Applied Digital plans to expand in Ellendale, ND

ELLENDALE, N.D. — Applied Digital Corp. plans to expand its footprint in Ellendale, North Dakota, according to Nick Phillips, executive vice president of public affairs and real estate acquisitions for the company.

Applied Digital completed a blockchain facility in Ellendale in 2023, and its current 380,000-square-foot, high-performance computing facility is expected to begin operations later this year. That will be followed by two additional 900,000-square-foot expansions, Phillips said.

“The first building that’s going up right now is about a $1.3 billion investment for us, and we’re anticipating another $4 billion,” he said. “That’s our investment for the buildings, the transformers, the chillers, all of the mechanical equipment. We anticipate our customer will invest approximately another $15 billion, so this is about a $20 billion total capital investment on our 320-acre site.”

Applied Digital hosted Gov. Kelly Armstrong and officials from the state, the City of Ellendale and Dickey County on Wednesday, March 19, to learn about the company’s operations in North Dakota. The event included a tour of Applied Digital’s data center, which is currently under construction, and Ellendale Acres.

Ellendale Acres is a housing community that was developed with a partnership between Applied Digital, the City of Ellendale, the state of North Dakota and Headwaters Development to build 20 homes and a 38-unit apartment complex.

Armstrong also signed House Bill 1539 at the event in Ellendale. With the signing of HB 1539, on-site backup electric generation that exceeds 50 megawatts and is not connected to the power grid will no longer be subject to the North Dakota Public Service Commission’s Siting Act, according to a news release from the Office of the Governor. The change in law takes effect Aug. 1.

“This will allow data centers and other businesses to add on-site backup generation more easily with local approval while still complying with environmental protections,” the news release says. “In testimony on the bill, Applied Digital, which also has a facility in Jamestown, said backup power generation will protect workers and equipment from unintentional harm caused by unexpected disconnection from the power grid and will allow the data center’s large load to operate off-grid in emergency situations, improving the reliability of the grid for other customers and the grid’s operators.”

Applied Digital designs, develops and operates next-generation data centers across North America to provide digital infrastructure solutions to the high-performance computing industry, Phillips said.

In North Dakota, Applied Digital has blockchain sites that support cryptocurrency mining about 7 miles north of Jamestown and 1 mile west of Ellendale.

Armstrong told The Jamestown Sun that Applied Digital’s project in Ellendale can happen in North Dakota because of the state’s great fiber buildout, business environment and energy.

“When you have a town like Ellendale in this area of rural North Dakota that has really been struggling just to stay alive for the last 20 years, it’s a tremendous opportunity not just for this community but for the economy of south-central North Dakota,” he said.

Ellendale Mayor Don Flaherty said Applied Digital gives the City of Ellendale an ability to move forward and do things for the community that weren’t possible five to 10 years ago.

“Now I can stand in front of you today and I can say with the things that are happening right now, I see Ellendale being a shining light in this area of North Dakota well into the 22nd century because of the things that we’re going to do and the strength that we’re going to bring back to our community because of this,” he said.

Phillips said Applied Digital expects to be a top 10 property taxpayer in the state in the next year or two.

Applied Digital expects to employ 350 full-time employees at the Ellendale site, and those people will need places to live in the community, Phillips said.

“In terms of local infrastructure, one of the things that we’ve needed to do is we’re trying to convince folks to move here, to live here in Ellendale, and that’s very important for us,” he said. 

Currently, about 450 workers are in Ellendale for construction of the 380,000-square-foot, high-performance computing artificial intelligence data center, Phillips said.

“I’m told that number (of workers) is going to go up drastically as the next two buildings get farther underway,” he said.

Flaherty said Ellendale’s peak population was either 1,800 in the late 1950s or early ’60s or 1,500 in 2000, depending on what artificial intelligence Google search engine was used. Ellendale’s current population is over 1,100, according to the U.S. Census Bureau.

Flaherty said Applied Digital coming to Ellendale is the “first domino to fall.” As a result, he said more people will want to do business in Ellendale.

“We’re going to have spouses of people who are going to work at the data center who are going to say, ‘Hey, I want to start this kind of business,’ or ‘I’ve had this kind of experience and I want to bring that to here,’ ” he said.

To help the Ellendale community, Applied Digital partnered with Headwaters Development and the Bank of North Dakota to build 20 new homes — eight four-bedroom and 12 two-bedroom — and a 38-unit apartment complex utilizing the state’s Rural-Workforce Initiative to Support Housing (R-WISH) pilot program. The housing development is called Ellendale Acres and is located in south Ellendale.

The R-WISH pilot program utilizes up to $10 million of Bank of North Dakota capital to complement the work done by the North Dakota Housing Finance Agency and the North Dakota Housing Initiative Advisory Committee, according to Bank of North Dakota’s website. The maximum amount from the R-WISH fund is the lesser of 30% of the project costs, $3.5 million or the matching contribution from the company.

Applied Digital contributed $3.5 million toward the program to build housing in Ellendale. Headwaters Development will own the homes and apartment complex and rent them to Applied Digital employees.

Armstrong said Applied Digital’s project and helping with Ellendale’s housing challenge is a holistic view of economic development. He said a local community and its elected officials need to promote and welcome business.

“You need a company that wants to be there,” he said. “You get private equity and then you get the Bank of North Dakota to step in. It really is kind of an all-above approach. They (Applied Digital) can’t build that facility if anybody who works there has nowhere to live. So they’ve engaged in the community in a really meaningful way. I think it’s a model for how you would do a large-scale project in a place like Ellendale.”

Ryan Sailer, president of Headwaters Development, said Ellendale Acres is a big accomplishment that had great collaboration to make it happen. He talked about the challenges and hurdles to bring housing to rural communities.

He said construction costs have increased for housing in rural communities. He also said it’s difficult for rural communities to get contractors and subcontractors to build housing the magnitude of Ellendale Acres.

He said the rental prices are lower in rural areas compared to urban areas, which caps the mortgages.

“As developers, we’re bringing in more equity which often isn’t sustainable because we have investors that require a certain risk-adjusted rate of return, and they’re not willing to take the risk,” he said.

He said if employers want to expand or a city wants to bring in employers, housing is needed for their employees.

“You almost have to come up with a combined solution to figure out how to do it somewhat all at once, to make it sustainable and viable,” he said.

Armstrong said Senate Bill 2225, which establishes the Housing for Opportunity, Mobility and Empowerment (HOME) grant program in the North Dakota Department of Commerce, is a complementary program to the R-WISH pilot program.

“Not every community that has a housing need has an Applied Digital coming in,” he said. “The R-Wish program only works because Applied Digital has bought in, the financing guys, Headwaters has bought in, and the bank (Bank of North Dakota) has bought in. There are places across North Dakota whether it’s Richardton or Hillsboro and between that also need housing that don’t have something like this (Applied Digital) at scale.”

If SB 2225 is approved, the Commerce Department would award grants to political subdivisions to build infrastructure to support affordable market-rate housing. The grant program would be funded one time and ends on June 30, 2027.

SB 2225 would appropriate $50 million to the program. The Commerce Department would allocate $10 million for communities with a population of 5,000 or less, $20 million for communities with a population of 5,001 to 20,000 and $5 million for rural metropolitan areas located within 20 miles of city limits of a community with more than 20,000 people.

The program provides grant dollars for one-third of the infrastructure costs for residential development projects. The local political subdivision and the developer of the residential lots would each provide one-third of the costs for residential development projects.