States are rolling out red carpets for data centers. But some lawmakers
are pushing back
[May 31, 2025] By
MARC LEVY
HARRISBURG, Pa. (AP) — The explosive growth of the data centers needed
to power America's fast-rising demand for artificial intelligence and
cloud computing platforms has spurred states to dangle incentives in
hopes of landing an economic bonanza, but it's also eliciting pushback
from lawmakers and communities.
Activity in state legislatures — and competition for data centers — has
been brisk in recent months, amid an intensifying buildout of the
energy-hungry data centers and a search for new sites that was ignited
by the late 2022 debut of OpenAI’s ChatGPT.
Many states are offering financial incentives worth tens of millions of
dollars. In some cases, those incentives are winning approval, but only
after a fight or efforts to require data centers to pay for their own
electricity or meet energy efficiency standards.
Some state lawmakers have contested the incentives in places where a
heavy influx of massive data centers has caused friction with
neighboring communities. In large part, the fights revolve around the
things that tech companies and data center developers seem to most want:
large tracts of land, tax breaks and huge volumes of electricity and
water.
And their needs are exploding in size: from dozens of megawatts to
hundreds of megawatts and from dozens of acres up to hundreds of acres
for large-scale data centers sometimes called a hyperscaler.
While critics say data centers employ relatively few people and pack
little long-term job-creation punch, their advocates say they require a
huge number of construction jobs to build, spend enormous sums on goods
and local vendors and generate strong tax revenues for local
governments.
In Pennsylvania, lawmakers are writing legislation to fast-track
permitting for data centers. The state is viewed as an up-and-coming
data center destination, but there is also a sense that Pennsylvania is
missing out on billions of dollars in investment that's landing in other
states.
“Pennsylvania has companies that are interested, we have a labor force
that is capable and we have a lot of water and natural gas,” said state
Rep. Eric Nelson. "That’s the winning combination. We just have a
bureaucratic process that won’t open its doors.”
It's been a big year for data centers
Kansas approved a new sales tax exemption on goods to build and equip
data centers, while Kentucky and Arkansas expanded pre-existing
exemptions so that more projects will qualify.
Michigan approved one that carries some protections, including
requirements to use municipal utility water and clean energy, meet
energy-efficiency measures and ensure that it pays for its own
electricity.
Such tax exemptions are now so widespread — about three dozen states
have some version of it — that it is viewed as a must-have for a state
to compete.
“It’s often a nonstarter if you don’t have them, for at least the
hyperscalers,” said Andy Cvengros, who helps lead the data center
practice at commercial real estate giant JLL. “It’s just such a massive
impact on the overall spend of the data center.”
Zoning, energy fights often frustrate developers
In West Virginia, lawmakers approved a bill to create “microgrid”
districts free from local zoning and electric rate regulations where
data centers can procure power from standalone power plants.
Gov. Patrick Morrisey, a Republican, called the bill his “landmark
policy proposal” for 2025 to put West Virginia “in a class of its own to
attract new data centers and information technology companies.”
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Construction is seen at an Amazon Web Services data center on Aug.
22, 2024, in Boardman, Ore. (AP Photo/Jenny Kane)
Utah and Oklahoma passed laws to make it easier for data center
developers to procure their own power supply without going through the
grid while Mississippi rolled out tens of millions of dollars in
incentives last year to land a pair of Amazon data centers.
In South Carolina, Gov. Henry McMaster signed legislation earlier this
month that eased regulations to speed up power plant construction to
meet demand from data centers, including a massive Facebook facility.
The final bill was fought by some lawmakers who say they worried about
data centers using disproportionate amounts of water, taking up large
tracts of land and forcing regular ratepayers to finance the cost of new
power plants.
“I do not like that we’re making customers pay for two power plants when
they only need one,” Senate Majority Leader Shane Massey told colleagues
during floor debate.
Still, state Sen. Russell Ott suggested that data centers should be
viewed like any other electricity customer because they reflect a
society that is “addicted” to electricity and are “filling that need and
that desire of what we all want. And we're all guilty of it. We’re all
responsible for it.”
Some lawmakers are hesitant
In data center hotspots, some lawmakers are pushing back.
Lawmakers in Oregon are advancing legislation to order utility
regulators to ensure data centers pay the cost of power plants and power
lines necessary to serve them.
Georgia lawmakers are debating a similar bill.
In Virginia, the most heavily developed data center zone in the U.S.,
Gov. Glenn Youngkin vetoed a bill that would have forced more
disclosures from data center developers about their site's noise
pollution and water use.
In Texas, which endured a deadly winter blackout in 2021, lawmakers are
wrestling with how to protect the state's electric grid from
fast-growing data center demand.
Lawmakers still want to attract data centers, but a bill that would
speed up direct hookups between data centers and power plants has
provisions that are drawing protests from business groups.
Those provisions would give utility regulators new authority to approve
those agreements and order big electric users such as data centers to
switch to backup generators in a power emergency.
Walt Baum, the CEO of Powering Texans, which represents competitive
power plant owners, warned lawmakers that those provisions might be
making data center developers hesitant to do business in Texas.
“You’ve seen a lot of new announcements in other states and over the
last several months and not as much here in Texas," Baum told House
members during a May 7 committee hearing. "I think everybody right now
is in a waiting pattern and I worry that we could be losing to other
states while that waiting pattern is happening.”
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