Agreement Set to Keep Warwood Data Center Below 90MW

Photo by Eric Ayres

WHEELING - The city of Wheeling and Silicon Foundry Energy LLC have agreed to terms outlined in a binding memorandum of understanding that the company will not develop a high-impact data center in Warwood.

A 10-page draft of the memorandum has been developed and reviewed by both parties, and the measure is expected to be approved via resolution during next Tuesday evening’s meeting of Wheeling City Council.

The memorandum of understanding or MOU had previously been discussed in the wake of community concerns over Silicon Foundry Energy’s plan to develop a data center and energy technology campus at the former Centre Foundry & Machine Company property on the south end of Warwood. The company acquired the property, including the large industrial building along W.Va. 2, with a plan to redevelop the site.

Citizens have expressed concerns about the potential of noise, water pollution, increased electric bills and other negative impacts a data center could bring to the community. Although initial information posted on the website of Silicon Foundry Energy - also known as Silicon Foundation - had stated that long-term plans included expansion to a 100 megawatt facility, company officials have since publicly stated that this was not their objective.

The MOU is designed to be a "legally binding and enforceable contract" in which the company will agree that the operation in Warwood will not become the kind of large-scale data center that could bring with it a myriad of issues similar to those that have been reported in rural areas across the country.

"This is an agreement that the city requested of Silicon," Wheeling City Manager Robert Herron said. "They agreed to it as it confirms what they have been saying all along about their project, mainly that it would not become a high-impact data center. It is a binding agreement, which not only provides certainty to the community, but also would enable the city - solely at the city's discretion - to include this area in a TIF District and if needed the agreement provides certainty if the city were to issue bonds."

City leaders have noted that under the West Virginia legislature’s laws regulating data center development, municipalities are barred from utilizing Tax Increment Financing or TIF Districts where high-impact data centers operate. The city of Wheeling intends to establish or extend a TIF District into Warwood to include the former Centre Foundry property, thus putting a potential funding mechanism for the city in play. Through the agreement, the company will be agreeing to not negatively impact the city’s ability to maintain this TIF District.

By definition, a high-impact data center has a critical information technology load in the aggregate of 90 megawatts total or higher. The MOU states that Silicon would be responsible to pay the city tax revenues lost if an expansion would impact the TIF District.

"There have been no representations of TIF benefits to Silicon," Herron explained. "In fact, TIF regulations wouldn't be able to be used at this location."

Attorney David Croft, who has been serving as legal counsel for Silicon Foundry Energy LLC, said this agreement will be beneficial to both the company and the city.

"Upon execution, the Binding Memorandum of Understanding or MOU between the city of Wheeling and Silicon Foundry Energy will confer meaningful benefits on both parties," Croft said. "For the City, the MOU will enable the establishment and maintenance of a Tax Increment Financing or TIF District, allowing the city to apply tax increment revenues toward public improvements benefiting the TIF District. For Silicon, the MOU is expected to facilitate coordination with the city on infrastructure and utility connections."

If the resolution is approved by city council on Tuesday, the MOU will be signed by Herron on behalf of the city of Wheeling and by Andrii Garanin, chief energy and infrastructure officer for Silicon Foundry Energy LLC.

"As a condition of establishing the TIF District, the city requested that Silicon enter into a binding commitment not to seek certification as a high-impact data center," Croft said. "In furtherance of the city’s and the broader community’s interests, Silicon has agreed to this commitment."

Herron noted that the city and the company have worked cooperatively on this agreement.

"Silicon has been cooperative in discussions regarding this MOU," Herron said. "I recognize that there are opinions for and against data centers, but based on where we are, it is my opinion that this is a beneficial agreement for the city."

A copy of the binding memorandum of understanding is expected to be available on the city’s website.

The MOU notes that Silicon has not been certified as a high-impact data center and has not submitted any notification - which would be required under state code - for the facility to become one through an application to the W.Va. Secretary of the Department of Commerce or the W.Va. Division of Economic Development.

Data center opponents who have appeared before Wheeling City Council in recent months and who have held their own public meetings regarding the issue have urged city leaders to place a moratorium on the development of data centers in the city. Council members and city administrators have said that they cannot do so under the law, nor can they legally take measures to obstruct the company from establishing a business inside an existing facility that is properly zoned for Industrial use.

HB 2014 puts much of the regulatory control over data centers in the hands of the state. If the Silicon Foundry operation remains under the high-impact threshold, it will be subject to local governmental authority, as the MOU notes.

"Nothing in this agreement obligates the city to exercise - or refrain from exercising - its legislative, regulatory, zoning, taxing or police powers in any particular manner, or to take any action that would constitute an unlawful derogation of its governmental functions," the agreement states. "The city’s undertakings are limited to those it may lawfully make in its proprietary and administrative capacity, and no provision shall be construed to require the city to act contrary to law."