Lawmakers at various levels of government seek decisionmaking authority over whether and where data centers are built.
This spring, the County Commission of Box Elder, Utah, voted unanimously to advance the construction of a 40,000-acre “hyperscale” data center—more than twice the size of Manhattan—despite local protests. Officials cited both economic and national security benefits of the project as justifications.
On the other hand, New York’s Governor Kathy Hochul recently signed an executive order that imposes a temporary moratorium on the construction of new data centers in that state. In doing so, she cited concerns about the environmental and economic impacts of data centers, stemming from their energy consumption and use of water resources.
Across the United States, government officials are confronting questions about the benefits and harms of data centers—facilities that provide the enormous computing power needed for artificial intelligence (AI). Competing federal, state, and local interests are sparking contests over the authority to decide whether and where data centers are built.
Many state officials view data centers as economic boons. Private developers promise that the centers will generate jobs, tax revenue, and investment in local communities, and many states are competing to be chosen as the sites of these developments. Thirty-eight states offer some form of tax incentive for data centers.
But data centers can also disrupt the communities that they occupy. They demand tremendous amounts of power, which can raise electricity rates for nearby residents. Most centers also consume thousands of gallons of water each day to cool their servers, straining local water supplies especially in regions with water shortages. Data centers also generate air, light, and noise pollution, which degrade the long-term health of nearby residents.
These problems have provoked opposition in some communities, and many municipalities across the United States have enacted bans on data centers. In 2025, local opposition blocked or delayed data center development worth an estimated $156 billion.
These delays and bans pose obstacles for state governments trying to entice developers. Some states have attempted to reassert control.
Several states have enacted statutes that limit municipalities’ ability to regulate data centers. A recent West Virginia law, for example, prohibits counties and municipalities from limiting the creation of data centers “in any way.” In some states, state-level energy commissions hold authority over where large energy consumers, such as data centers, can connect to the power grid, allowing these commissions to dictate where data centers can be constructed.
Local activists in some communities have sued to stop data centers, alleging that local governments have failed to follow proper permitting procedures. In turn, some states are reducing permitting requirements, mandating that municipalities process permit applications more quickly, and restricting the bases for rejecting permits.
Not all states officials have embraced data centers, however, and a growing number are considering state-wide moratoriums on data center construction such as the one recently put in place by Governor Hochul. In Maine, Governor Janet Mills vetoed a bill that would have imposed a similar moratorium only because it lacked a carveout for one already approved data center—otherwise, Mills said she would have signed the bill into law.
State-level opposition to data centers has grown as more lawmakers question the economic proposition offered by data centers. Some researchers argue that state tax incentives for developers eclipse the revenue that the centers generate. Backlash from local communities has underscored the effects of data centers on utility rates, and some state officials have challenged whether data centers produce the job growth that proponents suggest.
A Brookings Institution report found that data centers generate some local jobs but fewer than many proponents claim. The overall effect depends strongly on the type of data center built. Some centers need continual support from local technology contractors and service providers, generating lasting jobs, but other data centers need less upkeep and primarily generate temporary jobs during construction.
Meanwhile, industry associations have upped their spending on lobbying in an effort to reinforce perceptions of data centers as job creators.
States seeking to limit data centers must also contend with federal AI policy. The Trump Administration’s recent National Policy Framework for Artificial Intelligence called for accelerating the construction of AI infrastructure and called on lawmakers to preempt state AI laws.
Arguably, the federal Framework leaves state data center laws untouched. In a December 2025 executive order that underlies the Framework, the Administration clarified that data center laws should be exempt from a draft federal AI law that would preempt state laws.
The Center for American Progress, however, noted the narrowness of that exemption. The order separately directs federal agencies to identify funding that could be withheld from states with “onerous AI laws,” and it includes no parallel exemption for data centers—which would have been an “easy inclusion,” according to the Center.
These federal measures appeal to national security as a further justification for regulatory authority at the national level. Some states have also embraced this framing. The West Virginia legislature, in a prohibition it enacted on local regulations of data centers, cited both competition with China and the threat of cyberattacks as a justification .
As data centers continue to proliferate, stakeholders in and outside of government will continue to invoke legal, economic, environmental, security, and other arguments to advance competing regulatory approaches. Where decisionmaking power lands—at the national, state, or local levels of government—will likely have important consequences for how data centers are built, how they operate, and who experiences their costs and benefits.
