HARRISBURG, Pa. (AP) — The surge in data centers, driven by America’s increasing demand for artificial intelligence and cloud computing technologies, has sparked both excitement for economic opportunities and opposition from lawmakers and local communities.
In recent months, activity in the state legislature has intensified, as competition for data center sites has ramped up. This momentum was notably triggered by the launch of OpenAI’s ChatGPT in late 2022, prompting a search for new, energy-intensive sites.
Many states are offering financial incentives amounting to tens of millions of dollars. While some of these incentives have received approval, they often require negotiations that mandate data centers to finance their own energy consumption or adhere to energy efficiency criteria.
State legislators are advocating for benefits where an influx of data centers has created tensions in surrounding communities. The primary contention revolves around what tech firms and data center developers believe is essential: large plots of land, tax incentives, ample electricity, and substantial water supply.
As the demand for data centers escalates, the size of these facilities has increased rapidly, transitioning from dozens of megawatts to hundreds, and expanding from dozens to hundreds of acres, resulting in the emergence of large data centers known as Hyperscale facilities.
Critics argue that data centers create relatively few jobs and mainly provide limited long-term employment. However, proponents counter that these centers generate numerous construction jobs, invest heavily in local goods and services, and contribute significantly to local tax revenues.
In Pennsylvania, lawmakers are drafting legislation to expedite the establishment of data centers. The state is seen as a potential hotspot for emerging data centers, but there is growing concern that Pennsylvania is losing out on billions that are being invested in other states.
“There are businesses interested in Pennsylvania; we have a skilled workforce, abundant water, and natural gas,” state Rep. Eric Nelson stated. “This combination should lead to success, but our bureaucratic processes hinder progress.”
A pivotal year for data centers
Kansas has introduced a new sales tax exemption for data center construction and equipment, while Kentucky and Arkansas have expanded their existing exemptions to encompass more projects.
Michigan has enacted protections that align with local government utility, water, and clean energy standards, along with energy efficiency measures and a mandate for self-financed electricity.
Tax exemptions for data centers are prevalent, with around 30 states implementing some form, making them crucial for state-level competition.
“Without these incentives, particularly for hyperscale data centers, it often becomes a deal-breaker,” explained Andy Kvengross, a leader in data center practices at the commercial real estate company JLL. “This has significantly influenced overall data center investments.”
Zoning and energy battles frustrate developers
West Virginia lawmakers have approved legislation to establish a “microgrid” district free from local zoning and electricity regulations, enabling data centers to obtain electricity from independent power plants.
Republican Gov. Patrick Morisei touted the 2025 bill as a “landmark policy proposal” designed to enhance the state’s appeal to emerging data centers and tech companies.
Meanwhile, Utah and Oklahoma have passed laws facilitating easier access for data center developers to secure their own power sources without relying on the grid. Last year saw Amazon data centers benefit from tens of millions in incentives.
In South Carolina, Gov. Henry McMaster recently signed legislation to ease regulations, hastening the construction of power plants to meet the high demand from data centers, including substantial facilities operated by Facebook.
The final bill faced opposition from lawmakers who raised concerns about the excessive water usage and land occupation by data centers, which could burden local rates to finance new power plants.
“It seems unnecessary for two power plants to be funded when only one is needed,” Senate majority leader Shane Massey expressed during floor discussions.
Despite the concerns, state Sen. Russell Ott suggested that data centers should be treated like any other electricity consumers, as they are “dependent” on electricity, reflecting a society that aims to fulfill collective needs and desires.
Some lawmakers express reservations
Some legislators are pushing back against the expansion of data center hubs.
Oregon lawmakers are progressing with legislation that mandates utility regulators to ensure data centers cover the costs associated with power plants and transmission services.
Georgia legislators are considering a similar approach.
In Virginia, where the most developed data center regions in the U.S. are located, Gov. Glenn Youngkin has rejected proposals requiring data center developers to disclose information about noise pollution and water consumption.
Following the fatal winter power outage in Texas in 2021, lawmakers are working to protect the state’s electrical grid against the demands posed by expanding data centers.
While lawmakers aim to attract more data centers, the proposal speeding up direct links between data centers and power plants includes provisions that have drawn protests from business groups.
These provisions would grant utility regulators power to approve contracts and mandate large electrical consumers, such as data centers, to utilize backup generators during power emergencies.
Walt Baum, CEO of Powering Texans, representing competitive power plant operators, cautioned that such regulations might deter data center developers from investing in Texas.
“We’ve seen numerous announcements in other states recently, but not as many here,” Baum warned lawmakers during a committee meeting on May 7. “I’m concerned that while we’re in a waiting phase, we risk falling behind other states.”
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Source: apnews.com