Political backlash compels Kevin O’Leary to pivot on massive data center project

The developer behind a proposed Box Elder County data center committed Thursday to cut the project footprint in half after state Senate President Stuart Adams called for a reduction in response to concerns from Utah voters.

The back-and-forth exchange between Canadian investor Kevin O’Leary and Adams demonstrates how deep dissatisfaction with the project, including among many fellow Republicans, forced influential policymakers to backtrack.

A storm of protests, negative media coverage and skeptical public opinion revealed that what many state leaders thought was a winning issue can quickly become a liability if it is perceived to be a corporate handout at the expense of communities.

In recent weeks, Adams — one of the most powerful legislators in the state — has borne conservative criticism over the accelerated economic development process he oversaw which left voters and officials with little initial information or input.

Beehive State observers see Thursday’s announcement as a step toward Republican leaders trying to reclaim the narrative around artificial intelligence infrastructure, which has become a top political issue in a year when Adams is up for reelection.

What did the letters say?

Adams has tried to flip the momentum on data center messaging through his public letters to O’Leary.

On Monday, the Layton lawmaker asked O’Leary to downsize the project area for his massive artificial intelligence hub from 40,000 acres to 10,000 acres. He also demanded that excess water be treated and dedicated to the Great Salt Lake.

O’Leary conceded the change in a letter to Adams, agreeing to remove 20,050 acres of the 41,200-acre zoning area approved in late April by Utah’s Military Installation Development Authority, a quasi-governmental entity chaired by Adams.

O’Leary accepted a list of requests from Adams: to minimize water consumption, to sign a memorandum of understanding on how land will be conserved, to incorporate heat-capture technology and to create a website with project updates.

In a statement responding to O’Leary’s letter on Thursday, Adams validated voters’ worries over water, wildlife and growth. MIDA approval, he said, is just the earliest stage in a series of permit applications and environmental reviews the project must undergo.

“The response to the demand letter I sent demonstrates that public engagement matters and that Utahns’ concerns are being heard,” Adams said. “With responsible water use, transparency and input from the people of Utah, we will show the nation how to build it right.”

What do Utahns think?

The “Stratos Project” has made odd bedfellows on opposite ends of the political spectrum.

Utahns of all stripes reacted with surprise to its projected 7.5-9 gigawatts of power consumption at full build-out: double the state’s peak energy demand. Upon the request of Gov. Spencer Cox, O’Leary agreed to limit his applications to a first phase of 1 gigawatt.

Lacking details from the developer, speculation about environmental impacts have driven the news, despite assurances from government agencies that the facility and accompanying natural gas plant will take less water than current agricultural applications.

A Deseret News-Hinckley Institute of Politics poll conducted from May 15-18 among 802 Utah voters found that 53% either somewhat or strongly opposed the 40,000-acre project proposed for three sites in Box Elder’s rural and dry Hansel Valley.

The poll identified bipartisan opposition: Nearly 85% of Democrats opposed the project, compared to 62% of independents and 36% of Republicans. The largest share of GOP voters (45%) supported the project, while 1 in 5 said they don’t know.

The Deseret News-Hinckley Institute poll also asked voters whether they thought the economic benefits of new data centers outweighed costs to natural resources. Nearly 7 in 10 voters, including a majority across every partisan group, said they did not.

What are Utahns’ concerns?

Concerns over drought conditions and air quality cross partisan boundaries, according to Gunnar Thorderson, a member of the Utah Republican Party’s State Central Committee, and founder of Nexus Growth Engine, an AI business based in Park City.

But the central problem for most conservatives, he said, is how the project was sped along by an opaque state entity.

“For me, this stopped being about a data center debate and became a governance debate,” Thorderson told the Deseret News. “I think the fastest way to lose support for AI is to make people feel excluded from the process.”

Sitting at the center of this process is MIDA, which Thorderson believes circumvents accountability.

MIDA is political subdivision, composed of an eight-member board of lawmakers, municipal officials, military affairs and business leaders, with statewide jurisdiction to zone areas to facilitate military projects, support military communities and incentivize new missions.

The entity can only enter an area with local approval, but once it does it wields local government authority to manage land use and issue bonds. In an April 24 meeting with O’Leary, MIDA approved the Stratos Project Area with property tax relief for the developers.

On May 4, The Box Elder County Commission approved a resolution backing the project area.

In an interview with the Deseret News on Monday, Adams defended MIDA as an important tool, responsible for the land-based missile defense system at Hill Air Force Base. Other MIDA projects include a data center at Camp Williams and military recreation housing.

Worries about MIDA’s ability to fast-track deals prompted Thorderson to introduce a resolution to the state GOP in May, which passed, calling for disclosure of tax incentives, independent impact studies and legislative oversight of data centers under MIDA.

Are the letters just PR?

It is unclear how O’Leary’s Thursday announcement will actually alter the data center plans. The facility was always intended to take up just a fraction of the total project area. The majority of the reduced area will still be preserved as open space.

While Adams told the Deseret News on Monday that his letter carried no legal weight, O’Leary said in an interview with NBC News on Wednesday night that he had “no choice” but to give in to the demands, which O’Leary said Adams made “for political reasons.”

This is not necessarily a bad thing, according to Alexis Ence, the president of Washington County Republican Women.

“Actually, that’s what the goal of representative government is,” Ence told the Deseret News. “Yes, the process matters. Yes, this should have been handled differently. But there is definitely still time to get this right.”

Most Republicans are open to arguments about the importance of data centers to help the United States lead the globe in AI, energy production and security, Ence said. But these arguments are hard to make when project approval outpaces public buy-in.

Without concrete plans, regular Utahns have been bombarded by alarmist talking points from environmental activists and online agitators, according to Ence. What leaders should do, she said, is conduct impact studies and a special audit of MIDA to fill “that information void.”