By Mary Barrow, CFA Legal Intern
Behind data intensive products like artificial intelligence and cryptocurrency are data centers, large buildings that process data and enable large scale computing. The typical data center houses a collection of computers in a windowless warehouse and requires significant water and energy usage to keep the system cool and running.
As of March 2025, the U.S. was home to around 5,426 data centers, far more than any other country. As of mid 2025, approximately 335 additional data centers are under construction across the country, with hotspots in Virginia, Texas, Ohio, and Arizona. In 2023, US data centers alone used about the same amount of electricity as the entire country of Poland, with this demand projected to triple within three years. A Department of Energy study found that in 2023, US data centers consumed 4.4% of the nation’s electricity, and if recent trends continue, that metric could climb to 12% by 2028. This extreme energy usage is exacting an environmental toll which is being felt in people’s pocketbooks and their communities. Utility companies have asked regulators for $29 billion in rate hikes in the first half of 2025 alone, 142% more than the same period last year, to meet surging data center driven demand.
Data Center water usage is equally as staggering. A single 100 MW facility can consume up to 2 million liters of water per day, equivalent to the needs of roughly 6,500 households. Even worse, more than 160 new AI-focused data centers have been built in water-stressed regions over the past three years and 40% of all U.S. data centers are in water-scare areas.
Given the steep costs to the American public, the question arises of what is sustaining this data center boom. Capital deployment in data center construction reached $31.1 billion in 2024, driven largely by AI-focused “hyperscale facilities.” The ten largest cloud providers globally are forecast to pour roughly $1.8 trillion into US data centers between 2024 and 2030 to keep up with ballooning AI and high-density computing demand. AI industry leaders argue that without the expansion of infrastructure, the United States risks losing its global leadership in AI innovation and the economic benefits that accompany it. However, to ensure that Americans truly benefit from AI’s promise, this infrastructure must be carefully deployed with transparency that empowers communities to advocate and bargain for themselves.
This three-part blog series peels back the curtain on America’s data center surge, beginning with an exploration of the federal, state, and local policies that have opened the door to unchecked expansion. The next installment will examine the data centers themselves: how they’re built, where they’re built, and who foots the bill. Finally, we’ll step into the communities forced to live in the shadows of these massive facilities to assess the financial, environmental, and health burdens these residents face.
Federal In Washington, bipartisan efforts have driven a steady erosion of the environmental and regulatory guardrails that once served to protect the American people from precisely the kind of industrial overreach now unfolding in the form of massive, energy-intensive digital infrastructure.
Even before ChatGPT hit the internet in November of 2022, the weakening of the National Environmental Policy Act (NEPA), long a cornerstone of environmental review, had begun. In 2020, the Council on Environmental Quality overhauled the rules, imposing restrictive timelines, and cutting the requirement to consider cumulative impacts. With these changes, a new gas-fired plant built to power a data center no longer needs to account for regional air quality, carbon emissions, or the strain on shared water resources. Instead, federal agencies are now directed to approve projects based solely on their narrow, immediate footprint, with little room for public input or community challenge.
This regulatory loosening is now codified within President Trump’s “One Big Beautiful Bill Act,” which reflects the prevailing ethos: fast-track growth and expand infrastructure for AI and data operations, no matter the cost. The act allocates $20 billion in federal investment to AI and data center capacity, spurring the construction of hundreds of new facilities across partner states like Texas, Arizona, and Illinois. Although the Senate stripped a moratorium provision that would have banned state and local level AI regulation for a decade, the legislation still rolls back key clean-energy tax credits and amplifies federal authority to site AI and data infrastructure on public lands. The DOE has already identified 16 federal sites, including national labs and former uranium-enrichment facilities, as ideal locations for co-locating new AI-focused data centers and energy infrastructure. Under the revised NEPA rules, these projects can now be approved under categorical exclusions.
Meanwhile, a quieter, more structural change is also underway: the consolidation of independent oversight. Moves to bring independent agencies like the Federal Communications Commission (FCC) and the Federal Energy Regulatory Commission (FERC) under more direct executive control threaten to erode their autonomy. Empowered by Congress to act as independent regulators with technical and legal expertise, these agencies are now being reshaped into instruments of policy execution, streamlining approvals, rather than questioning them. On February 18, 2025, the President signed the Ensuring Accountability for All Agencies EO, which redefines “significant regulatory actions” taken by bodies such as FERC and the FCC to require pre‐publication review by the Office of Information and Regulatory Affairs (OIRA). This move effectively inserts the White House into what had been a parallel track of independent rulemaking. Similarly, a pair of February 2025 Executive Orders aim to recalibrate enforcement and rule‐writing procedures by granting the President broader authority to remove agency heads and direct investigatory priorities, potentially chilling internal dissent and constraining agencies’ long‐standing “expert‐based” decision-making processes. As a result, the institutional safeguards designed to ensure rigorous expert review and public accountability are weakening, and the scope for independent oversight is shrinking. We can expect that that agencies will be far less likely challenge or delay projects with significant impact.
The noted shifts in governance benefit a small set of extremely powerful actors. One such beneficiary is American Bitcoin, a firm co-founded by Eric and Donald Trump Jr., which merged earlier this year with crypto-mining company Hut 8. Since the February 2025 executive orders, American Bitcoin has secured roughly $220 million in new capital to fund expanded crypto-mining operations. This infusion reflects a direct financial bet by the Trump family on the venture’s accelerated growth under the second Trump administration’s deregulatory framework. The convergence of executive whims and insider advantage signals a return to an era when government and industry were intrinsically entwined, risking the marginalization of public accountability in favor of those who are best positioned to profit.
