Data Center Development Faces Mounting Scrutiny, Moratoriums, and New Regulations

Rapidly expanding artificial intelligence infrastructure and data center developments are facing widespread public opposition and regulatory hurdles across the United States. Residents, local advocacy groups, and environmental organizations have raised concerns regarding strain on power grids, rising electricity prices, and heavy water consumption. In response, lawmakers and local leaders nationwide are implementing moratoriums, introducing new taxes, and proposing stricter environmental controls on digital infrastructure projects.

The push for computing capacity is intersecting with concerns over per- and polyfluoroalkyl substances, commonly known as PFAS or forever chemicals. Semiconductor manufacturing and closed-loop or immersion cooling systems often rely on PFAS compounds for their chemical stability and heat resistance. Environmental advocates warn that rising demand for artificial intelligence could increase the release of these toxic chemicals into air, water, and soil. These concerns have prompted calls for increased monitoring, with several states incorporating PFAS disclosure requirements into industrial permits.

Federal lawmakers are also increasing oversight of the industry. Representative Frank Pallone of New Jersey has supported moratoriums and requested detailed information from technology executives regarding water contamination and air emissions. Furthermore, a bipartisan transparency bill has been introduced in Congress to mandate public reporting on water pollutants discharged by data centers.

In Illinois, State Senator Sue Rezin has proposed Senate Bill 4203, which would require data centers to pay a tax into a community benefits agreement fund. This fund would then be used to provide direct property tax rebates to affected local homeowners. Governor JB Pritzker has urged lawmakers to consider reforms during upcoming legislative sessions to ensure local communities retain control over large-scale developments.

Local governments across various states are taking direct action to halt new construction while they study the potential impacts. In southern New Mexico, counties such as Sierra, Santa Fe, Socorro, and Grant have enacted temporary moratoriums to study noise pollution, emissions, water use, and power demand. Meanwhile, Doña Ana County is monitoring Project Jupiter, a massive development featuring four data center structures and a planned natural gas-powered fuel cell power plant.

In California, San Diego Mayor Todd Gloria signed an executive order for a moratorium on data center facilities within city limits, targeting a proposed 400-megawatt data center at the Naval Information Warfare Systems Command site. The measure, which heads to the San Diego City Council, directs city staff to establish a stakeholder working group to draft regulatory frameworks within 180 days.

At the federal level, President Donald Trump weighed in on the debate, declaring that new and large data centers should be mandated to generate their own electricity and provide excess power back to local grids, while also suggesting financial dividends for host communities. However, energy policy experts argue that regulatory barriers and transmission infrastructure costs remain the primary drivers of high electricity prices, suggesting that deregulation and off-grid models would be more effective solutions.