A bipartisan group of 10 Virginia lawmakers introduced a slate of seven measures that would impose regulations on the data center industry, whose development they say has gone unregulated.
“We are not here today to talk about reform, because there are no laws to reform,” Sen. Russet Perry (D) said at a press conference Tuesday unveiling the measures. “The data center industry has largely grown unchecked.”
The lawmakers are swimming against a tide of political support for data centers, which bring in large amounts of tax revenue and have been portrayed as important for domestic manufacturing and technologies such as artificial intelligence. Gov. Glenn Youngkin (R) is a firm supporter of the industry.
The issue is often framed as a national security matter. President Biden on Tuesday signed an executive order allowing for the building of “gigawatt-scale AI data centers” on federal land.
The other lawmakers introducing the measures are Sens. Creigh Deeds (D), Danica Roem (D), Kannan Srinivasan (D) and Richard Stuart (R), and Dels. Michelle Maldonado (D), Shelly Simonds (D), Rip Sullivan (D), Josh Thomas (D) and Michael Webert (R).
Data centers are specialized buildings that house servers and other equipment needed to run and develop new AI tools.
The set of measures includes legislation that requires a periodic review to ensure that energy-cost allocation does not benefit the data center industry at the expense of other utility customers; a bill that requires the public disclosure of energy, water and emissions; and a bill that mandates that certain high-energy users must provide localities with a site assessment examining their noise impact on nearby residential areas and schools.
One bill would require new projects requiring over 25 megawatts to get certifications from the state that they will not affect grid reliability, and to assess the cost impacts, economic contributions and compliance with Virginia’s energy and environmental policies. The state cannot veto such projects, according to Thomas, one of the bill’s sponsors.
Another measure would require data centers to take certain steps to receive certain tax breaks, including an exemption from the state’s sales and use tax.
Such conditions would include: using only backup generators, which typically run on diesel, that meet certain emissions standards; requiring them to buy a certain percentage of their energy from clean sources; and exploring a beneficial use for the heat generated. Sullivan, the bill’s sponsor, said that the pool at the 2024 Paris Olympics was heated with excess heat from a nearby data center.
A bill introduced by Roem, an outspoken industry critic, would limit data center construction to only industrial-zoned areas.
“Any of these measures can stand alone, but together, they represent a comprehensive framework to ensure economic development while also safeguarding our natural resources and ensuring fairness for all Virginians,” Perry said.
Perry, who said she had not spoken with Youngkin about the package, said the point is not to do away with the industry but to balance its needs with those of constituents.
“What we are trying to say is that our communities deserve a seat at the table,” Perry said. “Their voice matters.”
Read more: Lawmakers push to regulate data centers to protect ratepayers, environment
Other states are also gearing up to regulate data centers, including legislation in Oregon and New York, to address their massive use of electricity and water.
Still, data center demand is projected to grow, fueled by an increase in domestic manufacturing, the electrification of different industries, and the growth of AI.
States are competing to lure data centers, which typically boost state and local tax revenue. More than 30 states now offer incentives for data centers.
Read more: Data center industry watching for more state incentives in ‘25
Virginia was early to the data center table and first enacted its tax incentives in 2008. Now, northern Virginia, outside of Washington, D.C., has the largest data center market in the world.
According to a recent report, the data center industry has contributed $5.5 billion in labor income and $9.1 billion per year in gross domestic product to Virginia’s economy.
“While this industry has brought economic growth, its rapid expansion is outpacing the state’s ability to manage its impact on energy, water and communities,” Perry said.
The report said the projected increase in data centers in the state will double electricity demand over the next 10 years.
“Its rapid expansion is outpacing the state’s ability to manage its impact on energy, water and communities,” Perry said.