How Significant Is the Backlash Against Data Centers?
As proposals grow larger, policymakers need time to review project impacts on ratepayers and the environment.
There’s a growing pushback against AI-driven data center development across the U.S. as local, state and federal government officials grapple with concerns raised by residents about potential electricity rate increases, water shortages, expensive tax breaks, noise and air pollution problems. The backlash has resulted in a slew of enacted and proposed building moratoriums and policy changes.
Calling the pushback “a pretty recent phenomenon,” Sean Farney, JLL’s vice president of data center strategy for the Americas, told Commercial Property Executive there may be “some fear, uncertainty and doubt around AI and perhaps this negative perception that AI will take jobs away, when the opposite is true.”
Farney and others say there are misperceptions and misinformation surrounding data centers, particularly regarding impacts on electricity rates and water usage. Many officials say that is why they need more time to research how data centers will affect their communities.
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On a federal level, Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez introduced the Artificial Intelligence Data Center Moratorium Act in March that would stop new construction or upgrades to data centers with power demand of 20 megawatts or more. The bill calls for requirements to protect residential ratepayers and the environment. It would give communities the right to decide on projects and curtail government subsidies. Earlier that month, big tech companies like Amazon, Google, Meta, Microsoft, Oracle and OpenAI signed a “ratepayer protection pledge” at the White House, stating they would pay their own power and grid integration costs.
More than 300 data center-related bills were proposed in over 30 states this year. At least 14 states considered data center moratoriums: Georgia, Maine, Maryland, Michigan, Minnesota, New Hampshire, New York, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, Virginia and Wisconsin, the National Conference of State Legislatures reported.
Maine was set to be the first state to enact a temporary ban after the legislature agreed to an 18-month moratorium on data centers over 20 megawatts. But Gov. Janet Mills vetoed the bill because it didn’t provide an exception for a facility at a shuttered paper mill. She argued it would create more than 800 construction jobs and 100 high-paying permanent jobs as well as contribute substantial property tax revenues.
Voters in Ohio, home to about 200 data centers, may see a proposed ban on the November ballot if enough signatures are collected by July 1. The amendment would prohibit data centers requiring 25 megawatts or more.
After considering a statewide moratorium, South Dakota approved a bill allowing local governments to ban or regulate data centers. It includes residential ratepayer protections and requires projected water consumption data.
A proposed one-year moratorium on data center construction in New Hampshire failed to pass. In Wisconsin, at least four data-center bills, including one banning non-disclosure agreements with local officials, died when no action was taken.
Dan Diorio, vice president of state policy at industry group Data Center Coalition, pushed back against statewide moratoriums, saying they would discourage further investment, both from data center developers and other industries.
“It would send a signal that the state is closed for business, causing it to relinquish significant long-term economic investment, high-wage jobs and critical tax revenue to nearby areas,” he said.
Local communities take action
Breana Wheeler, director of operations for BREEAM USA, which creates sustainable building standards, said legislation proposing moratoriums isn’t NIMBYism.
She said data center developers need to do a better job of engaging with communities and explaining how they plan to manage concerns and risks as well as the benefits they will provide.
But she noted even a moratorium can be interpreted as an outright ban because “in the context of speed to market, it might as well be a ban” from the industry perspective.
That speed has led many local communities to take action, with nearly 70 moratoriums adopted this year. On May 18, The Denver City Council adopted a moratorium to halt the construction of data centers for the next year. In April, Oakley, Calif., became the first Bay Area city to temporarily ban data centers while officials draft new zoning rules and study environmental impacts.
At least 20 Ohio municipalities, including Dayton and Findlay, have enacted moratoriums. The Village of Lordstown, Ohio, is being sued by the developer of a proposed $3.6 billion data center, who claims the village enacted a ban and later a moratorium after the plan was filed under current zoning rules.
In Texas, Hill County commissioners recently approved a one-year moratorium. It’s the first temporary ban in Texas and comes as data center developers are increasingly targeting rural areas for new campuses.
