Data Centers are a Political Third Rail. West Virginia is Grabbing it Anyway.

West Virginia wants more data centers, even as other states slam the brakes on them

Americans of all political stripes have grown wary of data centers, a backlash that threatens to stifle the artificial-intelligence boom.

On a 1,700-acre industrial site in West Virginia's Putnam County, Google is working to build a $7 billion data-center campus of up to nine buildings. Local officials hope a groundbreaking ceremony will take place next year and that about 600 jobs will be created by the project, which is still in the permitting stages.

The largest private employer in this corner of West Virginia is Toyota (TM), with more than 2,100 workers at an engine and transmission plant about two miles from where the data center will be located. Google identified the location by working with the local utility, American Electric Power (AEP), to find sites that had readily available electricity, said Morganne Tenney, executive director of the Putnam County Development Authority.

AEP owned the site that was ultimately chosen, which had been vacant for several decades. The location next to the Kanawha River is within two miles of a 765 kV, or extra-high-voltage, power line.

"There is, of course, a group that doesn't want data centers in our community and in West Virginia," but there's also a "quieter" group that wants the data center, Tenney told MarketWatch. "So even though that may not be the narrative that you hear in the media, there are a lot of people who are excited for the opportunity to stay in West Virginia, and about what this could mean for a generational impact in terms of employment and in tax dollars."

Americans of all political stripes have grown wary of data centers, and the political backlash threatens to stifle the artificial-intelligence boom, which has been fueled in part by the hundreds of billions of dollars that Big Tech companies such as Nvidia (NVDA) and Google parent Alphabet (GOOG) (GOOGL) are pouring into the AI build-out.

As the midterm elections near, more than a dozen states are considering temporary bans and other constraints on data-center development. It's a political third rail that has put ideological opponents on the same side, with community resistance growing so fierce that both the Democratic governor of New York and the Republican governor of Texas have backed halts on data-center projects.

Yet one state is bucking that trend. West Virginia, which has a long and complicated history with extractive industries such as coal, wants to attract more data centers. It has made their permits and approvals strictly a state business, hoping to offer developers a smoother ride and to attract jobs and a larger tax base. Some residents, however, say the state has robbed them of any input over developments they consider bad neighbors.

Depending on whom you ask, the move is either a bold one aimed at bringing prosperity to West Virginia, one of the nation's poorest states, or another gamble it may lose against powerful corporations. Either way, it's a vivid example of how data centers and the AI boom have become crucial economic and political issues going into the elections.

'Very friendly' legislation

West Virginia passed a data-center law last year, House Bill 2014, that is meant to attract large-scale data centers by shifting regulatory control to the state. It recently built upon the law, in August launching what it calls a "responsible" data-center development plan.

Unlike other states, where local communities directly benefit from the tax revenue created by a data center, under West Virginia's law, half of a project's revenue would go to reducing and "ultimately eliminating" the state's personal income tax, according to Gov. Patrick Morrisey's office.

Counties hosting data centers would get a third of a project's revenue for their schools and government operations, while another 10% of the revenue would go to all counties in the state. The remaining portion would be allocated to upgrading local water, wastewater and electrical infrastructure. Developers must procure their own energy resources and fully fund their infrastructure and microgrid costs, among other requirements. The state also created a data-center advisory council to recommend standards and address concerns.

"Most people, whatever side they're on, recognize that this new law is very friendly to the data-center industry," said Ann Eisenberg, a law professor at West Virginia University and the director of the university's Center for Energy and Sustainable Development.

According to the U.S. Data Center Map, West Virginia has 16 data centers in operation, along with two major ones under construction or in the permitting phase, and at least nine planned. It's not yet a destination for data-center developers, but most of the state sits on the Marcellus shale, one of the most prolific natural-gas-producing formations in the United States. West Virginia is the country's fifth largest producer of natural gas.

Nationwide, there are about 400 new data centers under construction, many of them massive in order to handle the high amounts of computing capacity needed for AI as well as for more mundane tasks associated with online shopping and social-media use.

More than 1,000 centers are being planned across the U.S., with Virginia, Texas and California leading the nation in terms of hosting facilities that are operational, under construction or planned.

In West Virginia, most of the criticism of the state's data-center push comes from the lack of local oversight and the centralization of so much of the tax revenue, Eisenberg said. The state has a long history of being promised jobs and economic development that turned out not to be as robust as advertised, she added. And there's also a general concern that data centers might bring fewer benefits to the state than industries such as coal and natural gas, which have their own history of burdens and benefits, Eisenberg said.

The 2025 data-center bill moved quickly, "too quickly for a lot of the public to get involved," said Kelly Allen, the executive director at the West Virginia Center on Budget and Policy. It initially called for no tax revenue at all for host counties, which only changed after county and local economic development officials, some of whom were in the middle of working directly with developers, expressed their concerns.

