Governors tighten data center regulations amid concerns over power and water use

Several US governors who previously competed to attract data centers with tax incentives and expedited permitting are now tightening regulations. The rapid expansion of data centers powering artificial intelligence (AI) has raised concerns about rising electricity prices, water consumption, and the strain on local community infrastructure.

Governors are now seeking to demonstrate to voters that the costs of the AI boom will not fall solely on surrounding communities and ratepayers, particularly ahead of upcoming midterm elections. This shift comes as some leaders who once actively encouraged development are now pulling back.

Examples of states where leaders have changed course include Pennsylvania, Texas, and New York. In Pennsylvania, Governor Josh Shapiro is now requiring stricter environmental standards and local approval for data centers. Texas Governor Greg Abbott has halted approvals for new data centers pending an audit of tax benefits, energy usage, and water consumption. New York Governor Kathy Hochul has implemented a one-year moratorium on new data centers requiring over 50 megawatts.

Adjustments to tax incentives and regulations for data centers have also been made in Arizona and Illinois. These changes reflect a growing concern about the social and environmental impacts of large-scale AI infrastructure development.