Data centers have emerged as the biggest issue in rural areas throughout the Midwest. These have been debated in town halls, often in heated exchanges over money and the future of the community. It is important for landowners to understand the implications of data centers, and to seek independent legal counsel if approached for purchase or option to purchase, as each carry significant implications. What are data centers anyway? Data centers are specialized facilities housing servers and data storage. With the advent and growth of artificial intelligence (AI) in recent years, demand for the newest and largest data centers, commonly referred to as “hyperscale data centers,” (generally defined as facilities exceeding 100 megawatts of power demand and spanning hundreds of thousands ofsquare feet), has been growing and requires significant flat acreage.

The size of these hyperscale data centers has caused significant opposition based on the water and energy uses of these developments. Opponents raise environmental and noise concerns as well. Some of the opposition is based on the uncertainty that AI brings to many facets of the economy.

Based on their opposition to data centers, some Ohio voters are proposing an amendment to the Ohio Constitution that would ban all data centers with an aggregate monthly demand or peak load exceeding 25 megawatts, including hyperscale data centers. The Ohio Attorney General has certified that the title and summary of the proposed amendment are fair and truthful statements of the proposed constitutional amendment. The proponents of the proposed amendment must now obtain 413,487 signatures from Ohio voters. In addition, signatures must be obtained from at least 44 of Ohio’s 88 counties, and from each of the 44 counties, signatures must equal at least 5% of the votes cast for Governor in 2022. The proponents of the amendment have until July 1, 2026 to obtain the required signatures. (Actions like these are proposed in the form of anamendment to the Ohio Constitution because the General Assembly cannot alter the Ohio Constitution.)

The General Assembly is also considering action on data centers. Ohio House Bill 646 would create the Data Center Study Commission within the Department of Development, with members appointed by the Governor, Speaker of the House and the President of the Senate. The members of the commission would be appointed based on knowledge of certain areas, including agriculture, county government, municipalities, and water and environmental impacts of data centers. The Commission would be required to analyze the following issues raised by data centers: (1) environmental impact; (2) effect on electrical grid; (3) water usage; (4) noise pollution; (5) light pollution; (6) local economic impact; and (7) impact on farmland. The Commission’s report and findings must be submitted to the Governor and General Assembly within 6 months of the bill’s effective date. HB 646 passed the Ohio House of Representatives unanimously and is now in the Ohio Senate.

In the meantime, some municipalities and townships have passed temporary moratoriums (typically enacted by resolution and effective for a defined period) regarding new data centers, and others have strengthened their zoning regulations regarding such developments. Most potential data center sites are in rural areas that are within townships, as opposed to municipalities (cities and villages), and a township’s primary authority over data centers is its ability to enact strong zoning regulations of areas that might be the target of data center developers. Zoning rules can be written to allow data centers only if approved by the township’s board of zoning appeals (BZA), which can apply additional conditions on the approval of any potential data center. For example, a township can limit the size of the data center site, establish significant setbacks from neighboring properties and the road right-of-way, and limit the height of buildings. It is critical to note that, in order to be enforceable, these zoning regulations must be formally adopted before a developer or property owner submits an application to build a data center; regulations enacted after such an application is filed may not be applied retroactively to that application. Many rural areas are not zoned, leaving those areas subject to data center development with little or no local regulation.

Developers of data centers seek very specific criteria in selecting potential sites. They require significant flat land (at least 50 to 75 acres) and access to natural gas lines and abundant water. After finding these infrastructure components, they look to have zoning in place that would permit the facility.

If the infrastructure and zoning are in place, the developer will solicit options to purchase undeveloped farmland for data center development, often at premiums well above the market price of farm acreage – frequently in the range of $75,000 to $100,000 per acre or more. These option agreements are usually for one or two years. As the terms of the option bind the property owner to a fixed price, and the representatives and attorneys for the developers are experienced and savvy, owners of rural real property should consult with legal counsel before signing any options (which grant the developer the right to purchase the property at a set price during a defined period), letters of intent (which, depending on their terms, may create binding preliminary obligations on the owner), or contracts (which establish the full and enforceable terms of sale). Each of these instruments carries distinct legal consequences, and no such document should be executed without independent legal review.

Jeffrey M. Stopar, Esq.

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