Data centers, non-disclosure agreements and democracy

Data centers evoke strong and conflicting opinions. Advocates point to the truly significant revenue they can generate for local governments. Opponents point to data centers’ enormous energy needs, climate impacts, water use and their capacity to diminish the quality of life for residents living nearby.

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To weigh the costs and benefits of data centers and to set the ground rules for any potential data-center development, local governments should empower members of the public with all relevant information to foster a meaningful debate. We fear, however, that the widespread use of non-disclosure agreements (NDAs) and a larger ethic of secrecy regarding data-center development curtails this discussion and, in so doing, impairs local democracy.

In order to understand how common NDAs are between local governments and data center companies, we submitted Freedom of Information Act requests to every Virginia locality we could identify with an existing, approved, or proposed data center. We found that the vast majority – 25 out of a total of 31 localities – have NDAs. We think that this could be an underestimate because some local governments may use definitions or maneuvers to avoid disclosing this information. For instance, one county reported that officials signed an NDA with a major tech firm, but they did not retain a copy for public record.

When we began our research, we naively assumed that NDAs were narrowly drawn guarantees that local governments would not share a company’s proprietary technology or cutting-edge trade secrets. But upon reading the documents, we found that they were written much more broadly, to prohibit sharing all “business plans” and/or “non-public information.” Such  broad categories could cover almost anything, including information that relates directly to community impacts. 

While these agreements acknowledge that a local government may be required to disclose information if requested by the public, they also often call on officials to share as little as legally possible, while giving the data center company advanced notice to intervene with its legal team if it so wishes before any information is shared. In this way, NDAs are written to privilege secrecy over transparency in data center development.

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There is, of course, another perspective on this topic. Local officials might argue that the use of non-disclosure agreements is both lawful and routine in many types of economic development, not just for data centers. Our response is that just because a practice is currently legal, it doesn’t mean that it should remain that way. And even if local governments frequently join confidentiality agreements, it doesn’t mean that they are in the interest of local democracy. 

For example, when one local government released two NDAs to us, it asked that we keep the information as confidential as possible out of fear that it could jeopardize its data-center projects that were in the works, but not yet publicly announced. Why would sharing this information put the deals in jeopardy? If they are in the public interest, the projects should be able to withstand scrutiny even as they develop.

Here in our hometown of Fredericksburg, the city council recently passed zoning changes to create a technology overlay district for a new data center campus. But it did not give the public enough information to effectively participate in the conversation beforehand. The city did not announce the name of the data center company until the night of the city council’s vote. The city did not share the total number of data centers that would be included in the project until the day after the vote. Members of the public knew that the project would include several data centers, but many people – including us – were surprised to learn that the project will include eight to 12 new data center buildings.

Depending upon the kind of cooling system that a data center uses, its operation may require huge amounts of water, as much as several million gallons a day. But confidentiality agreements may prevent the public from fully understanding potential impacts to our rivers and water systems. This is clearly evident in a water service agreement between Spotsylvania County and Amazon for a new data center campus, which includes a confidentiality clause that states, “for the avoidance of doubt ADS [Amazon Data Service] water usage, sewage usage, and basis of design is considered Confidential Information.”

Data center water and wastewater use should not be confidential. The wellbeing of our rivers, streams and aquifers impacts us all. But this is not just about protecting the health of our environment; it’s also about protecting our democracy.

Local democracy means more than elections. It also requires properly informing the public, nurturing meaningful discussions, and giving community members an opportunity to influence decisions that will directly impact them. By withholding important and timely information, local governments and data center companies short-circuit debate in order to arrive at predetermined outcomes. 

Democracy – some say – dies in the dark. But that is exactly where many data center deals are born and live.