Our Feed

communities, considerable apprehension. Local governments and planners are fielding questions from residents, receiving inquiries from developers, and grappling with how to respond to a land use that feels unfamiliar. Some communities are avoiding the issue or attempting to block these facilities entirely, but these approaches may not be the most legally defensible. Other communities are taking a more prudent approach where they are investing to understand the land use and how its current land use goals would align with any defensible regulations.

This E-Letter serves as a practical road map for municipal officials and planners navigating the data center landscape in Michigan by explaining what data centers are and clarifying that these facilities exist along a broad spectrum—from small server rooms to massive hyperscale proposals. Michigan has emerged as a prime target market for large-scale data center development, including the natural advantages and state-level tax incentives driving developer interest. Currently, with no state preemption, municipalities remain able to use their traditional planning and zoning tools to determine how best to regulate this use.

Data Centers Are Not New

The idea that data centers represent a brand-new land use is a common misconception. These facilities date back decades with significant expansion during the 1990s internet boom. A data center is simply a facility that houses the computing infrastructure required to process and store data. Every cloud file you save, and every AI query you submit connects to a data center.

What is new is the unprecedented scale of demand driven by artificial intelligence, which has created a perceived urgent need for larger, more resource-intensive facilities. It is worth noting that many organizations already operate data center infrastructure on a much smaller scale—a dedicated server room within an office building, a single floor of a commercial facility, or a modest co-location space. These existing operations have been sited as part of a current principal use and other smaller uses that are aesthetically compatible with surrounding uses. As such, they rarely draw public attention during the zoning review process because of their limited footprint and more traditional resource demands. The current apprehension around this use, however, is due to those on the larger end of the spectrum. Since there are a full range of data center formats, appreciating this full range is critical when reviewing your master plan land use goals, identifying applicable zoning districts, drafting definitions and finalizing use classifications in your zoning ordinance.

The Scale of Data Centers Is Not One Size Fits All

Not every data center proposal will look like the large-scale developments that have drawn public attention—such as the hyperscale facility proposed in Saline Township, which may consume significant agricultural acreage. Data centers exist along a wide range. Understanding this range may inform whether different scales of facilities warrant different regulatory review processes and standards; and second, it helps your community distinguish between the types of data center development that may already exist within your borders and the larger-scale facilities that are now driving public concern.

Traditional data centers have operated for decades across a range of formats: small private facilities hosting a single organization, co-location centers offering shared server space, and telecommunications-company-owned facilities. These smaller-scale operations are commonly found near university campuses, along highways, or within commercial and industrial land uses and corridors. They are not the facilities making headlines.

Hyperscale data centers are a different magnitude entirely. Built for organizations like Google, Amazon, and Meta, these facilities incorporate traditional computing functions but can sustain vastly more servers and large-scale IT infrastructure. They require substantial physical land, enormous water and energy resources, and represent capital investments that can range from $100 million to over $10 billion. Data centers are measured by their electricity consumption in megawatts (MW), and facility demands can range from 3 kW to over 2,000 MW.

Interest in Michigan

Historically, Michigan was not a top destination for large-scale tech development. That has changed. Several factors have converged to make our state one of the most attractive locations for hyperscale data center development:

• Abundant water supply. Michigan’s proximity to the Great Lakes provides access to the enormous volumes of water required for cooling systems.
• Cooler climate. Michigan’s year-round temperatures reduce cooling costs, a significant operational expense for data center operators.
• Available open space. Large tracts of undeveloped land can accommodate the physical footprint hyperscale facilities demand.
• State-backed tax incentives. The Legislature has expanded incentives specifically targeting data center development. The Enterprise Data Center Sales & Use Tax Exemption significantly reduces the tax burden for qualified entities certified by the Michigan Strategic Fund (MSF), provided the development meets thresholds for capital investment, job creation, and environmental standards.

The combination of natural advantages and state government support appears to have provided the current attraction—one that has occurred all within the last 12 months.

The Good News: Local Control Remains

Currently, no state-level permitting or regulatory process governs the siting of data centers. The permitted uses and regulations for these facilities are determined at the local government level. Local governments and planners maintain significant control over how data centers can be regulated and sited within their boundaries. However, that control must be exercised thoughtfully. A municipality’s existing regulatory framework provides a foundation, but specific consideration for large-scale and hyper-scale data centers will be likely.

Avoid Exclusionary Zoning

A common misconception is that an undesired land use can simply be excluded. The Michigan Zoning Enabling Act (MCL 125.3207) generally prohibits township zoning ordinances from totally prohibiting a land use, subject to standards set forth within MCL 125.3207. Even if regulations avoid being exclusionary, overly restrictive regulations may invite legal challenges under these exclusionary zoning theories. The effective approach is to be proactive in reviewing any current regulations or amendments from the foundational aspects of your zoning by being grounded in your master plan and tailoring regulations to your community’s needs. (For more on this topic, see our article: “Zoning It Out? — Applying Michigan’s Statutory Exclusionary Zoning Provision“ at fsbrlaw.com.)

Consider Your Master Plan

Before drafting any zoning language, consider a careful review of your municipality’s master plan to determine where data center development may—or may not—be appropriate. The master plan sets the foundation for land use policy, and a well-articulated plan gives the municipality greater leverage and sharper oversight when evaluating proposed zoning text changes or, even if applications are received, development proposals.

Consider the land use goals articulated for your commercial, industrial, technology, flex, mixed-use and other relevant districts and the infrastructure capacity to serve them. Compare the extent of your current relevant zoning districts with what your master plan envisions. This will help determine whether adjustments are warranted and will ensure that any data center regulations are supported by a coherent planning framework.

