What a Data Center Moratorium Can Buy
PLUS: Another centralized price-fixing scheme.
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Today’s post was co-written by Maxine Adelson, an intern at the American Economic Liberties Project.
Before adjourning earlier this month, the New York State legislature approved a bill that, if signed by Gov. Kathy Hochul, would institute a one year moratorium on data center development across the Empire State. During that year (which is actually a reduction from the original proposal, which was a three-year pause), the state’s utility regulators would be tasked with creating new rates for data center power and water use; the bill also creates new requirements for labor and community feedback on data center projects.
It’s unclear what Hochul will do, though she has previously been skeptical of a statewide data center moratorium, and does have the power to offer changes to the legislature in exchange for her signature (a process known as “chapter amendments”). Last month, Maine Gov. Janet Mills faced a similar situation, and ultimately vetoed the first statewide data center moratorium to pass a state legislature.
Three other states — Ohio, Oregon, and Arizona — have adopted data center tax break moratoriums, meaning new projects can still go ahead, but they will not receive the same public funds as did previous projects. (Arizona and Ohio’s are broader, while Oregon’s only applies to its largest data center subsidy.)
Meanwhile, across the country, about 100 municipal- or county-level data center moratoriums have already been enacted, mostly clustered in the Midwest across Michigan, Ohio, and Indiana, as well as in the southeast, across North Carolina, Tennessee, and Georgia. And billions of dollars worth of individual data center projects have been blocked or delayed.
It’s clear then that, despite some federal interest, the real action on restricting data center development, or at least denying data center developers further access to public funding, is happening at the state and local level.
The public, legislators, and regulators need to make at least three critical decisions when it comes to data center development: 1) decide if data center tax breaks or other subsidies should persist; 2) decide how data center operators will pay for additional power and water infrastructure they require and what utility rates they will face; and 3) determine what a public process for data center siting decisions will entail.
These decisions can’t be properly made in an environment in which new data centers are constantly being proposed and approved in a mishmash of processes and procedures, with advocates and state officials alike scrambling to understand a rapidly changing tech industry and likely overblown declarations of just how many AI-related data centers the industry ultimately requires. Absent the industry meaningfully engaging in providing adequate protection and answers to the taxpaying public, then, moratoriums make sense to provide that time and space.
The tech industry and its lobbyists and assorted front groups — as well as the politicians backing them — are screaming bloody murder about the growing movement to slow down data center development, making it seem as if this very normal policy move is the end of the world. And their go-to tactic is to recast the entire debate as occurring due to misinformation.
For instance, when a data center attorney addressed a public hearing in Nashville, his takeaway for reporters was that the community was “reacting based on fear, not facts.” Two Republican members of the North Carolina House made the same case in a widely circulated op-ed opposing local data center moratoriums, assuring readers that grid and water concerns regarding data center development are simply outdated — the technology has moved on, even if the public hasn’t. The mayor of St. Charles, Missouri said an approved moratorium was “overly reactive.”
Running alongside this argument is a familiar threat to regular readers. Industry leaders and politicians contend that a moratorium is synonymous with hostility to investment, that a “patchwork” of local moratoriums makes the whole state look unpredictable, and that data center developers don’t want to deal with differing state and local laws.
The Data Center Coalition, the industry’s main lobbying group, made this case in multiple states, including Illinois and Colorado, warning of lost competitiveness, driving away investors, and development migrating to more lenient states. When that framing requires more urgency, elected officials’ land on ceding ground to China, instead of just one state versus another (even though the U.S. already has 10 times as many data centers as the next closest countries, the UK and Germany).
Finally, moratorium opponents argue that they detract from tax revenue and job opportunities. Missouri State Senator Mike Cierpiot, for example, framed a moratorium as lost tax revenue for school districts and local governments. The jobs argument is made with similar force — electricians, HVAC technicians, plumbers, security staff, middle-class careers that can’t be outsourced, all gone begging — as North Carolina proponents put it. Mills also used a version of this argument to justify her veto.
But none of these arguments supersede the case for pausing in order to get the rules correct so that communities actually benefit from this supposed upside of data center development.
