Anthropic taps a deep well of distrust as it eyes its Australian AI debut

Story by Hilary Whiteman, Photos by Dan Peled

Dalby, Australia (CNN) — The first rainfall in months splashes off the windshield as the mayor of Western Downs Andrew Smith drives to the site of a proposed AI data center behind a cattle feedlot in rural Queensland.

It’s feeding time and 16,000 cattle are standing under shade sails waiting for a passing truck to shoot grain into their troughs.

Agriculture is the biggest employer in this area, 260 kilometers (131 miles) west of Brisbane. But beneath the rich vertosol soils that sustain year-round crops lies a massive gas field that’s also turned the region into an energy hub.

Now the AI data center industry has come knocking with a $22 billion proposal from Singaporean developer Zerra DC to build the Western Downs Digital Park, one of Australia’s largest AI data centers, with four buildings each the size of five football fields, and temporary accommodation for 1,500 workers during the construction phase.

The project hasn’t been formally approved. But its first major tenant, US giant Anthropic, has already signed a lease, setting the stage for the company’s Australian debut. Smith says the enthusiastic state government has assured him that the decision will fall to the local council.

It’s a hefty responsibility in a febrile environment where a growing number of Australians are expressing their opposition to AI, amid an unresolved national debate about the country’s place in the AI boom. American AI giants have turned on the charm, praising the nation’s open spaces, commitment to renewable energy, and trusted position as a partner in the Five Eyes intelligence-sharing alliance.

“We are working towards having significant capacity hosted in Australia,” David Masters, Anthropic’s head of policy for Australia and New Zealand told CNN.

But the Australian government is treading carefully, leading calls for responsible growth “with guardrails” – for many reasons, including a recent breach of its healthcare data and warnings from within tech companies, including Anthropic, that AI advances are outpacing controls.

Standing beside the proposed data center site in the Western Downs, Smith says he sees an opportunity to diversify the local economy, create jobs for future generations and give the region’s youth a reason to come home.

Though he insists a decision hasn’t been made on the data center, the mayor added: “Our role is to look ahead, and if we want to maintain our communities 20 or 30 years ahead, we need to be progressive. And sometimes you do need to be brave.”

AI centers run on fossil fuels

Back in July, the Australian prime minister vowed to require tech companies to power AI data centers with renewable energy, among a raft of requirements. Within a month, he’d backed down.

Queensland negotiated an exemption, so that if approved, the Western Downs Digital Park will be directly connected to the grid, running on a mix of energy sources that includes fossil fuels – coal and natural gas from one of Australia’s largest gas basins, which sits directly below the site.

More than 6,000 unconventional gas wells pierce the land around this region, extracting gas that’s mostly sold to foreign markets. Accessing coal seam gas requires a process called “de-watering” – pumping out groundwater to relieve pressure and free the gas.

And that lies at the heart of AI opposition in this community – this place is dry.

Months without significant rain have browned the grass and trees. Rainwater tanks were running low until a downpour last week. Many farmers rely on bore water, but some say their wells have been pumped dry by the gas industry, and their water is now being offered to the developers to help build the AI data center.

“That’s stolen water,” thundered grain farmer Bev Newton, who’s engaged in a long-running dispute with a gas company that she believes will end in court as she seeks payment to replace her bore water.

Bev and Wayne Newton rely on heavy downpours – when they come – to fill the family’s water catchment. But they say some of their farmland is sinking, due to subsidence caused by the coal seam gas industry, making future flows difficult to predict.

Rainwater will be harvested and recycled to sustain workers during operations, Zerra DC says, but Bev Newton points to a shared problem: “No amount of surface water catchment, be it shed roofs into tanks, works if you don’t have rain that falls from the sky.”

Zerra DC says it’ll cool the data center using air-cooling technology, which requires far less water than the evaporative methods that have sparked protests from the US to India to Indonesia.

But air-cooling technology is more energy-intensive, and residents already fear that the center’s energy demands could strain the network, raise electricity prices, encourage more gas extraction, more de-watering, and potentially more subsidence – adding more stress to their daily worries about water.

Zerra DC says the project’s phased development will give it time to work with its customers – like Anthropic – to create new power sources, and while demand for power will increase, it says its battery conditioning system will buffer the grid from load spikes to help “stabilise power prices.”

Anthropic says it intends to enter into virtual power purchase agreements – or deals struck with energy providers – to procure more power for the grid, with a preference for renewables. “The source for this generation will be new build projects – but precisely which projects is an ongoing discussion,” said Masters, from Anthropic.

Rogue AI agents

As Prime Minister Anthony Albanese prepared to deliver a speech to the United Nations General Assembly in late September, a surprise gift arrived to back his case for tougher guardrails on AI.

An agent from Anthropic’s main rival OpenAI had hacked the nation’s healthcare data. It accessed statistics but not personal information, making it a largely benign attack, but one that sent an ominous warning. After receiving a call from Albanese, OpenAI’s Sam Altman apologized and vowed to win back Australians’ trust.