So far, there are ballot measures in five municipalities in four states: California, Michigan, Nevada and Wisconsin, according to Ballotpedia.org. Residents of Box Elder County, Utah, where the 40,000-acre, 9-gigawatt Stratos project from O’Leary Digital was recently approved despite local opposition, are trying to secure enough signatures to force a referendum on the hyperscale data center campus.
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One measure has been decided. In April, Port Washington, Wis., became the first U.S. municipality to pass a referendum requiring voter approval for future tax incentives higher than $10 million for data center projects. The city is the site of a controversial $15 billion, 1,900-acre AI data center being built by a partnership of Vantage Data Center, OpenAI and Oracle as part of the Stargate Project, a $500 billion AI infrastructure venture to power about 10 gigawatts of data center capacity.
On June 2, voters in Monterey Park, Calif., will decide on a data center ban. Earlier this year, the City Council had enacted a 45-day moratorium in response to a 49.9-megawatt data center proposal even though the plan was withdrawn.
In Janesville, Wis., voters will decide in November if an $8 billion, 11-building, 800-megawatt data center proposed by Viridian Partners can be built at a former General Motors site because it exceeds $450 million.
Not all communities are looking to limit data center development. In Pittsburg, Calif., the city’s General Plan and Pittsburg Technology Specific Plan allow data center development. AVAIO Digital Partners is building a 92 MW data center campus there as the $800 million first phase of its 76-acre Pittsburg Technology Park.
Arielle Harris, a partner and land-use/zoning attorney with Cox Castle in San Francisco, pointed out local opposition is not following political party lines.
“It’s really very specialized to the project, its locations and the community. Opposition can come in any place. Whether the opposition is based on fact or not, when organized it can create regulatory uncertainty for projects seeking local zoning approvals,” Harris said.
Harris noted many jurisdictions don’t address data centers as a use category in their zoning codes.
“Each jurisdiction has to decide whether they’re going to regulate data centers in a way that’s different from other industrial uses,” she said.
Guardrails considered, tax incentives targeted
Even the states with the most existing and planned data centers—Virgina and Texas—are considering or implementing data center guardrails. Virginia has more than 600, mostly in Northern Virginia’s Data Center Alley. But Texas is expected to become the world’s largest data center market by 2030, according to JLL, underscoring broader data center market trends. The state’s abundant energy resources, including natural gas that could be used to power data centers or backup generators, ample land and a business-friendly environment are keys to the state’s growing data center base.
In Virginia, 61 bills were introduced this year, with 15 approved, including requiring high-demand users of 25 megawatts of power or more to pay for increased capacity and preventing costs from being passed to other ratepayers. Proposals of 100 megawatts or more will face more stringent permitting, including requiring assessments of impacts on historical sites. That regulation likely springs from the Prince William Digital Gateway project, which would put 37 data centers on 1,700 acres near the Manassas National Battlefield Park. After longstanding litigation, Compass Datacenters, one of the two companies behind the project, dropped out after a court ruling in March voided the zoning. QTS is appealing.
Legislation regarding tax exemptions for data centers, which costs Virginia about $1.6 billion a year in lost revenue, did not get a vote. There are proposals to eliminate it or require environmental compliance for the incentives.
Texas lawmakers are also considering changing the data center sales tax structure after tax breaks have reached more than $1 billion and could top losses of $3 billion by 2029.
Last June, the Texas Legislature approved Senate Bill 6 requiring large-load customers using 75 megawatts of electricity or more within the Electric Reliability Council of Texas region to pay the full costs of their grid interconnections so that residential ratepayers would not have to bear the costs of building new power lines, substations, transmission upgrades and other fees. Under other provisions of SB6, data center developers must also disclose if the project has backup generation capacity of at least 50 percent of the site’s demand and may be required to use it during ERCOT emergencies.
Jason Jennaro, CEO of FrontierGen, an infrastructure development platform delivering data center campuses in Texas, said SB6 strikes a balance between supporting growth and creating stability for the electricity systems.
“It puts more responsibility on the developers to not socialize their capital costs on the ratepayers and we think that this is completely appropriate,” Jennaro said. “We want development in Texas but it shouldn’t be subsidized by the Texas ratepayer.”
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