State At the state level, some policymakers have become eager partners in the data-center boom by giving away millions in public funds with little to no meaningful return for constituents. While federal agencies are providing the deregulatory scaffolding, it’s governors and state legislatures who have become the key dealmakers, unlocking vast tax breaks and regulatory waivers for Big Tech, often with little to no public input.
Across the country, at least 41 states now offer tax breaks and regulatory waivers to attract data-center investment. Common packages include sweeping exemptions of costly servers, cooling systems, and even overall electricity use in some states. The financial stakes are enormous. A Good Jobs First report found ten states each forgoing over $100 million in tax revenue annually, with Texas exceeding $1 billion in potential public funds lost to data center tax breaks. Nationwide, incentives could cost states $9 billion in the coming years and $1.7 billion annually by 2030. As a result, state treasuries and communities are left to foot the bill.
In Tennessee, a recent law granted sweeping tax exemptions to any data-center project which invests $100 million and creates just 15 full-time jobs that pay slightly above the state average. This threshold is shockingly low for an industry that touts itself as transformative. In return, companies gain complete relief from state sales and use taxes, not only on construction materials, but on hardware, software, and even electricity. The policy offers no formal mechanism for verifying whether the promised jobs are created or maintained, nor any review of the infrastructure costs passed on to local governments. The public is asked to simply trust that the investment is worth it, despite little information about what taxpayers will actually receive in return.
Georgia came close to, but ultimately fell short of, accountability earlier this year. The state legislature passed a bipartisan measure that would have paused the state’s data-center sales tax exemption for two years—long enough to study the costs to the state’s strained electrical grid and water systems. Governor Brian Kemp vetoed the bill, citing the need to support existing investments. Environmental and consumer advocates called the veto a giveaway to an industry already benefiting from generous federal support.
In Louisiana, Governor Jeff Landry’s administration recently passed Act 730 (HB 827), which offers a twenty-year sales-tax rebate on all data-center equipment purchases. The bill moved swiftly through the legislature with minimal public attention and no hearings with local stakeholders. Meanwhile, the state’s long-standing Industrial Tax Exemption Program (ITEP) continues to allow parish councils to wipe out up to 80 percent of a company’s property tax burden. These abatements are rarely announced in real time and become visible to the public only after they’ve already taken effect, leaving communities unable to weigh in before millions in potential public revenue vanishes into the pockets of Big Tech.
Taken together, these state policies reveal a broader pattern of governance that is increasingly detached from public interest. Elected officials are granting billion-dollar companies tax shelters and resource-heavy infrastructure with little evidence of public benefit. The federal government’s deregulatory policies may be encouraging reckless development, but it is state governments that are handing over the keys and ushering in a future where Big Tech is given enormous privileges, and the public is kept in the dark about what’s being handed over.
Local Across the country, in communities where local governments were once expected to safeguard public interests, officials are now rolling back safeguards and clearing the path for private development, prompting growing concerns about undisclosed financial arrangements, self-dealing, and the concentration of political power beyond public accountability.
This is the case in West Feliciana Parish, Louisiana. In 2024, a $12 billion, 300-megawatt crypto-mining and AI campus from Hut 8, linked to American Bitcoin, was quietly approved through a series of actions that reveal a deeper pattern of power consolidation and public exclusion. At the heart of the deal was a 107-acre parcel of parish land. The land was rezoned and sold for just $500,000—far below its estimated market value. It was initially transferred to M/V Industrial LLC, then flipped the same day to Hut 8.
The deal initially fell within the jurisdiction of the West Feliciana Port Commission, an independent body established in 2005 to ensure transparency in economic development. A local news investigation found that when members of the commission began to question the deal over a conflict of interest within the commission itself, Parish President Kenny Havard, a former state legislator and registered lobbyist, moved to dismantle the commission. With legislative support, the commission was abolished and oversight was consolidated to the parish council, led by Havard. This change effectively removed the public’s only independent mechanism for impartial economic review.
Yet even amid federal rollbacks, local governments elsewhere are able to exert substantial influence over data center projects. In Culpeper County, Virginia, a proposed $12 billion hyperscale data-center project faced unanimous rejection from local planners due to concerns about environmental and historical preservation. Similarly, in Prince William County, Virginia, the controversial “Digital Gateway” project, a $24.7 billion endeavor, remains ensnared in litigation due to intense community pushback over environmental and quality-of-life concerns.
These examples underscore the vital role local governments play in balancing economic development with public interest. The recent rejection of the proposed federal AI moratorium is a crucial victory for community autonomy. However, ongoing vigilance and advocacy remain essential. Concerned citizens must continue to hold their local elected officials accountable to ensure that developments align with the values and needs of residents.
Rapid growth in data center infrastructure has strained the balance between private ambitions and public accountability at all levels of government. The cumulative effect is clear: without sustained public vigilance and transparent governance, community voices and interests are marginalized in favor of powerful private entities. Continued advocacy, informed engagement, and rigorous accountability are necessary to ensure this wave of development ultimately serves the broader public interest rather than enriching a privileged few.