County sets regs for potential data centers
Levi Hill/News-Sun
Artificial Intelligence data centers are springing up across the world as the demand for computing power skyrockets. Lea County is poised to be a perfect home for data centers, but new industry breeds new problems and Lea County Commissioners are getting out in front of it.
At the Feb. 26 Lea County Commission meeting, the commission unanimously approved the first of what County Manager Corey Needham said could become eight or 10 regulation revisions for any data centers targeted for the area.
“It was kind of eye-opening when we went to the Association of Counties in Washington, most of the topics were on data centers and the pros and cons of those,” Needham said, adding his staff spoke with county officials in other states who have data centers.
“We were talking to people that already have data centers and hearing the things they wish they would have established prior to them coming in,” he said. “The big things were regulations on water use and impacts to the power grid.”
Data centers require massive footprints to construct and require even larger amounts of water for their evaporative cooling systems and the power draw by a data center can be as much as needed for 100,000 households.
“Lea County is a great place probably for the development of data centers,” Needham said. “We have open land, we are fairly used to industry. We have a robust network of gas producers for energy production and plenty of land for behind the meter like solar.”
But water and power are both scarce in Lea County. At least useable water.
Until the State of New Mexico adopts regulations allowing for the expanded use of cleaned produced water, water for data center cooling would come from limited potable ground and drinking water sources.
The state generates some 2.5 billion barrels of produced water annually, 98 percent of which comes from Lea and Eddy counties. Estimates show that data centers can use as much as 5 million gallons of water a day for cooling.
Needham said one requirement in the county’s newly-adopted regulations is potential AI data centers coming to the area must have closed-loop or other type cooling systems so as not to waste precious drinking water sources.
On Feb. 7, the New Mexico House Acequias, Agriculture and Water Resources Committee killed House Bill 207 in a 5-4 vote after four and a half hours of testimony and debate.
The bill was designed to force the state’s Water Quality Control Commission to adopt rules and issue permits by the end of 2026 that would expand produced and brackish water reuse.
The other shortage in the area is power.
At a meeting held in Hobbs in January with the New Mexico Energy, Minerals and Natural Resources Department, James Lackey, director of Customer Relations at Xcel Energy, said Xcel is short of meeting power demands in the region by some 7,500 megawatts and that number could grow to 20,000 megawatts in the next 10 years.
He said Xcel is currently in hearings with the New Mexico Public Regulatory Commission to build out 3,000 more megawatts of power, but it is happening too slow.
“The process is very arduous,” he said, adding that the 14 projects identified in 2023 totaled an estimated build-out cost of $9 billion.
Xcel serves 128,000 customers in New Mexico. Lackey said 47 percent of Xcel’s power sales go to New Mexico and 50 percent to Texas. The remainder is wholesale sales.
Needham said the county regulation requires data centers to either build their own behind-the-meter power, like solar or their own gas-fired power plants, or negotiate with local energy providers to ensure their added load won’t increase rates for existing customers.
Finally, Needham said the new regulations require data centers that seek industrial revenue bonds or payment in lieu of taxes incentives must establish their payouts to benefit all school and hospital districts in the county.
“I like this. I like that we are doing this. I think it is a great deal,” said Commissioner Dee Ann Kimbro.
Needham said the county has been in talks with various developers in the past two years and a data center could be coming.
“Over the course of the last 24 months we have had different discussions with different developers and data centers. At some point it may come to fruition and we want to be ready for it,” he said.
In November, Midland-based New Era Energy and Digital announced plans to acquire 3,500 acres of land in Lea County near Caprock for the construction of a massive data center with its own natural gas-fired power plant and a modular nuclear reactor power plant.
“Lea County’s deep energy heritage provides a foundation of skilled talent that directly supports our next-generation digital infrastructure vision,” said E. Will Gray II, CEO of New Era Energy in a released statement. “We believe this development will not only drive economic growth and high-tech job creation but also leverage New Mexico’s natural resources to power the future of AI innovation.”
New Era Energy spokesman Jonathan Paterson said the goal is to have the data center up and running by 2028.
Other data center projects have already landed in New Mexico, including the Meta Platform Inc.’s data center campus in Los Lunas, Project Jupiter in Santa Teresa, a $500 million project, and a 300-acre data center by Zenith Volts Corp under development near Roswell.
New Mexico has nearly two dozen data centers operating or under development, according to the Data Center Map website.
