Virginia Lawmakers Launch Bipartisan Push To Stem Data Center Growth

A bipartisan group of Virginia lawmakers has filed a package of legislation that could place sweeping new constraints on data center development in the industry’s largest market. But Gov. Glenn Youngkin, a big proponent of the industry, is already pushing back on statewide efforts to limit where data centers can be built. 

On Tuesday, the coalition held a press conference to unveil what members termed a “framework for responsible growth” for the data center industry - a series of bills that would give the state new powers to manage data center development that they say has expanded unrestrained at the expense of residents and local businesses. 

The bills filed Tuesday largely focus on preventing the data center industry’s skyrocketing energy use from raising electricity prices for Virginia residents and creating new environmental oversight and regulations for data center developers and operators. They come after last month's release of a landmark report from the Joint Legislative Audit and Review Commission on data centers’ impact on Virginia’s economy, environment and infrastructure. 

“We aren't here today to talk about reform, because there are no laws to reform. The data center industry has largely grown unchecked,” said Senator Russett Perry, a Loudoun County democrat who has led the legislative effort, speaking at a press conference Tuesday.

“If we fail to act, the unchecked growth of the data center industry will leave Virginia's families and will leave their businesses footing the bill for infrastructure costs, enduring environmental degradation and facing escalating energy rates. The status quo is not sustainable.”

Virginia, particularly Northern Virginia, is the world’s largest data center market, with around 340 facilities built on over 7,200 acres. Data centers in Virginia today use nearly the electricity equivalent of 60% of households in the commonwealth, with the industry’s power consumption expected to double within 10 years.  

This rapid growth has pushed data center development beyond the borders of its traditional Northern Virginia industrial hubs and into suburban and rural areas that previously had little in the way of data centers or other industrial infrastructure. 

The industry’s geographic expansion, along with growing concerns over the impact of the sector's rising energy use on the environment and consumers, has resulted in a wave of organized pushback that has already stalled projects, influenced elections and led to an earlier wave of proposals at both the state and local level to restrict the industry’s growth.

Still, the legislative package unveiled Tuesday, which includes at least seven separate bills, marks the most coordinated and wide-ranging effort so far aimed at increasing state-level control over data center growth in Virginia. 

At the heart of the legislative effort are House Bill 2101 and its Senate counterpart SB960, which would require Virginia regulators to investigate whether residential utility customers are paying higher electricity rates due to infrastructure projects to provide power to data centers. If it is determined that households are effectively subsidizing data center energy rates, the bill mandates that regulators create new rules to shift costs to data center firms.

The legislation comes on the heels of a study commissioned by the legislature predicting that data centers’ electricity needs could raise residential rates in Virginia by as much as $37 per month by 2040.

The package also includes HB1601, which would require environmental site assessments for all new data centers in Virginia and allow municipalities to mandate additional environmental reviews when permitting new development. 

Another bill, HB 2578, would tie eligibility for Virginia’s data center sales and use tax exemption — a critical element in attracting data center development to the commonwealth — to a facility’s compliance with strict efficiency and clean energy standards. 

Meanwhile, HB2035 would require that data center operators file quarterly reports detailing their water and energy use. It’s a measure that one of the bill’s sponsors, Del. Shelly Simonds, a Democrat from Newport News, says is necessary to ensure that citizens and local governments have the data they need to make informed choices when it comes to managing data center development in their communities

“We just want the information so we know what it is we're doing and how we plan for the future,” she said Tuesday.

The legislative push comes just over a month after the publication of the highly anticipated JLARC Report that provided a detailed analysis of both the data center industry’s economic impact in Virginia and the adverse energy and environmental impacts that have come with the industry’s growth. 

The report was commissioned by Virginia's legislature a year ago in the wake of an earlier wave of legislation seeking to reign in data center development. Its broad intent is to provide a common set of facts and data to frame legislators’ decisions regarding data centers, and most of the previously proposed data center legislation was tabled to allow lawmakers to consider JLARC’s findings.

Many of the bills filed Tuesday closely mirror bills from that earlier legislative push and were backed by the same lawmakers.

While the JLARC study made headlines with its findings that data centers’ surging energy consumption would require an unprecedented build-out of power plants and transmission infrastructure that would be nearly impossible to achieve, it also offered lawmakers a menu of policy options to manage data center growth. Some of these options, such as requiring utilities to develop special power rates for data centers and leveraging Virginia’s sales and use tax exemption, were incorporated into a number of the bills filed Tuesday. 

Whether any of the bills will garner the support needed for approval by the legislature remains to be seen.

The bills would also need to be signed by Youngkin, a pro-business Republican who has been a major proponent of the data center industry’s growth in Virginia. The governor was an executive at private equity firm The Carlyle Group before being elected in 2021.

The announcement of the legislative effort to limit data center build-out came just a day after Youngkin touted the industry’s importance to the state’s economy in his State of the Commonwealth address.

The governor credited data centers with generating billions in local tax revenue and $9.1B in Virginia GDP and preemptively pushed back on efforts to impose state-level limitations on where and how data centers can be built. 

“We should continue to be the data center capital of the world and make sure Richmond is doing what is necessary to support that goal,” Youngkin said. “Different communities will make different decisions on data centers, but these must be their decisions. And Richmond should not stop them from capitalizing on these incredible economic opportunities.”  

But Perry says her goal isn’t to stop future data center development in Virginia dead in its tracks. Rather, she framed her coalition’s effort as an attempt to enact “responsible policies that balance economic opportunity with resource stewardship and fairness for ratepayers.” 

It’s something she says is long overdue.

“Last year … we passed by every single data center bill for a study,” Perry told reporters. “Now that we have it, we have a duty to act. And the time for that is now.”