US governors reverse course on data centers as public backlash grows ahead of midterms

As the midterm elections approach, U.S. governors are reversing their once-enthusiastic support for AI data centers in response to growing public outrage over soaring utility bills, noise pollution, and depleted water supplies. Texas Governor Greg Abbott halted approvals for 1,800 data centers, while Pennsylvania Governor Josh Shapiro stripped fast-track permitting for developers who fail to meet strict environmental standards. Meanwhile, states like New York and Arizona have enacted moratoriums on tax exemptions and new construction to protect local grids.

Gubernatorial election backlash

• ▪Texas Governor Greg Abbott halted approvals for approximately 1,800 new data center projects in August 2026 due to concerns over their high power and water consumption.
• ▪Texas Democratic gubernatorial challenger Gina Hinojosa released a television advertisement on August 18, 2026, accusing Governor Greg Abbott of selling out rural communities to data center executives.
• ▪Pennsylvania Governor Josh Shapiro announced on August 18, 2026, that his administration will no longer prioritize data center projects for construction permits or tax exemptions unless developers meet strict standards.
• ▪In Wisconsin's gubernatorial primary, Democratic nominee David Crowley narrowly defeated a challenger who campaigned on a proposed one-year moratorium on data center construction.
• ▪Pennsylvania Republican gubernatorial candidate Stacy Garrity has criticized Governor Josh Shapiro's past support of data centers, accusing him of opening the state to predatory developers.

Data center resource consumption

• ▪Artificial intelligence data centers require massive amounts of electricity, with some facilities using more energy than small cities and causing electricity price hikes up to 76% in major U.S. power regions.
• ▪The massive processing power demanded by artificial intelligence workloads has led to excessive water consumption for cooling, threatening local aquifers and lowering water pressure in neighboring communities.
• ▪A planned 10-gigawatt data center campus in Pike County, Ohio, is estimated to consume electricity equivalent to the annual power usage of 8 million U.S. households.

State-level regulatory responses

• ▪Illinois Governor JB Pritzker halted new sales tax exemptions for data centers until state lawmakers establish tougher operational standards.
• ▪New York Governor Kathy Hochul signed an executive order in July 2026 establishing a one-year moratorium on large, hyperscale data centers to protect the state's energy grid and environment.
• ▪Arizona Governor Katie Hobbs signed a three-year moratorium on the state's sales tax exemption for data centers, characterizing the tax breaks as a corporate handout.

Community opposition to development

• ▪Residents living near data centers have filed complaints and lawsuits over 24/7 noise pollution generated by server cooling fans and backup diesel generators.
• ▪Residents in Archbald Borough, Pennsylvania, launched a community uprising and lawsuits against developers planning to build six campuses containing approximately 50 server warehouses.
• ▪A Pew Research Center report published on August 18, 2026, found that 53% of Americans are more concerned than excited about the growing use of artificial intelligence in daily life.

Industry lobbying efforts

• ▪Microsoft published a community-first commitment in January 2026, outlining steps to minimize water use and invest in local jobs to address public concerns over data center expansion.
• ▪OpenAI committed to paying its own way for energy infrastructure and minimizing water use while arguing that artificial intelligence infrastructure is vital for American competitiveness.

Loudoun County tax benefits

• ▪Loudoun County, Virginia, generated $1.1 billion in tax revenue from data centers in 2025, up from $150 million in 2015, allowing the county to cut property taxes to 0.805% of assessed value.
• ▪Loudoun County ended its policy of zoning data centers as office parks, requiring developers to obtain public approval and undergo a rigorous review process.