For an opposing point of view, see “Data center myths holding Virginia back,” by Ross Marchand of the Taxpayers Protection Alliance.
After a two-month impasse, the governor and the General Assembly reached a compromise agreement and passed a state budget. The hold-up was the sales tax exemption for data centers that’s costing Virginia nearly $2 billion per year. Unfortunately, the final compromise budget didn’t eliminate that $2 billion subsidy for the largest, wealthiest tech companies in the world, or do anything to recoup the billions in future lost tax revenue for Virginia. Instead, it enacts an “electricity consumption tax” on data centers that amounts to just less than one-third of the revenue lost from data center tax exemption.
The budget debate and resulting data center “solution” provides no fix for the havoc data centers are wreaking on our communities and natural resources. While the electricity use tax generates some revenue for the state, it is capped at $600 million — a drop in the bucket for these companies — which means there is no incentive for data centers to use less energy. They’ll even get a rebate for anything they’re taxed above the cap and continue to gobble up huge amounts of energy with no penalty.
The General Assembly has once again kicked the can down the road, ignoring the cold, hard facts about energy costs, air quality and water use. They’re ignoring the concerns, and rising energy costs, of their own constituents, while they enjoy their summer vacations.
Meanwhile, other states are taking responsible action. Michigan, Georgia, New York, Pennsylvania, South Carolina and Vermont have all introduced moratorium legislation that would allow better planning and informed decisionmaking. Similar legislation is pending in other states like New Jersey, where the governor has frozen utility rates and is investing in innovative solutions, taking a constituent-first approach.
Our elected leaders still have no plan to assess the aggregate impacts of data centers on our communities, our land and our environment despite accumulating evidence of direct and indirect impacts on air, water, noise, property rights and utility rates.
In the absence of state analysis, the Piedmont Environmental Council commissioned an air quality study showing potential cumulative impact of just one data center powered by gas turbines. The Interstate Commission on the Potomac River Basin released a study projecting severe depletion of the river if data center growth continues. American Rivers designated the Potomac as the nation’s Most Endangered River this year.
The lack of coordinated state-level planning has also pushed data center transmission and generation costs on to residents and other businesses. The president of the United States declared that Americans will not have to pay for data center energy costs; Virginia has yet to enact any policies that clearly protect citizens from paying for the infrastructure being built for data centers, relying instead on the State Corporation Commission to find a solution. President Trump may not be able to control what happens with Virginia utility prices, but Governor Spanberger and the General Assembly certainly can.
The electricity consumption tax is a red herring. It’s a distraction from the real issues. The recent budget compromise fails to include any intention to control energy demand and allocate costs for the more than 200 substations and thousands of miles of transmission lines necessary solely for data center demand. The state must pursue a comprehensive approach to get a handle on the aggregate impact of data centers on air quality, water supply, natural resources and quality of life for Virginia residents. At the moment, there is no connection between the state agencies that should be measuring and analyzing data center impact and the localities faced with local proposals.
It is time for the state government to step up. Virginia is the data center capital of the world, and should be the example of best practices, not the “don’t do what we did” state.
Chris Miller is president of the Piedmont Environmental Council.