Use Features for Consideration in your Zoning Ordinance

With your master plan as a guide, your municipality should address the following when developing data center regulations:

1. Permitted Uses & Zoning District Placement

Many hyperscale developers are focusing on agriculturally zoned land because of its available open space. This can directly conflict with a municipality’s land use and preservation goals. Data centers, if cited in those areas, will require buffers to avoid incompatible uses. This is why many communities are considering text amendments that are providing for data centers as a special land use within non-agricultural zoning districts. The special land use review affords the Planning Commission and governing body the opportunity to give proposals additional scrutiny and attach meaningful conditions. Given the scale of large data center facilities, treating them as by-right uses is generally not advisable.

2. Water Consumption & Cooling Systems

Hyperscale data centers can consume millions of gallons of water for cooling. The cooling technology a facility employs directly determines its water and energy footprint—and there is an inherent trade-off between the two. Evaporative cooling systems are energy-efficient but water-intensive. Closed-loop and air-cooled systems minimize water usage but consume more energy. Requiring closed-loop or recycled-loop water systems in your ordinance can protect your municipality’s water supply for some trade off of more energy consumption.

3. Energy Use & Ratepayer Protection

Large-scale and hyperscale data centers are enormous consumers of electricity. Michigan’s regulatory framework provides some safeguards: the Michigan Public Service Commission (MPSC) requires electric utilities to incorporate large new loads into their long-term electrical capacity plans, long-term contracts, minimum billing thresholds, and financial security from large customers. These provisions are designed to ensure that infrastructure investments needed to serve data centers are paid for by the centers themselves—not subsidized by residential ratepayers. One of the difficulties compounded with electrical capacity demand has been the difficulty in assessing master plans for available electrical infrastructure given that some hyperscale developments are including extensive distribution system upgrades to the area not previously considered. Municipalities will want to understand these regulatory features to ensure they are comfortable with any perceived protections, have sufficient information gathered and understood so as to understand how they integrate into the local zoning process.

4. Noise

Hyperscale facilities generate continuous vibrational humming from hundreds of servers, cooling equipment, and backup generators. Noise is consistently one of the most significant quality-of-life concerns raised by neighboring property owners. The noise has continued to see some of the most significant focus, and current information with hyperscale facilities suggests that noise standards for decibel limits should be carefully considered. A zoning ordinance amendment should establish clear decibel limits, consider noise emissions during specific hours, if necessary, and consider requiring sound studies and acoustical consultants as part of any zoning amendment and/or zoning application review.

5. Wastewater

Data center cooling systems can generate wastewater with altered pH levels and concentrations of conditioning chemicals and biocides. While these chemicals serve important public health functions (such as minimizing bacterial growth), they can strain local treatment plants that are not equipped to handle them. Your ordinance, in both the application and in the performance standards, should address wastewater discharge requirements and ensure compliance with applicable EGLE and NPDES standards. EGLE’s Water Resources Division regulates wastewater discharges under three permitting categories: direct discharges into surface water (requiring an NPDES permit), discharges onto the ground or into groundwater (requiring a Groundwater Discharge Permit), and indirect discharges into a municipal wastewater treatment facility via sanitary sewer. Understanding which category applies to a proposed data center’s cooling system is critical for evaluating both the application and the ongoing monitoring requirements your municipality should impose. Next-generation cooling designs, such as closed-loop and dry cooling systems, are moving toward minimal or near-zero wastewater discharge, and municipalities may wish to incentivize and address these technologies where feasible.

6. Impact Studies

Given the recent advent of larger-scale and hyperscale data centers, many planning commissions will be learning about this land use’s specific technology and features during siting. This is where the special land use’s feature to allow for additional application materials can be very helpful. Consider requiring data center applicants to submit comprehensive impact studies as part of the zoning application, including water feasibility analyses, noise assessments, and community impact reports addressing electric, emergency services, and community concerns. Importantly, your municipality may also want to ensure it has appropriate escrow language in the zoning ordinance or any text amendment to retain independent third-party consultants to evaluate applications. For example, a water feasibility study should not only assess whether the municipality’s water supply can support the proposed facility, but also estimate the cumulative impact on surrounding wells and long-term aquifer sustainability. A community impact analysis might address projected effects on roads and traffic from construction and operations, and demands on fire and emergency services. Municipalities should also consider requiring periodic studies—at defined intervals throughout the project’s operational life—to ensure ongoing compliance with approved conditions and to hold the operator accountable as technologies, operations, and community conditions evolve over time.

7. Setbacks & Buffering

Setback requirements establish critical separation distances between data center operations and neighboring uses, particularly residential properties. However, be mindful that overly aggressive setback requirements can have unintended consequences—such as requiring more land to comply—and may function as a de facto ban. There is not general rule for setbacks because they are complementary other standards, such as noise, light, and visual impact. Plus, the zoning district where the use is permitted as well as adjacent non-compatible uses will all impact reasonable setbacks. Municipalities will have to consider setbacks for the purposes of their own circumstances and zoning regulations.

Looking Ahead

Hyperscale data centers are an emerging land use that will impact each community differently. The regulatory scheme for each municipality must be tailored to its unique circumstances. With proactive planning, legally defensible regulations, and experienced consulting support, these developments can be managed effectively. Our firm has deep experience advising Michigan municipalities on complex land use, zoning, and planning matters—including the emerging challenges posed by data center development. Whether your community needs help considering implications from your master plan, drafting data center ordinance language, evaluating a pending application, or defending your regulations, we can assist.

By: Christopher Patterson and Sophia Youssif

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.