Public opposition to AI infrastructure is rising

Across the country, discontent has exploded over the growing abundance of server farms that has accompanied the AI ​​boom. The anger has escalated to the point that it has begun to change legislative agendas. Some states and communities are considering temporary bans on the development of entirely new data centers. And earlier this month, New York joined the club, with a bold new proposal to stop local cloud buildup in its tracks.

A new New York state bill would impose a three-year moratorium on issuing new permits to build data centers across the state, while giving local regulators a chance to study the environmental and economic impacts the industry is having on communities. The bill’s authors, state Sen. Liz Krueger and Assemblywoman Anna Kelis, called the legislation the “strongest” ever introduced in the country.

While no statewide moratoriums have been imposed yet, local bans are spreading quickly. Several weeks before Kroger and Kels introduced their bill, the New Orleans City Council passed a moratorium on all new data center construction in the city for one year. In early January, the city of Madison, Wisconsin, passed a similar law after protests erupted over regional technology projects.

Similar policies have also been passed in large swaths of communities throughout construction hot spots like Georgia and Michigan, as well as in many other regions across the country.

Environmental activists have long targeted data centers, but more recent concerns have come from high-profile lawmakers, tapping into widespread populist anger toward the tech industry. In conservative Florida, for example, Gov. Ron DeSantis recently announced an AI “bill of rights” that gives local communities the right to limit the construction of new data centers.

In the liberal state of Vermont, US Senator Bernie Sanders proposed a nationwide moratorium. And in Arizona, where the political environment is decidedly mixed, Gov. Katie Hobbs recently said she supports withdrawing tax incentives for the industry. Politicians have even begun to fight over the topics, with the governor of Mississippi lashing out at Sanders online over his proposal to stop the vote.

The political resistance comes as technology companies allocate more and more money to build infrastructure. The four biggest spenders — Amazon, Google, Meta, and Microsoft — plan to spend a whopping $650 billion in capital expenditures over the next year, the vast majority of which will go toward building data centers. More spending is scheduled in the following years, as companies race to secure as much computing power as possible.

But the speed and scale of these projects has made them increasingly unpopular, according to recent opinion polls. A recent Echelon Insights poll found that 46% of respondents would oppose plans to build a data center in their community, compared to 35% who were in favor. A different Politico poll found that while there is significant concern about facilities, many voters have little opinion either way — making it possible that public sentiment will be swayed either way.

The industry is already spending large sums of money to try to change these numbers, at least in the areas that matter to it. In January, the Financial Times reported that some of the industry’s largest data center operators were planning a “lobbying campaign,” with plans to “increase targeted advertising spending and engagement” targeting the communities they build.

Tech companies are also making real concessions, such as a planned ratepayer protection pledge that would make them responsible for providing power to any new AI-powered data centers. But it is not clear that these measures will be enough to attract the public.

Data centers should appeal to small communities because they provide revenue without straining those communities’ limited resources, Dan Diorio of the Data Center Alliance said in a conversation with TechCrunch. If incentives are cut and companies decide not to build in those places, the revenues won’t be there either. “This is where political considerations at the state level come into play,” he said. “Are you going to restrict the communities where these companies could be of great benefit to them?”

The logic behind pressing pause

Overall, the data center moratorium is intended to give communities breathing room while policymakers weigh the potential costs and benefits of allowing such facilities to be built in their communities. The rate of construction in some states has accelerated at a pace that has left communities uncertain about how the industry will impact them in the long term.

Justin Flagg, director of communications and environmental policy in Senator Krueger’s office, told TechCrunch that the legislation was driven, in part, by what he called New York’s energy affordability crisis. The aforementioned crisis has upset ratepayers and politicians alike.

Recently, a group of 30 state lawmakers called on Gov. Kathy Hochul to declare an “energy emergency” in New York due to rising prices. While there are a variety of factors at play in rising energy prices, the consensus is that growth in data centers is making the problem worse, not better.

