City Council makes strides toward harnessing data center development in the Bluff City; delays vote on moratorium ordinance
An ordinance that would temporarily halt data center development in Memphis has been held until the council’s Oct. 6 meeting.
MEMPHIS, Tenn. — The Memphis City Council voted on two ordinances Tuesday, Sept. 15, that could play a significant role in the future of data center development in Memphis and, ultimately, the Mid-South.
Councilors approved the second reading of two ordinances that represent a massive step toward how data centers, and the companies that own them, will interact with the communities in which they exist, where they will be situated, and how much access they have to Memphis’ resources.
And while councilors were set to consider a third and final reading of a proposed ordinance that would temporarily halt data center development in Memphis during Tuesday’s meeting, the final reading has been postponed until Oct. 6 while council members continue to work toward a long-term solution.
All three ordinances are eligible to be presented for a third and final reading at a future council meeting.
If the temporary moratorium is ultimately passed, data center development in Memphis will be halted for up to 12 months, or until data-center-specific laws are written into the city’s charter — this is where the two ordinances that moved forward Tuesday come into play.
Unlike the ordinance proposing a temporary moratorium, the two ordinances that were moved forward Tuesday night — Ordinance No. 5985, sponsored by Councilman Philip Spinosa, and Ordinance No. 5986, sponsored by Councilman Jeff Warren — would establish guidelines under which Memphis data centers must operate. Based on the language of the temporary moratorium, either ordinance could end the potential pause on development.
“This moratorium shall remain in effect until … (B) adoption of comprehensive zoning regulations governing Data Centers and High-Density Computing Facilities by the Memphis City Council,” reads the proposed ordinance that would pause development.
However, many questions remain. Both of the governing ordinances — opposed to the moratorium ordinance — had their second readings passed Tuesday night, but either could be amended before a third reading; either, or both, could be voted down or withdrawn; or the bills’ sponsors could work together and present an enjoined ordinance in the future.
What is in the ordinances that could govern data centers moving forward?
Ordinance No. 5985 – “Memphis Strategic Large-Load Development and Digital Infrastructure Ordinance”
The second reading of Ordinance 5985, sponsored by Councilman Spinosa, was passed in Tuesday’s council meeting.
Spinosa’s proposal would replace the proposed blanket data center moratorium with an established review system that requires developers to meet specific infrastructure and resource-use obligations before receiving approval from the City of Memphis to build or expand data centers.
Ordinance 5985 would establish a system that would put data centers, AI-computing facilities, and similar high-demand computing facilities into different tiers based on their electricity demand at any given time. Specifically, if a facility uses 10 to 25 megawatts, it would be considered a Tier I facility; a center demanding 25 to 50 MW would be a Tier II facility; and structures that fall within the ordinance’s designation and demand 50 MW or more would be deemed a Tier III project. The tier a project or facility belongs to would impact which accountability measures it would be subject to.
The ordinance would also establish much stricter water-use rules than what the city’s charter currently requires. Most notably, after an initial “startup period,” Tier II and Tier III facilities would not be able to use water from the Memphis Sand Aquifer for routine cooling operations. Instead, facilities would be required to develop alternative cooling methods, such as “dry cooling,” closed-loop systems or other methods outlined in the ordinance.
Perhaps the most significant provision in Ordinance 5985 is the development of a designated zone for data center development; the zone — at least the first one — would be known as Memphis Digital Infrastructure Development District No. 1.
The development district would be determined based on “industrial compatibility, separation from residential uses, electric and gas pathways, reclaimed-water potential, fiber [internet access], roads, emergency access, environmental baseline” and whether the zone leaves room for expansion, according to the ordinance.
Establishing a development zone, the sponsor hopes, would create greater competition from developers and stricter adherence to guidelines.
It is unclear whether all development will be strictly bound to these development zones or how existing data centers would align within this proposed system.
Sponsored by Councilman Jeff Warren, Ordinance 5986 focuses less on categorizing data centers into tiers and more on governing future or current high-demand structures. A second reading of the ordinance was passed Tuesday.
Like Ordinance 5985, Warren’s proposal establishes an electricity-use threshold that would trigger additional enforcement; however, it is not tiered. The ordinance establishes a difference between “data centers” and “large data centers” based on their resource demand: if a “data center” requires more than 20 MW, it is a “large data center” and may be bound to additional, more evolved regulations than “data centers” that require less electricity to operate.
Also, like Spinosa’s proposal, Ordinance 5986 strictly regulates the use of local water sources.
“All new Data Centers shall use closed-loop cooling systems,” Ordinance 5986 reads.
Perhaps most notable, however, is the complete prohibition on “major local water withdrawals”:
“No Data Center shall use groundwater, surface water, municipal drinking water, aquifer water, river water, lake water, reservoir water, or other Local Water Resources for routine cooling operations if the withdrawal constitutes a Major Water Withdrawal,” the ordinance reads.
The ordinance goes on to specify that no water can be “diverted” from “the Mississippi River, Wolf River, Nonconnah Creek … or other local water resources for routine cooling operations.”
Any company filing an application for future data center development would be required to submit a water conservation plan detailing its specifications, requirements and expected consumption.
Also, unlike Spinosa’s proposal, Warren’s proposal establishes long-term renewable energy requirements for new data centers.
“Every new Data Center shall obtain electricity from qualifying renewable or other non-carbon energy resources according to a schedule outlined in the ordinance. Additionally, the ordinance requires all data centers to eventually phase out carbon-based electricity sources.
After 10 years of operation, Memphis data centers, under Warren’s proposal, would not be allowed to rely on carbon-based electricity sources unless in an emergency.
Both governing ordinances and the moratorium ordinance are expected to be heard for a third and final reading at a future meeting. It is unclear whether the current version of any of the ordinances will make it that far.
However, one thing is clear: The future of the Digital Delta is coming fast, and Memphis plans to be there.
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