Some in the communities fear that if a developer wants to come to West Virginia specifically because of the lack of local control and engagement, that would not be the type of project a county or town would want, she said.

"We're maybe inviting in some of the worst actors, the people that don't want to follow the rules. We don't want West Virginia to be a race to the bottom for data centers that don't care about being good neighbors in their communities," Allen said.

Morgan King, climate and energy program manager at the nonprofit West Virginia Citizen Action Group, also decried the lack of local oversight, and pointed to several data centers being proposed or rumored to be in the works near environmentally sensitive areas of the state, such as the Monongahela National Forest.

"I don't think we'd see the same amount of interest if the law had not been passed," King said.

People from all parts of the political spectrum feel that their voices have been silenced, she added. "On a political level, an election is coming up, and I've heard from many residents across the state that data centers are at the top of their priority when voting," King said.

Opponents of the law hope that the next state legislative session, which opens in January, will bring about changes to the law or new legislation to address what they view as its flaws.

Tenney, of the Putnam County Development Authority, was one of local officials who spoke out against earlier versions of the law that allocated nothing to local governments.

"When I testified, I said, if we're not receiving any of the tax dollars, that doesn't encourage local communities to want a data center. So now we do get 30%, and 30% is still a lot whenever you're looking at the potential billion-dollar investments that are being made across the state," she said.

Google "is moving forward as though House Bill 2014 wasn't in place," Tenney said. "They're still going through our county permitting process, even though they may not necessarily have to. So we're thankful for that project still allowing the community to have a seat at the table."

Google says that a project of comparable size typically supports more than 1,000 construction jobs over time and creates "hundreds" of permanent roles. The state estimated Google's investment at $7 billion in a recent report.

It's no surprise that Google chose a site with a ready connection to electricity. Data-center developers speak of "powered land": While there is undeveloped land everywhere in the U.S., not all of it can host a data center. There needs to be enough power connectivity to support a hyperscaler.

Not yet a top market

Ben Alingh, CEO and co-founder of data-center developer Monarch Energy (which has no relation to a data center called Monarch Compute that is being planned in West Virginia's Mason County), has closely followed the situation in the state. Part of his job is to stay focused on what different states are doing "to attract data centers or to push data centers away," he said.

West Virginia is not what he would consider a top market for data centers, at least not yet, Alingh said. Those are Northern Virginia, the Dallas-Forth Worth area and cities like Columbus and Phoenix, which are home to "legacy" developments, he said.

"West Virginia does have a lot of good things going for it in the form of available energy resources," Alingh said. But the state is part of PJM Interconnection, the largest U.S. grid operator, which is in the midst of re-evaluating how it will connect data centers with power producers.

MW Data centers are a political third rail. West Virginia is grabbing it anyway.

By Claudia Assis

West Virginia wants more data centers, even as other states slam the brakes on them

Americans of all political stripes have grown wary of data centers, a backlash that threatens to stifle the artificial-intelligence boom.

On a 1,700-acre industrial site in West Virginia's Putnam County, Google is working to build a $7 billion data-center campus of up to nine buildings. Local officials hope a groundbreaking ceremony will take place next year and that about 600 jobs will be created by the project, which is still in the permitting stages.

The largest private employer in this corner of West Virginia is Toyota (TM), with more than 2,100 workers at an engine and transmission plant about two miles from where the data center will be located. Google identified the location by working with the local utility, American Electric Power (AEP), to find sites that had readily available electricity, said Morganne Tenney, executive director of the Putnam County Development Authority.

AEP owned the site that was ultimately chosen, which had been vacant for several decades. The location next to the Kanawha River is within two miles of a 765 kV, or extra-high-voltage, power line.

"There is, of course, a group that doesn't want data centers in our community and in West Virginia," but there's also a "quieter" group that wants the data center, Tenney told MarketWatch. "So even though that may not be the narrative that you hear in the media, there are a lot of people who are excited for the opportunity to stay in West Virginia, and about what this could mean for a generational impact in terms of employment and in tax dollars."

Americans of all political stripes have grown wary of data centers, and the political backlash threatens to stifle the artificial-intelligence boom, which has been fueled in part by the hundreds of billions of dollars that Big Tech companies such as Nvidia (NVDA) and Google parent Alphabet (GOOG) (GOOGL) are pouring into the AI build-out.

As the midterm elections near, more than a dozen states are considering temporary bans and other constraints on data-center development. It's a political third rail that has put ideological opponents on the same side, with community resistance growing so fierce that both the Democratic governor of New York and the Republican governor of Texas have backed halts on data-center projects.

