State Lawmakers Weigh Costs and Benefits of AI Data Centers

State Lawmakers Weigh Costs and Benefits of AI Data Centers

Rapid growth brings jobs and investment, but raises concerns about energy use, water demand and local planning.

As artificial intelligence drives rapid growth in data center construction, state and local lawmakers are grappling with how to balance economic development with rising demands on energy, water and community infrastructure.

In the latest installment of "State of Play," a bipartisan video series created by A Starting Point and NCSL, Virginia Delegate Michelle Maldonado (D) and Kansas Rep. Mark Schreiber (R) discuss the issue.

Between 2014 and July 2025, spending on U.S. data center construction surged from $1.6 billion to $41 billion, reflecting the scale and speed of expansion. At the same time, data centers' electricity demand is projected to approach 12% of total U.S. energy use by 2030, according to recent estimates.

That growth is increasingly felt at the local level.

Maldonado says the exponential growth of data centers puts a growing impact on the energy grid and utilities. "Those start to feel really personal and direct when all of a sudden, you're starting to see increases in what you pay every month."

Schrieber points to the economic upside. "Jobs, of course, are big for economic development," he says, noting that while data centers generate the most jobs during construction, permanent positions "are still good paying jobs."

Energy and water use remain central concerns. Large data centers can consume millions of gallons of water daily, often for cooling. "Cooling to data centers is so important," Maldonado says. "That's the part that has a really adverse impact on the water and the surrounding areas."

Schreiber agrees water planning is essential. "These data centers have to have a plan for how to use that water in a way that doesn't endanger the use of the water to a community's water system or to a large agricultural operation," he says.

Environmental impacts extend beyond utilities. A 2025 Cornell study estimates data centers could emit between 24 and 44 million metric tons of carbon dioxide annually by 2030. Maldonado calls for "independent third-party evaluations" and greater use of clean and efficient energy sources.

Land use decisions also fall largely to local governments. Zoning rules determine where data centers can locate, though some jurisdictions allow projects to move forward "by right," without public hearings. Maldonado urged communities to consider building facilities away from neighborhoods and schools, while Schreiber highlights concerns about noise and compatibility with nearby land uses.

States are also weighing tax incentives. At least 26 offer incentives for data centers, while lawmakers in at least 11 states have proposed temporary bans on new construction. Both lawmakers said incentives can make sense if they are limited in scope and duration.