The wave of opposition to AI data centers is heating up in the US - what are the reasons behind it?

Across the United States, discontent over the surge in AI-driven data center construction is escalating. The proliferation of server farms fueled by the AI ​​craze has provoked strong reactions from many local communities. Public pressure is even beginning to directly impact the agendas of several states, with some considering temporarily banning new data center development. Earlier this month, New York joined the trend with a bold proposal to halt the expansion of its cloud computing infrastructure.

 

A bill in New York State proposes a three-year moratorium on permits for new data center construction, giving regulators time to assess the environmental and economic impact of the industry on communities. The bill's co-authors, State Senator Liz Krueger and Representative Anna Kelles, call it the "most drastic" proposal ever introduced in the U.S.

Although no statewide moratorium has been passed, local bans are rapidly increasing. Weeks before the New York bill was introduced, the New Orleans City Council passed a one-year moratorium on data center construction. In early January, Madison also enacted a similar policy following protests related to the technology project in the area. Many communities in construction hotspots like Georgia and Michigan have done the same.

Previously, data centers were primarily opposed by environmental activists. But recently, concerns have spread to senior lawmakers amid growing skepticism about the technology industry. In conservative Florida, Governor Ron DeSantis announced an 'AI bill of rights,' granting local communities the power to restrict the construction of new data centers.

 

In more liberal states like Vermont, U.S. Senator Bernie Sanders even proposed a nationwide moratorium. In Arizona, Governor Katie Hobbs expressed support for withdrawing tax breaks for the industry. The controversy escalated further when the Governor of Mississippi attacked Sanders' proposal on social media.

The wave of protests comes at a time when tech giants are committing massive spending to expand their infrastructure. The four biggest spenders – Amazon, Google, Meta, and Microsoft – are expected to invest up to $650 billion next year, much of it going into building data centers. That figure could rise even higher in subsequent years as companies race for computing power.

However, the speed and scale of deployment are causing these projects to increasingly lose public support. A survey by Echelon Insights found that 46% of respondents opposed building data centers in their communities, while 35% supported them. Another poll by Politico showed that many voters remain undecided, meaning public opinion could be influenced in either direction.

The industry has begun spending heavily on lobbying and communications. In January, the Financial Times reported that large data center operators were preparing a 'massive lobbying campaign,' increasing spending on advertising and community engagement in the areas where they build. Companies have also made practical concessions, such as committing to the 'Rate Payer Protection Pledge,' under which they are responsible for providing electricity to new AI data centers. However, it remains unclear whether these measures will be enough to sway public opinion.

Dan Diorio from the Data Center Coalition argues that data centers can generate revenue for small communities without putting significant pressure on their limited resources. He argues that if incentives are cut and businesses withdraw, the revenue disappears. The issue, he points out, lies in state policy: whether or not to restrict the opportunities for growth of communities that could significantly benefit from these projects.

 

Why do we need to 'press the pause button'?

The moratoriums are primarily intended to create a "breathing room" to assess the benefits and risks before allowing further construction. In some states, the pace of construction is so rapid that communities don't have time to understand the long-term impacts.

According to Justin Flagg, who handles communications and environmental policy for Senator Krueger's office, the New York bill stems in part from the "energy affordability crisis." Thirty state legislators recently called on Governor Kathy Hochul to declare an energy emergency due to rising electricity prices. While many factors are at play, there is a consensus that the growth of data centers is exacerbating the problem.

Beyond electricity prices, concerns also revolve around the impact on water resources, noise, and local infrastructure. To address grid pressure, large companies like Microsoft, Google, Meta, and OpenAI have committed to paying for the additional electricity fed into the grid themselves, even installing their own power sources behind the meter.

According to the Washington Post, Silicon Valley is increasingly considering building a "dark grid"—a massive private power supply dedicated to AI data centers instead of relying on the public grid. But this strategy is also controversial.

A prime example is xAI, Elon Musk's AI startup. At its 'Colossus' data center in Memphis, Tennessee, the company installed a series of methane gas turbines and was accused of polluting the surrounding area. The U.S. Environmental Protection Agency later ruled that the turbines were not exempt from air quality permits, as the company had argued. Environmental groups announced they would sue over emissions that create smog, particulate matter, and hazardous chemicals.

The xAI story shows that while a 'shadow grid' might solve the problem of overloading the public grid, it could create a whole new set of environmental issues.

At the federal level, the Donald Trump administration – which considers AI a top priority – seeks to portray the industry as "responsible stewards" of the communities they build. One proposal put forward is to require AI companies to bear the additional costs of local power grids, although policy details remain vague.

 

Controversy over tax incentives

For years, U.S. states have attracted data centers with tax incentives. CNBC's analysis shows that 42 states either don't collect sales tax or offer partial exemptions or reductions for technology companies. In the 16 states that publicly released data, the total amount of taxes "forgotten" totaled approximately $6 billion over five years.

Now, many states are considering tightening regulations. In Georgia, Senator Matt Brass proposed ending the sales tax exemption for servers. He argued that the state's business environment is already attractive due to low property taxes and an overall low tax burden, so no further incentives are needed. He suggested that eliminating the exemption could generate hundreds of millions of dollars in revenue for the state.

A similar debate is underway in Ohio, where some Democratic lawmakers want to end the tax exemption, but this has already been rejected by Governor Mike DeWine. One of the supporters, State Senator Kent Smith, called it the "most absurd tax break" and argued that it should end for the benefit of those who pay their electricity bills.

Conversely, some lawmakers still support maintaining the incentives. In Colorado, State Representative Alex Valdez proposed extending the tax loophole for data centers for another 20 years. He argued that the incentives are merely a "carrot" to attract businesses; once they have established operations, the passive income will then be used to serve the community.