able to put us on a slope that we could do an offramp with it,” Sigler said. “But if we can bring a piece of property back on the tax roles and increase the value substantially—then that’s a win for Lansing.”

No formal determination has been made as to whether the data center will operate under a PILOT agreement or a traditional assessment structure. However, according to those interviewed, it is most likely to operate under a new PILOT. The final structure of this will be developed as the project moves forward.

Finally, as Jerry Goodenough, vice president of development for Heorot Power management (a subsidiary of Beowulf Energy), explained, these sites will continue to offer opportunities that will have continued and long-term positive economic impacts on our community.

“These data centers, in essence, can be an energy storage device, almost like a reverse battery, that when the electric need is high, these data centers can power down,” Goodenough said. “We are just going to continue to grow, and this is just step one.”

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