To land Meta's massive $10 billion data center, Louisiana pulled out all the stops. Will it be worth it?

CNBC

4 days ago

On a massive, 2,250-acre site about 250 miles north of New Orleans, hundreds of construction workers and tons of heavy equipment are turning former soybean fields into what will be the largest data center in the Western Hemisphere. And in the process, officials say, they are transforming Louisiana's economy.
"It put us on a scale that has a lot of people, not just domestically, but internationally, sort of rethinking Louisiana," Secretary of Economic Development Susan Bourgeois told CNBC.
Meta, the parent company of Facebook, Instagram and WhatsApp, announced in December that it had chosen Louisiana as the site for its largest data center to date — a $10 billion hub for its rapidly growing artificial intelligence operations. The announcement set off the public phase of a sprawling, real world experiment in the promise and the peril of data centers — which have become among the most sought-after trophies in the battle between the states for business.
Data centers are essentially giant collections of computer servers, which are needed to process enormously complex operations for things like artificial intelligence and data storage. They typically take up massive spaces and use huge amounts of power and water, but they employ very few people. Meta's newest data center will ultimately create just 500 permanent jobs, though employment will briefly swell to about 5,000 during construction. Nonetheless, Meta found itself with no shortage of suitors willing to meet its demands.
"We set out looking for a place where we could expand into gigawatts pretty quickly, and really get moving within that community on a large plot of land very quickly," said Rachel Peterson, vice president of data centers for Meta. "We looked at finding very, very large contiguous plots of land that had access to the infrastructure that we need, the energy that we needed, and could move very, very quickly for us."
Louisiana was one of the few states that could deliver a site as large as Meta needed — the equivalent of about 1,700 football fields. The state had already purchased most of the land, in rural Richland Parish, back in 2006 in hopes of luring an automotive plant that never materialized.
As for the energy — the Meta site will use roughly twice as much electricity as the city of New Orleans on a peak day — local utility Entergy said it could deliver.
"What I see is an opportunity for this industry to grow in a way it hasn't seen in many decades," said Phillip May, CEO of Entergy Louisiana. The company is seeking regulatory approval to build not one, but three gas-fired power plants at the site, at a cost of more than $3 billion.
The one piece Louisiana did not have was one that Bourgeois said was non-negotiable for Meta: a program to allow the company to avoid paying potentially billions of dollars in sales tax on the equipment to build and operate the center.
Last June, only six months after taking office, Republican Gov. Jeff Landry signed into law a 20-year sales tax exemption for data centers built before 2029. The fact that the state was courting Meta at the time was not disclosed.
"The Meta folks made it clear to us from day one that in order for a project like this to happen in any state, that exemption or rebate — whatever the formula is — has to exist," Bourgeois said.
"It's one of the things that we look at," said Peterson. "Obviously these are very high investment capital projects for us and any others who are developing data centers and investing them. So, we do look at the overall cost of the project to make sure it's in line with what we'd expect," she added.
A recent CNBC investigation found that in just the past five years, 16 states have handed out nearly $6 billion in similar sales tax breaks, and that is just the ones that have been disclosed. More often, the amounts are either undisclosed, or, as appears to be the case in Louisiana, officials don't know the exact cost yet.
An analysis by the state's Legislative Fiscal Office in May said the incentive could cost the state "tens of millions of dollars or more each year, possibly through (fiscal year) 2059."
But whatever the cost, Bourgeois said the benefits of the project outweigh it.
"This wasn't about what the state would win or lose, just that one isolated sales tax," she said. "This was about we want to compete with Texas. We want to compete with Mississippi, Alabama, Georgia, South Carolina, all our Southern neighbors."
Meta earned $164.5 billion in revenue last year.
There are also concerns about the energy needs of the facility, even though Entergy has committed to generate massive amounts of electricity to support it.
The Louisiana Public Service Commission is considering the utility's proposal to build three new power plants. But a citizen's group, Alliance for Affordable Energy, is warning that the project could compromise the state's power grid and increase electricity rates statewide.
"While they're building new power plants, they're also adding a huge consumer of electricity," said Jackson Voss, Climate Policy Coordinator for the group. "Which means we're all still facing the same vulnerabilities that we were before, but now with a huge new data center added on."
Louisiana has a spotty track record on grid reliability. According to U.S. Department of Energy data analyzed by CNBC for this year's America's Top States for Business study, the average Louisiana customer lost power for 9.7 hours in 2023, the most recent data available, ranking the state in 40th place, though Entergy by itself performed substantially better.
Still, as many as 100,000 Entergy customers in the New Orleans area lost power on Memorial Day weekend when the regional power grid became overloaded.
Entergy's May said that the added generation capacity for the Meta facility — including 1,500 megawatts of solar power in addition to the gas-fired plants — will make the grid more stable, not less. And he said the project will ultimately reduce electric bills across the state.
"We're getting new power plants that will be improving in terms of the efficiency. There will be lower fuel costs as a result of adding incremental, more efficient power plants," he said.
Plus, he said, while Entergy will pay for the power plants, Meta will pay for the infrastructure to connect to them.
"So, hundreds of millions of dollars of support from this customer that would not otherwise have been there had Meta not come."
More important, he said, the project will be a huge economic boost for Richland Parish — one of the poorest areas in the state, if not the nation.
"This massive $10 billion investment, coupled with the billions of dollars that we're going to invest ourselves, is going to bring new opportunities for these communities," he said.
"500 jobs in Richland Parish, or even in this northeast Louisiana region, is transformational," Bourgeois said.
Plus, she said, this project opens the door for more of the same.
"I could try to sell Louisiana to the world for a long time," she said. "The fact that [Meta] chose us makes my job a lot easier."