Appalachian author: Who pays when Virginia’s data centers go quiet or get sold to another firm?

Communities in Southwest and Southside Virginia are being told that data centers will pay property taxes for decades. Given the incredible growth of AI use, that is a reasonable assumption. Caution is in order, however, because the technology business has a long history of sudden change and obsolescence. The companies’ own financial statements may give the buildings decades, but they write off the most expensive part, the servers and chips inside, in five or six years.

The public is finally getting more information about the data centers proposed in Cardinal’s region. That, along with Gov. Abigail Spanberger’s Executive Order 22, offers some protection on the front end. What is missing is the back end. What happens when these centers go quiet or change hands?

Southwest Virginia’s long experience with the coal industry has something to teach here. Let’s start with the companies’ own books.

At Standard & Poor’s I learned to read the notes in an annual report before I believed a press release. I checked the “useful life” the largest firms assign to the servers, chips and networking gear that fill their data centers.

Google, Microsoft, Amazon, Meta and Oracle all write off that equipment in equal annual amounts over its estimated useful life. Here is what their most recent annual reports show.

From the companies’ annual reports (10-K filings).

All five have lengthened at least some of those lives in recent years. Longer lives lower each year’s depreciation expense, in Meta’s case by billions of dollars. Only Amazon moved the other way for part of its fleet, because AI hardware was changing too fast.

Some analysts think even six years is generous. The investor Michael Burry contends that the real economic life of AI chips is closer to two or three years and that the industry will understate depreciation by about $176 billion from 2026 through 2028. Nvidia’s Jensen Huang insists his chips are durable.

Whoever is right, nobody in that argument is talking about 30 or 40 years.

These are accounting estimates, not expiration dates. A server does not quit the day it is fully depreciated, and a data center does not close when its equipment has been written off.

But the estimates still matter to a county. The building may stand for decades. Alphabet depreciates its buildings over as long as 40 years. The equipment inside, which draws the power and makes up much of what a Virginia locality taxes, is written off in five or six years.

So a county counting on decades of revenue is really counting on repeated rounds of reinvestment. Each round is a fresh corporate decision about whether to refill that building in Pittsylvania or Russell County or to put the new chips somewhere cheaper, unless a legal agreement requires the same site to be used.

Cheaper may not mean Virginia. The economics of this industry are changing fast. In January 2025 the Chinese firm DeepSeek released an AI model it said was built with a fraction of the computing power American firms use. Data center and power stocks fell sharply.

Elon Musk, whose SpaceX has absorbed his AI company, says that within two or three years the cheapest place to run AI will be in orbit. You don’t have to believe him to see the point. The industry itself does not know where its computing power will be in 2035.

The promises to Virginia counties are being made now. Stack Infrastructure’s campus at the Berry Hill megasite in Pittsylvania County is pitched as a 15-year buildout of 21 buildings paying up to $48 million a year in property taxes once complete.

In Russell County, Oasis Digital Properties wants three or four data centers on the old Moss No. 3 coal mine and still has to find companies to occupy them. The county’s industrial development authority cites a nondisclosure agreement and turned down a public records request from Cardinal News.

In Roanoke County, the buyer at Wood Haven Technology Park was a company called Clearview Dynamics. Google was not confirmed as its parent until Oct. 16, after the regional authority backed out of its nondisclosure agreement.

Notice who signs the papers. It is often a subsidiary or a limited liability company formed for the purpose. There is nothing improper in that, but a project can be sold before the first building goes up unless a binding agreement is in place.

Southwest Virginia has seen this before. The 1977 federal strip mine law made coal operators responsible for reclaiming the land, but it let regulators accept self-bonds, promises backed only by the company’s own balance sheet.

When Alpha Natural Resources, Arch Coal and Peabody Energy went bankrupt in 2015 and 2016, they held about $2 billion in reclamation obligations covered by nothing but their signatures, according to the Government Accountability Office. Blackjewel LLC collapsed in 2019 and left permits scattered across Southwest Virginia, Kentucky and West Virginia.

Nobody doubted who was responsible for that land. The trouble was that nobody had made sure the money would be there.

The nuclear industry faced a bigger version of the problem and handled it better, with two different tools. The Nuclear Regulatory Commission requires every plant to build a decommissioning trust fund during its working life and report at least every two years on whether it is adequate.

Separately, from 1983 to 2014, utilities paid a tenth of a cent on every kilowatt-hour of nuclear power into a federal fund for spent fuel disposal, which grew to tens of billions of dollars. One tool ties assurance to each plant. The other pools a small charge across the industry.

Virginia can do both. Every customer above 25 megawatts could pay a small charge per kilowatt-hour into a pooled fund that covers stranded grid costs, site cleanup and the commitments a county relied on when a project fails and its own bond falls short.

The money is already being collected. The budget Spanberger signed in June taxes data center electricity at 1.1 cents a kilowatt-hour through June 2028. None of it is set aside for long-term assurance, though. Up to $600 million a year goes to the general fund, and anything above that is set aside for pro-rata refunds to the operators.

The 2027 General Assembly could dedicate part of that tax to a trust with a share for host counties, require third-party financial security on every large project and reopen the file whenever a project is sold.

Where state law allows it, counties should make real financial security a condition of approval. That means a surety bond, a letter of credit or cash in escrow, not a promise that depends on the health of whoever owns the project. They could review the amount on the five- or six-year cycle the companies themselves use and ask who stands behind it and what happens if the project changes hands or closes.

If the answer is a promise from an affiliate, the county has been offered a self-bond under another name. The coalfields can tell you what those are worth.

Jim Branscome’s recent book is “Annihilating the Hillbilly Redux: Appalachia’s Struggle Against America’s Institutions.”