Backlash Against Data Centers Spurs New Laws and Policy Reviews Across States

In response to community opposition, several states are curbing data-center incentives and increasing transparency. New Jersey Governor Mikie Sherrill signed legislation ending a $500 million tax-credit program created in 2024 and requiring facilities to report energy and water use. California’s Assembly passed Bill 1577, mandating operators to submit consumption data to the California Energy Commission and local permitting agencies. Texas Governor Greg Abbott ordered the Public Utility Commission and ERCOT to audit all data-center projects and pause new construction until reviews are complete.

New Jersey Ends Tax Break for Data Centers as Backlash Builds

Data centers underpin AI services. Virginia hosts roughly a quarter of U.S. hyperscale facilities, with Loudoun County handling an estimated 70 percent of global internet IP traffic. States such as Virginia and New Jersey offered tax breaks—Virginia’s equipment sales-tax exemption costs about $1.6 billion annually, while New Jersey awarded CoreWeave the maximum $250 million credit before pausing the program. Expansion has sparked resident complaints about noise, rising electricity bills, and perceived corporate influence over land use.

Bulletin of Atomic Scientists

• New Jersey’s former program: $500 million total credit, $250 million awarded to CoreWeave.

New Jersey Ends Tax Break for Data Centers as Backlash Builds

• Virginia’s equipment exemption: $1.6 billion in foregone tax revenue; the state recovers roughly 48 cents per dollar given up.

Bulletin of Atomic Scientists

• Loudoun County derives about 38 percent of its general-budget revenue from data-center personal-property taxes.

Bulletin of Atomic Scientists

• Data centers consume about 1.5 percent of global electricity and 4.4 percent of U.S. electricity.

Bulletin of Atomic Scientists

• National daily water use by U.S. data centers is estimated at 449 million gallons.

Bulletin of Atomic Scientists

• California hosts 331 data centers, accounting for roughly 2 percent of the state’s peak electricity demand; projections suggest a rise to 9 percent (about 4,500 MW) by 2040.

Bulletin of Atomic Scientists

Governor Sherrill framed the New Jersey measures as a “wider crackdown” aimed at mitigating community impacts. Assemblymember Rebecca Bauer-Kahan described California’s bill as a transparency step that ensures data centers serve “the constituents.” Governor Abbott emphasized that the Texas audits will provide information needed for legislators to protect residents from “water and electricity” costs and “noise and light pollution.”

Data centers bill passes Assembly days before session ends

Analysts differ on water-consumption impacts. Koomey notes that the largest centers use 1–5 million gallons per day—comparable to a major EV plant—and that water-use figures are often presented without context. Comprehensive, comparable data on local utility-cost effects remain limited.

Bulletin of Atomic Scientists

• New Jersey’s reporting requirement will begin later this year, with the state Economic Development Authority set to publish facility usage data.

New Jersey Ends Tax Break for Data Centers as Backlash Builds

• California’s Bill 1577 awaits Governor Gavin Newsom’s signature; if enacted, it will obligate operators to disclose load, generation, and power-usage effectiveness metrics.

Data centers bill passes Assembly days before session ends

• Texas audits are projected to take several months, after which the Public Utility Commission and ERCOT will release findings that could shape future permitting rules.

CBS News

• Virginia continues to evaluate the fiscal balance of its equipment tax exemption, with a 2024 study indicating the incentive’s marginal impact has fallen to about 50 percent.

Bulletin of Atomic Scientists

These coordinated policy shifts show how community backlash is reshaping the regulatory landscape for data-center development nationwide.

Reason