US local governments urged to negotiate better datacenter deals
FAS report provides tools for communities to secure fair benefits from datacenter projects.
1The datacenter construction boom
The AI industry has triggered a surge in server farm construction across the US, with many local governments negotiating large-scale datacenter projects for the first time. The Federation of American Scientists reports that communities often lack experience in these complex negotiations. Some states are losing over $1 billion annually in tax abatements and rebates offered to attract datacenter developers, while property values may increase without corresponding community benefits.
2The FAS intervention
The Federation of American Scientists has released a comprehensive guide titled 'Before Breaking Ground: A Local Government Guide to Better Data Center Policy and Community Benefits.' This report equips officials with negotiation strategies and highlights the importance of Community Benefits Agreements (CBAs). It specifically recommends against long-term tax exemptions without renegotiation clauses, as these can leave communities financially disadvantaged when property values rise.
3Community Benefits Agreements explained
CBAs are contractual tools used to ensure developers contribute to community welfare through infrastructure improvements, local hiring, and sustainable practices. While commonly used in large infrastructure projects, the FAS found only one explicitly labeled CBA for datacenters - in Lancaster, Pennsylvania. These agreements typically cover taxes, energy use, water consumption, noise levels, lighting, e-waste management, and legal compliance procedures.
4Key energy provisions
The FAS recommends CBAs explicitly address how datacenters will handle sudden energy demand spikes, specifying whether they'll generate power or draw from the grid. The report also suggests including detailed water use reporting requirements and procedures for securing additional water beyond average daily needs. These provisions come as AWS faces a lawsuit in Virginia over alleged misleading statements about water use at its facilities.
5Noise and environmental controls
For noise mitigation, the report advises including specific, measurable numerical standards in CBAs that can be legally enforced. It recommends annual noise testing near residences regardless of complaints. The FAS also suggests incorporating clauses about alternative dispute resolution methods like mediation, rather than relying solely on litigation for conflict resolution.
6Legal framework integration
The FAS emphasizes that CBAs should complement rather than replace local ordinances, with both documents written to reinforce each other. As the report states: 'A CBA cannot fix a zoning gap and a zoning ordinance cannot capture specific project commitments like a CBA can.' This dual approach ensures both general regulations and project-specific commitments are addressed.
7The decommissioning challenge
The report highlights that datacenter decommissioning regulations remain largely untested, with no known cases of formal datacenter closures. Despite this uncertainty, the FAS recommends authorities require approved decommissioning plans before approving new projects. This forward-looking approach aims to prevent future environmental and financial liabilities for communities.
8A blueprint for fair development
The FAS guide represents a crucial resource for communities navigating the datacenter construction wave. By implementing its recommendations, local governments can better protect community interests, ensure sustainable development, and secure fair compensation for hosting energy-intensive infrastructure that powers our digital economy.