“There is widespread dissatisfaction being expressed about energy prices,” Flagg said. “We certainly hear that constantly from our constituents, whose electricity and gas prices are rising.” He added that the local decline was also driven by environmental concerns – which he described as “the impact of water, noise and the impact of local infrastructure as well”.

In response to these grid concerns, major technology companies — including Microsoft, Google, Meta, and OpenAI — have promised to pay for their additions to the electric grid in the communities where they operate, often installing behind-the-meter power supplies coupled with new data centers.

The Washington Post recently reported that Silicon Valley is increasingly looking to build its own electricity supply — a kind of “shadow grid” — that can be used to power the energy-hungry properties that now fuel the artificial intelligence industry. The strategy involves harnessing massive new private energy sources rather than relying on the public grid.

One example of this practice comes from xAI, Elon Musk’s artificial intelligence startup, which – at the site of its massive data center in Memphis, Tennessee, known as “Colossus” – built a series of methane gas turbines that have been accused of polluting the local community.

The company’s efforts have already run into a major problem. XAI reportedly told local officials that due to a legal loophole, the turbines were exempt from air quality permits. In January, the Environmental Protection Agency ruled that Musk’s company was not exempt from permits, making its previous operation illegal. Environmental activists, who have decried the facility’s discharge of “pollution from smog, soot and hazardous chemicals,” announced earlier this month that they intend to sue the company over it. Musk’s facility has since commissioned its turbines.

As the xAI example illustrates, if the “shadow grid” strategy aims to solve one problem (public grid overload), it threatens to create a host of new problems – with environmental activists and local communities alike expressing concern about how new facilities could spew pollution into people’s backyards.

At the federal level, the Trump administration — which has made artificial intelligence one of its top priorities — has also sought to cast the industry as responsible stewards of the communities in which they build. In fact, Trump officials have floated a hypothetical policy to force AI companies to absorb the costs of their additions to local power grids, though the details of that policy remain vague.

Controversy over taxes

For many years, communities have incentivized data center development through tax breaks. Last summer, an analysis by CNBC found that 42 states across the US either have no sales tax or offer full or partial sales tax exemptions for tech companies. Of that number, about 16 states have publicly announced the amounts they have given businesses through tax breaks. The outlet wrote that confiscated revenues amounted to about $6 billion over five years.

But now, more and more states are considering turning off the spigot. In Georgia, for example, a variety of bills have recently been introduced that would stifle industry benefits. State Senator Matt Brass, who introduced a bill that would eliminate the server sales tax exemption, told TechCrunch that he doesn’t think tech companies need the extra money, and he doesn’t think taking away the benefit would discourage them from doing business in the state. “In Georgia, if you compare us to other states, our property taxes are low, our property values ​​are low, and 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 the state Rules Committee, told TechCrunch he expects there will be significant support for his policy. The Georgia Legislature passed similar legislation in 2024, but the governor vetoed it. Brass added that if the exemption were eliminated, he believes it could generate hundreds of millions of dollars for the state.

In Ohio, a similar political battle is currently underway. A group of Democratic lawmakers recently introduced legislation that would — as in Georgia — move to eliminate the state’s sales tax exemption. A similar policy was introduced last year, but – as in Georgia – was defeated by the state’s governor, Mike DeWine.

“The most ridiculous tax break on the books right now is for data centers,” Kent Smith, one of the lawmakers supporting the bill, said recently. “This tax break must end, to the benefit of everyone who has an electric bill.”

Meanwhile, there are still plenty of lawmakers who support a tax break on server sales. In Colorado, State Representative Alex Valdez recently introduced a bill that would preserve the data center loophole for the next 20 years. Valdez told TechCrunch that the exemption is just a carrot to get tech companies in the door. Once they establish a base of operations in the state, they become a source of passive income that inevitably bounces back to benefit the communities in which they operate, he said.