Less than two weeks later, at an Australian parliamentary committee hearing on AI, Anthropic’s international special envoy Jeff Bleich invited the country’s leaders to “step up to” the choice of AI. “If Australia takes this opportunity and gets the balance right, it will not simply participate in the AI era; it will shape it,” he said.

Anthropic said the proposed center at Western Downs won’t be used to train large language models – because Australia’s tough copyright laws currently ban it – but it will answer questions to its Claude AI model.

So, CNN asked Claude whether the data center application should be approved based on the publicly available information, a petition to the Queensland parliament against the proposal signed by more than 23,000 people, and local media reports – removing any bias that may have crept in due to Anthropic’s involvement in the project.

Claude’s response: “Don’t decide before public notification and independent technical assessment of water, power, noise, and workforce. Hold the public meeting residents asked for. Be clear about who actually holds the decision if the state steps in.”

AI proposal troubles town

In a well-lit pub in Dalby, the closest major town to the proposed data center, cutlery clinks as elderly diners relax over a Friday-night meal. A few residents have agreed to meet in a private room to share their concerns, which range from water to power to the “dumbification of humanity.”

“Just because big companies over in the US are advocating for AI usage doesn’t mean that we should follow,” said Corey Cora, who works in retail. “Most people in the community won’t even know about this until it’s too late,” added telecoms worker Joel Holtham.

In the last few weeks, Zerra DC has held pop-up information sessions in the town, population 12,000, to answer residents’ questions. Before retiree Beris Furner dropped in for a chat, he supported the AI expansion.

“I thought this is fantastic for Dalby. A great opportunity for future generations coming along for the kids, if they’re that way inclined, to train and work in a place like that,” said Furner.

But after asking questions of Zerra staff, he now believes the council’s pushing ahead with a speculative proposition without enough community buy-in.

“We need a public meeting. It’s such a massive deal for the town,” he said.

Mayor Smith said the council wouldn’t be holding public meetings on the matter: “We always stay away from town hall meetings. It generally doesn’t end up well.”

Asked if it was also up to the council to provide residents with an alternative source of information, Smith said: “We need to stay in our lane. We aren’t the experts on data centers. So, for us to be in the public talking about data centers would, I think, be wrong.”

“We will stay out of the larger data center AI discussion.”

Calls for a pause

The lack of discussion is frustrating some residents who feel their home is being pulled into the competitive AI race between the US and China, exposing them to a future they don’t necessarily want.

“It feels like we’re in a weird sci-fi movie and everything’s just spiraling out of control really quickly,” said Ahri Tallon, from the Darling Downs Environment Council.

“We’re really calling on the government, as many people are around the world, to put a moratorium on AI and data centers and really take the time to work with the community to go through the deep ethical conversations that we need to think about in terms of how much can this technology be potentially for good, but how much could it be for bad?”

Others look at the practicalities of sharing their home with a water- and power-hungry industry, and a future where there may be more jobs for their children to come home to, but perhaps another set of challenges that will ultimately drive them away.

Shay Dougall took a job in workplace health and safety during the construction of a coal seam gas processing facility 20 years ago, married a farmer, and now works as a postdoctoral research associate with the University of Sydney examining the impact of industrialization in rural areas.

She’s seen firsthand the distress of farmers who’ve strained under the expansion of the gas industry, then renewables, and she now fears the same is happening with data centers.

“Those people not only are hosting this industrialization, but they’ve been impacted by the changes to the climate as a result of it. So, it’s just a double whammy,” she said.

In Queensland, the government hasn’t ruled out the approval of new coal-fired power stations to support the expansion of AI in the state – if tech companies pay for them. The federal member of parliament for the area has praised the possibility of more coal production.

“The proposed Western Downs data centre alone has a peak capacity of 2.16 gigawatts, more than a quarter of Queensland’s daily electricity consumption. You cannot run that on renewables alone. The coal is here…” he said in a Facebook post.

As Anthropic prepares to launch an IPO – potentially valuing the company at $1.5 trillion – it’s promising to spend tens of millions of dollars in the areas it operates. To that end, it’s hiring a “community engagement manager” in Australia whose role will be to “make Anthropic a trusted, visible, and valued neighbour.”

But the problem in Dalby is that trust dried up with the bore water, and some residents don’t see the same opportunity touted by AI companies, the council and the government – just more potential problems.

Rather than being a drain on resources, Smith, the mayor, sees interest from the AI industry as one way to get the water flowing. He wants billions of dollars of investment for new water infrastructure in the region – and is looking at the state and federal governments, as well as developers – to get it.

Smith said he’s having “almost daily” conversations with other data center developers about moving to the area, part of a national shift that’s seeing more development applications lodged for larger facilities, further away from metro regions, according to energy intelligence platform RenewMap.

“We know that the one guarantee we have is that data centers are a part of our nation’s future,” said Smith. “The question here on the Western Downs is do we want them here?”

“Do we want to take the opportunity that is there, or do we want to give that opportunity to somebody else?”

The-CNN-Wire
™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.