Data center development is accelerating nationwide as AI adoption surges, and policymakers at every level are being forced to confront the realities of finite energy, water and workforce resources. Cornerstone Government Affairs’ bipartisan policy experts are answering your most pressing questions about how rapid growth is shaping federal policy, state legislation and local community dynamics.
Continue reading to learn more.
Why are data centers receiving so much attention from lawmakers and communities?
The scale and speed of development are unprecedented. In 2025 alone, the sector saw around $400 billion in capital investment, much of which was from large technology companies. With that growth comes intense demand for electricity, water and skilled labor. Communities and policymakers are raising questions about the impact on rates, resource availability and local infrastructure, making data centers a more complex conversation than even last year.
What’s happening in terms of federal policies on data centers?
Federal agencies, especially the Department of Energy and the Federal Energy Regulatory Commission, are deeply engaged in efforts to streamline interconnection while ensuring reliability and affordability. Executive orders and new rulemaking proposals aim to accelerate how data centers hook into the transmission system. At the same time, the White House’s Ratepayer Protection Pledge—signed by numerous major hyperscalers—signals growing political pressure to ensure data center growth doesn’t translate into higher residential utility bills. But because energy regulation is still largely governed by state and regional authorities, federal influence has some limits.
How are states responding to the surge in data centers?
State legislatures have introduced a surge of bills targeting energy consumption, water use, permitting requirements and tax incentives. Many states are creating special rate structures for large electricity customers to prevent cost-shifting onto residents. Others are requiring feasibility studies or reporting on water usage, while some are debating temporary moratoriums to study long term impacts. States like Ohio, Pennsylvania, Texas and Virginia remain major hubs, but new policies could shift development toward emerging markets in the coming years.
Texas has been at the forefront of these conversations. What groundwork is being laid there?
Texas continues to see significant interest due to its regulatory environment and available land. But with more than 100 applications for large load interconnection, ERCOT has launched a new batch study process to avoid overloading the grid. Water scarcity is also a major concern, especially in rural areas, and is prompting serious scrutiny from local leaders. Developers are adapting by exploring colocation with generation, onsite backup power and more efficient cooling technologies, though community pushback remains strong in areas unaccustomed to largescale industrial projects.
How can companies better engage with communities before the build data centers?
Early, genuine engagement is essential. Every locality approaches development differently, and companies need to understand community priorities before entering formal negotiations. Effective engagement includes talking not only to elected officials but also schools, chambers of commerce, civic groups and residents. Clear communication about economic benefits, water and energy technologies and long term commitments helps establish trust—especially in places where concerns about noise, light and land use are top of mind.
What technologies help reduce the burden on local resources?
Closedloop cooling systems, the use of reclaimed water, onsite generation, microgrids and even small modular nuclear reactors are being explored to reduce strain on water supplies and the grid. States like Kansas and Iowa have already begun encouraging or requiring more water efficient systems, and several communities are pushing developers to commit to these technologies upfront.
What should policymakers and industry watch next?
Federal permitting reform debates, regional grid constraints and state level bills will continue shaping the policy environment. With midterm elections approaching, concerns about power costs, water scarcity and AI competitiveness are likely to gain even more visibility. Companies that invest early in community partnerships and transparent planning will be best positioned as scrutiny increases.
Ready to get to work in this space? Reach out to Cornerstone’s federal government relations, state government relations and public affairs team here.