Public resistance to AI infrastructure projects is intensifying

Across the United States, frustration has surged over the rapid spread of server farms tied to the AI boom. The backlash has grown loud enough to influence policy debates, with some states and local governments considering temporary bans on new data centre development. Earlier this month, New York joined that movement with a proposal to pause the expansion of new cloud infrastructure across the state.

A newly introduced bill in New York State would establish a three-year moratorium on issuing new permits for data centre construction statewide, giving regulators time to evaluate the environmental and economic impacts of these facilities on local communities. The bill's co-authors, State Senator Liz Krueger and Assemblymember Anna Kelles, have described it as the "strongest" data centre moratorium legislation introduced anywhere in the country.

No statewide moratorium has passed so far, but local bans are spreading quickly. Several weeks before Krueger and Kelles introduced their bill, the New Orleans City Council passed a one-year moratorium on new data centre construction in the city. In early January, Madison, Wisconsin, adopted a similar measure after protests erupted over tech projects in the region.

Comparable policies have also been approved across numerous communities in major construction hotspots such as Georgia and Michigan, as well as in many other regions around the country.

Environmental groups have long criticised data centres, but newer resistance is increasingly coming from high-level lawmakers who are tapping into broader populist anger toward the tech industry. In conservative Florida, Governor Ron DeSantis recently announced an AI "bill of rights" that would give local communities the authority to limit new data centre construction.

In liberal Vermont, U.S. Senator Bernie Sanders has floated the idea of a nationwide moratorium. In Arizona, where politics are more mixed, Governor Katie Hobbs recently said she supports removing tax incentives for the industry. The issue has also become a political flashpoint, with the governor of Mississippi publicly targeting Sanders online over the moratorium proposal.

This rising political pushback is arriving just as tech companies are committing staggering sums to infrastructure build-outs. The four largest spenders — Amazon, Google, Meta, and Microsoft — plan to spend about $650 billion on capital expenditures over the next year, with most of that going toward data centre expansion. Even more spending is planned beyond that as companies race to secure as much compute capacity as possible.

But the speed and scale of these build-outs are becoming increasingly unpopular, according to recent polling. An Echelon Insights poll found that 46% of respondents would oppose plans to build a data centre in their community, compared to 35% who would support one. A separate Politico poll found that while there is substantial concern about data centres, many voters do not yet hold strong views either way — suggesting public sentiment could still shift.

The industry is already investing significant funds to improve perceptions, at least in the regions where expansion is underway. In January, the Financial Times reported that some of the largest data centre operators were planning a "lobbying blitz," including increased spending on targeted advertising and community engagement in the areas where facilities are being built.

Tech companies are also making policy concessions, including a planned Ratepayer Protection Pledge that would require them to provide power for new AI data centres. Still, it remains unclear whether those steps will be enough to ease public opposition.

Dan Diorio of the Data Centre Coalition argued that data centres can be appealing to smaller communities because they generate revenue without heavily straining limited local resources. If incentives disappear and companies decide not to build in those areas, he said, revenue will also vanish. "That's where statewide policy considerations come in," Diorio said. "Are you going to limit communities in which these businesses could be a significant benefit for them?"

The logic behind pressing pause

In general, data centre moratoriums are designed to give communities time to pause and assess the real costs and benefits of allowing these facilities to expand. In some states, the pace of data centre construction has accelerated so quickly that local governments say they are unsure of the industry's long-term impact.

Justin Flagg, director of communications and environmental policy for Sen. Krueger's office, said the New York proposal is driven in part by what he described as the state's energy affordability crisis, which has become a growing concern for both residents and policymakers.

A group of 30 state lawmakers recently urged Governor Kathy Hochul to declare an "energy state of emergency" due to rising utility rates. While energy price increases have multiple causes, there is a growing consensus that data centre expansion is making the problem worse, not better.

"There's broad discontent being expressed about energy prices," Flagg said. "We certainly hear that constantly from our constituents, whose electric and gas rates are going up." He added that local opposition is also tied to environmental issues, including "the water impact and the noise and the local infrastructure impact as well."

In response to grid-related concerns, major tech firms, including Microsoft, Google, Meta, and OpenAI, have promised to cover the costs of their additions to the power grid in the communities where they operate. In some cases, they are installing behind-the-meter power sources alongside the dacentresers themselves.

The Washington Post recently reported that Silicon Valley is increasingly looking to build its own private power infrastructure — a "shadow grid" — to support the energy-intensive facilities now driving the AI boom. The strategy involves constructing large private power sources rather than relying on public utility grids.

One example is xAI, Elon Musk's AI startup, which built a set of methane gas turbines to power its massive data centre in Memphis, Tennessee, known as "Colossus." Those turbines have been accused of polluting nearby communities.

That effort has already encountered major legal trouble. xAI reportedly told local officials that a legal loophole exempted the turbines from air-quality permits. In January, the Environmental Protection Agency ruled that xAI was not exempt, making earlier operation of the turbines illegal. Environmental groups, describing the emissions as "smog-forming pollution, soot, and hazardous chemicals," said earlier this month they planned to sue the company. xAI has since permitted its turbines.

As the xAI episode shows, the shadow-grid strategy may address one challenge — stress on the public grid — but it can create others, especially around emissions and local air quality. Environmental activists and residents have raised concerns that new facilities could bring large-scale pollution into their communities.

At the federal level, the Trump administration — which has made AI a major priority — has sought to frame the industry as responsible actors within the places they build. Trump officials have also floated a policy requiring AI companies to internalise the costs their projects add to local electric grids, though details remain unclear.

Debate over taxes

For years, many communities have encouraged data centre construction through tax breaks. A CNBC analysis last summer found that 42 states either have no sales tax or provide full or partial sales tax exemptions for tech firms. Of those states, 16 publicly reported the value of tax incentives they granted. CNBC reported that the forgone revenue totalled about $6 billion over five years.

Now, however, more states are considering pulling back. In Georgia, multiple bills have recently been introduced to reduce incentives. State Senator Matt Brass, who introduced a bill to eliminate the server sales tax exemption, said he does not believe tech companies need that benefit and does not think removing it will deter them from building in Georgia. "In Georgia, if you compare us to other states, our property taxes are low, our property values are low, our overall tax burden is low," Brass said. "So, you know, our overall business climate is good. That should be the attraction."

Brass, who chairs Georgia's rules committee, said he expects significant support for his proposal. Similar legislation was passed by the Georgia legislature in 2024, but was vetoed by the governor. Brass said ending the exemption could generate hundreds of millions of dollars for the state.

A similar fight is unfolding in Ohio, where a group of Democratic lawmakers has introduced legislation to remove the sales tax exemption for data centres. A comparable measure was introduced last year but was rejected by Governor Mike DeWine, echoing Georgia's outcome.

"The most ridiculous tax break on the books currently is for data centres," state Sen. Kent Smith, one of the bill's supporters, said recently. "That tax break needs to end, for the benefit of everyone who's got an electric bill."

At the same time, not all lawmakers want to remove incentives. In Colorado, state representative Alex Valdez recently introduced a bill to lock in the data centre exemption for the next 20 years. Valdez said the exemption is intended as a carrot to attract tech firms. Once they establish operations, he argued, they become a steady source of passive revenue that ultimately benefits the communities where they operate.