Data center policy in the U.S. has entered a new phase marked by growing restrictions, community opposition and regulatory experimentation, replacing the incentive-driven approach that fueled the industry’s rapid expansion over the past decade, according to an analysis of more than 700 federal, state and local policies.
The findings come from the Data Center Policy Database maintained by the Digital Technology for Democracy Lab (DIGS Lab) at the University of Virginia. The analysis, published by Tech Policy Press, was authored by Dr. Lauren Bridges, the database’s project lead and an assistant professor of media studies at the university. The database tracks zoning, permitting and regulatory policies affecting data centers nationwide and is intended to provide greater transparency into how governments are responding to the industry’s growing economic, environmental and infrastructure impacts.
According to the analysis, four major trends have emerged across federal, state and local governments, reflecting a broad shift away from policies designed primarily to attract data center investment.
Perhaps the most significant change is the move from incentives to restrictions. For years, states such as Virginia, Texas and Arizona competed aggressively for data center projects through tax exemptions, streamlined permitting processes and other economic development incentives. The database shows that many jurisdictions are now reconsidering those policies. Virginia lawmakers are debating whether to sunset certain tax incentives, while Maryland has proposed repealing exemptions under specified circumstances.
At the same time, policymakers are increasingly turning to development moratoriums. Since 2025, at least 20 moratorium proposals have been introduced at the local, state and federal levels. Local governments in states including Georgia, Colorado, Michigan and Ohio have adopted temporary pauses on data center development while they draft new regulations. Statewide moratorium proposals have also surfaced in Oklahoma and South Dakota. Maine lawmakers approved a statewide moratorium before Gov. Janet Mills vetoed the measure, citing concerns that it would block a project with strong local support.
Local zoning has emerged as the most important regulatory tool. Many counties and municipalities have shifted data centers from “by-right” developments to projects requiring special-use permits or conditional approvals. Those changes often trigger additional requirements such as noise studies, environmental reviews and public hearings. Some local governments have gone further by removing data centers as permitted uses in certain zones altogether, effectively prohibiting new facilities in those areas.
The analysis also identifies growing state-level intervention. While local governments have often led the push for tighter controls, states are increasingly establishing their own frameworks. Virginia recently enacted laws requiring assessments of noise and water impacts. Maryland has proposed statewide siting standards, while South Carolina has considered creating a dedicated office to coordinate data center development.
Across jurisdictions, policymakers are focusing on four primary areas of concern.
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The first is electricity costs and grid reliability. Communities increasingly fear that large data centers will force residential and small-business customers to subsidize transmission upgrades and other infrastructure investments. Legislatures in Oregon, Virginia, California, Maryland, Michigan, Ohio, Pennsylvania and New York have all considered measures intended to prevent such cost shifting.
Water consumption represents a second major flashpoint. States including Utah, Michigan, South Carolina and Virginia have enacted or proposed requirements for water-use reporting and limits on withdrawals. Colorado has proposed one of the most expansive approaches, requiring estimates of both direct and indirect water use as part of permitting applications.
The third area of concern is environmental and community impacts. Local residents have increasingly objected to noise from cooling systems and backup generators, air emissions and the conversion of agricultural land. As a result, many local ordinances now require setback requirements, noise studies and air-quality monitoring.
The fourth focus area is transparency. Several states are considering legislation that would restrict the use of non-disclosure agreements in economic development negotiations involving data centers. Supporters argue that secrecy surrounding water consumption, tax incentives and environmental impacts has prevented communities from meaningfully participating in siting decisions.
Despite growing regulatory activity, the report concludes that transparency remains limited. Non-disclosure agreements, fragmented reporting requirements, inconsistent legal definitions and confidentiality rules continue to limit information about energy and water consumption. The result, according to the analysis, is a fragmented and often reactive policy landscape in which the central tension remains unresolved: balancing local community concerns against state and national economic ambitions tied to AI infrastructure and digital growth.
