As Applied Digital expands, Ellendale hopes to keep pace 

Limited housing and services mirror development situation for many smaller towns 

By Michael Standaert, North Dakota News Cooperative 

Applied Digital is in the process of expanding its footprint in the fields near Ellendale. The first phase included a data mining operation opened last September that smoothly hums just to the west of town.

The second phase, which can be seen rising through the fields if you’re close enough, and heard in town as the piles are driven into the foundation, is expected to be complete by the latter end of 2024.

The new 342,000 square foot facility will house a three-story state of the art data center. Hundreds of computers will churn through complicated algorithms used to power AI, machine learning and other advanced computing systems using 100 megawatts of power.

It will be Applied’s third data center in the state and has the potential to expand to 400 megawatts of computing system if fully developed. The project costs an estimated $600-$700 million, according to the company, and customers are expected to place up to $1.5 billion worth of equipment in the building.

It’s a big deal for the company and a big deal for Ellendale. Local complications with a lack of housing and services could, however, slow progress.

The expansion, once completed, has the potential to bring upwards of 80 more employees and their families to the area, raising the company’s local workforce up to around 110. These will include workers to maintain the facility, possibly hired from the local area, as well as some of the most qualified engineers working on AI systems migrating in from across the U.S.

Challenges to growth

Employees will, of course, need places to live, either rental housing, condos or single-family homes. Currently most housing, other than a few higher priced homes, is in short supply.

“Housing is a challenge for us,” said Michael Maniscalco, the company’s chief technical officer. “We’re probably going to have to end up building some houses.”

Since Ellendale, 65 miles south of Jamestown, only has about 1,000 people, Applied’s employees could end up comprising a large percentage of that.

For the major construction push this coming spring and summer, the company has been talking about possibly setting up “crew camps” in the area to get the building finished since so little housing is available, according to Nick Phillips, executive VP of operations and public affairs.

A lack of services has also been an issue. Like many smaller towns, childcare options are limited. The only sit-down restaurant in town - CBS’ – closed in August. Though it could reopen soon, its absence has left food options limited to the Cenex station, some food trucks, the bowling alley and the local American Legion’s community center. A drive-in restaurant is also expected to open by the start of 2024.

Don Frye of the Ellendale Job Development Authority said many of the service challenges are starting to be met. He said this “low hanging fruit” was important to tackle first before the big hurdle of housing can be addressed in any significant way.

One important to-do was getting more daycare for the town, something that’s been recently addressed with a new 16-child daycare his organization was able to help support.

“If you don’t have daycare, you’re not going to need the housing because no one will move here,” Frye said.

A professional eyecare office recently opened, and there are two medical clinics, a chiropractor and a dentist available, options that are “pretty impressive” for a town of 1,000, Frye said.

“You can’t get people to relocate to a community if there are certain basic services that are not available,” Frye said. “So for the past year-and-a-half we really focused on ensuring some of those that are missing are being filled.”

As far as housing, the authority is exploring opportunities for grants and other funding that might help mitigate some of the risk developers are concerned about with building in the area, but it is too early in discussions to say what concrete action could take place, Frye said.

Even though they know dozens of families could relocate to the area, construction costs and high interest rates have soured developers on any enthusiasm for building outside major metro areas at the moment.

Local realtor Mike Janke said with construction costs to build a simple ranch home reaching around $250 per square foot, he doesn’t see much opportunity for movement on single-family unit building at the moment.

“When you can purchase a decent home for under $100 a square foot all the way down to $75, it’s hard to justify a new build with the kind of prices we have right now, especially with an 8 percent interest rate,” Janke said.

Townhomes and condos or multifamily units like a four-plex might be a better option, since those developments help reduce total square foot construction costs, he said.

“In a lot of rural areas, when you build a home and stick the key in the lock, it’s probably not worth what it costs you to build,” Frye said, especially when interest rates are more than double what they were a couple years ago. “That’s just a sad reality.”

Just south of town, a development called Ellendale Acres plotted out 15 years ago, sits ready for development with most water and sewer infrastructure already available, but few developers are willing to start breaking ground. Electricity and phone utilities still need to be added, but that wouldn’t be a challenge, according to Ellendale mayor Don Flaherty.

“We’ve got the location available and ready,” Flaherty said. “We just need some people to speculate and do some building. I think it would be very profitable for them, especially with the (Applied Digital) expansion that’s going on right now.”

Flaherty said if the economy wasn’t where it was at the moment with high interest rates and construction costs, there “wouldn’t be as much of a concern.”

The North Dakota Department of Commerce recently announced a Rural Workforce Housing Grant accepting applications until Jan. 8, 2024 directed at cities, counties, economic development organizations and tribal entities with up to $300,000 per community under 10,000 people.

A separate Commerce grant focusing on developing facilities in rural communities opened applications on Dec. 18, and provides up to $50,000 for rehabbing vacant buildings into multi-use facilities.

Grants and funding opportunities like these from state and federal agencies like these could help bridge some of the risk gaps for communities across the state that face similar situations as Ellendale.

Frye said the processes for applying for and getting grants can be complicated. Focusing on a community-wide strategy that identifies other needs and shortcomings at the same time is helpful for ensuring success of applications and ultimately the success of any projects, he said.

Opportunities abound

Most of those hired for the first data center have been from nearby communities. Hired as operators to monitor and trouble shoot any issues with data mining operations, the workers were trained from essentially zero knowledge.

With those new skills, they could eventually move up to higher positions.

One of those who have capitalized on the opportunity is Chad Neuman, who worked as a night shift supervisor at Walmart in Jamestown before being hired on as an operator and worked his way up to managing the entire site.

“Going from a night shift supervisor at Walmart to running a billion-dollar project is pretty cool,” Maniscalo said.

Neuman, for his part, is pretty humble about the whole situation and said he was “fortunate” enough to be given the opportunity. Through “dedication and hard work” he was able to move up quickly, he said.

When he got the job, Neuman said nothing was available to rent in the area and he initially had to drive down from Jamestown daily for work. He eventually did find a rental, but only after finding someone to refer him to a property after an extensive search.

Neuman said the company is doing the best it can working with local representatives and construction companies, with options including building new homes or potentially refurbishing older homes.

There’s a lot to like about Ellendale for those contemplating a move, once more housing is available, those here say.

Besides the Ellendale Opera House, which hosts discussions, events, exhibitions and recently had the Medora Musical Christmas show come to town, mayor Flaherty lauded Ellendale’s’ K-12 education system, which he hopes can be a major enticement for families relocating there.

“The local public school system is incredible,” said Flaherty, who moved to the town 27 years ago from Minneapolis.

“It’s been a blessing, just because of the small-town atmosphere and the safety of my family and the things of that nature,” he said, referring to his own move. “Knowing that the community is there and wants to be connected with you, I think those things are strong and important.”

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Cutlines:

PastedGraphic 1 2: Applied Digital’s new 342,000 square foot data center rises next to its data mining operation in the fields near Ellendale. Hundreds of computers at the facility will churn through complicated algorithms used to power AI, machine learning and other advanced computing systems. Photo Ken Smith, Dickey County Leader.

PastedGraphic-1: A panorama view of Applied Digital’s data mining operation after it was completed last September. Photo Ken Smith, Dickey County Leader.