The last argument used by data center boosters, regarding jobs and revenue, is the most persuasive, but relies, as noted here previously, on the belief that the choice facing communities when it comes to economic development projects is a data center or nothing, which is not true: Other projects can be more beneficial, provide more long-term jobs, and cause ancillary economic development effects that raise revenue from multiple sources. The tech industry isn’t the only one in town, and data centers are some of the least impactful projects available in terms of creating broader economic activity.
Similarly, the “patchwork” and competitiveness argument not only ignores the fact that corporations deal with differing state regimes in a host of policy areas all the time — taxes, labor, land use, etc. — and fight for those differences when it suits them, but treats data centers as more valuable than they are. Again, though they are associated with the tech industry, they don’t actually make the area in which they’re sited any more economically competitive or attractive to anything other than data centers, as they’re simply large, noisy, boxes that don’t attract other businesses, don’t rely on local supply chains absent mandates, and don’t attract new entrepreneurs or new residents.
Finally, the “fear” argument is both an insult and an argument for the moratorium: Residents are rightly concerned about the effect data centers will have on local resources, feel correctly as if they have been cut out of planning decisions that affect them, and correctly connect the rapid spread of data centers to other AI-related abuses. If the industry is so sure none of this matters, a moratorium gives it time to set the record straight — but given the industry’s approach thus far, it’s clear that’s not of interest and that the various big tech firms feel they can’t adequately explain the benefits of data centers, hence the rush to hasten construction via nondisclosure agreements, secret meetings, and a lack of transparency.
But even these specific points ultimately pale in comparison to the main question hanging over the debate about data centers specifically and AI generally: Who gets to decide what this new technology and the infrastructure supporting it means for local communities?
It’s not that difficult to envision a policy framework in which data centers are net positive for particular locales, so long as their negative externalities are paid for, residents are isolated from increased utility bills that may result, data center operators provide concrete fiscal benefits that aren’t washed away via tax breaks and other giveaways, and communities are protected in case all of this AI-hype and data center construction is just a bubble that pops.
It takes time, though, to get those details right — time the tech industry doesn’t want to provide either in individual data center siting debates or in the aggregate, requiring a moratorium to provide that breathing room.
“Without a pause, New York could permit projects that shift costs onto ratepayers, strain an already aging electric grid and make it harder for the state to meet its climate goal,” said New York Assemblymember Anne Kelles, a sponsor of that state’s moratorium bill. “The pause gives the state time to evaluate these impacts and put enforceable protections in place before decisions are made that could affect utility bills, public health, water resources and grid reliability for decades.”
Indeed, the danger is in foisting decades worth of costs for a underdeveloped technology onto communities, not taking a year or two to ensure policy supports the rapid buildout that big tech firms desire.
UPDATE: A few weeks ago I wrote about a corporation called MultiPlan, which is accused of helping health insurers fix the prices they pay for out-of-network care. I also noted that centralized price-rigging schemes are proliferating across the economy, from rental housing to nursing homes to hotel rooms.
Well, we now have evidence of another one: According to a lawsuit filed in California under its newly-enacted algorithmic price-fixing ban, a corporation called Kalibrate is helping gas stations fix prices by pooling their data and having Kalibrate feed recommended prices back to all of them. If these allegations bear out, it’ll be further evidence that these collusive arrangements facilitated by software platforms really are everywhere.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
New research shows platforms such as Uber and Lyft offer customers dramatically different prices for the same ride.
New Mexico’s attorney general has asked for nearly $1 billion in damages from Meta in a landmark trial about social media harms to children.
The Oregon legislature approved funding to triple staff capacity at the state attorney general’s antitrust division.
Some state attorneys general are aggressively intervening in rate cases against monopoly utilities, while others are … not.
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— Pat Garofalo
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"Ceding ground to China"
This is always cracks me up. So China has 1/10 the data centers as the US yet the newly released Zhipu model is #2 in the global AI agent rankings. Chinese models use far less compute than US ones for similar results. Sounds like they've already won lol