Yet one state is bucking that trend. West Virginia, which has a long and complicated history with extractive industries such as coal, wants to attract more data centers. It has made their permits and approvals strictly a state business, hoping to offer developers a smoother ride and to attract jobs and a larger tax base. Some residents, however, say the state has robbed them of any input over developments they consider bad neighbors.

Depending on whom you ask, the move is either a bold one aimed at bringing prosperity to West Virginia, one of the nation's poorest states, or another gamble it may lose against powerful corporations. Either way, it's a vivid example of how data centers and the AI boom have become crucial economic and political issues going into the elections.

'Very friendly' legislation

West Virginia passed a data-center law last year, House Bill 2014, that is meant to attract large-scale data centers by shifting regulatory control to the state. It recently built upon the law, in August launching what it calls a "responsible" data-center development plan.

Unlike other states, where local communities directly benefit from the tax revenue created by a data center, under West Virginia's law, half of a project's revenue would go to reducing and "ultimately eliminating" the state's personal income tax, according to Gov. Patrick Morrisey's office.

Counties hosting data centers would get a third of a project's revenue for their schools and government operations, while another 10% of the revenue would go to all counties in the state. The remaining portion would be allocated to upgrading local water, wastewater and electrical infrastructure. Developers must procure their own energy resources and fully fund their infrastructure and microgrid costs, among other requirements. The state also created a data-center advisory council to recommend standards and address concerns.

"Most people, whatever side they're on, recognize that this new law is very friendly to the data-center industry," said Ann Eisenberg, a law professor at West Virginia University and the director of the university's Center for Energy and Sustainable Development.

According to the U.S. Data Center Map, West Virginia has 16 data centers in operation, along with two major ones under construction or in the permitting phase, and at least nine planned. It's not yet a destination for data-center developers, but most of the state sits on the Marcellus shale, one of the most prolific natural-gas-producing formations in the United States. West Virginia is the country's fifth largest producer of natural gas.

Nationwide, there are about 400 new data centers under construction, many of them massive in order to handle the high amounts of computing capacity needed for AI as well as for more mundane tasks associated with online shopping and social-media use.

More than 1,000 centers are being planned across the U.S., with Virginia, Texas and California leading the nation in terms of hosting facilities that are operational, under construction or planned.

In West Virginia, most of the criticism of the state's data-center push comes from the lack of local oversight and the centralization of so much of the tax revenue, Eisenberg said. The state has a long history of being promised jobs and economic development that turned out not to be as robust as advertised, she added. And there's also a general concern that data centers might bring fewer benefits to the state than industries such as coal and natural gas, which have their own history of burdens and benefits, Eisenberg said.

The 2025 data-center bill moved quickly, "too quickly for a lot of the public to get involved," said Kelly Allen, the executive director at the West Virginia Center on Budget and Policy. It initially called for no tax revenue at all for host counties, which only changed after county and local economic development officials, some of whom were in the middle of working directly with developers, expressed their concerns.

Some in the communities fear that if a developer wants to come to West Virginia specifically because of the lack of local control and engagement, that would not be the type of project a county or town would want, she said.

"We're maybe inviting in some of the worst actors, the people that don't want to follow the rules. We don't want West Virginia to be a race to the bottom for data centers that don't care about being good neighbors in their communities," Allen said.

Morgan King, climate and energy program manager at the nonprofit West Virginia Citizen Action Group, also decried the lack of local oversight, and pointed to several data centers being proposed or rumored to be in the works near environmentally sensitive areas of the state, such as the Monongahela National Forest.

"I don't think we'd see the same amount of interest if the law had not been passed," King said.

People from all parts of the political spectrum feel that their voices have been silenced, she added. "On a political level, an election is coming up, and I've heard from many residents across the state that data centers are at the top of their priority when voting," King said.

Opponents of the law hope that the next state legislative session, which opens in January, will bring about changes to the law or new legislation to address what they view as its flaws.

Tenney, of the Putnam County Development Authority, was one of local officials who spoke out against earlier versions of the law that allocated nothing to local governments.

"When I testified, I said, if we're not receiving any of the tax dollars, that doesn't encourage local communities to want a data center. So now we do get 30%, and 30% is still a lot whenever you're looking at the potential billion-dollar investments that are being made across the state," she said.

Google "is moving forward as though House Bill 2014 wasn't in place," Tenney said. "They're still going through our county permitting process, even though they may not necessarily have to. So we're thankful for that project still allowing the community to have a seat at the table."

Google says that a project of comparable size typically supports more than 1,000 construction jobs over time and creates "hundreds" of permanent roles. The state estimated Google's investment at $7 billion in a recent report.

It's no surprise that Google chose a site with a ready connection to electricity. Data-center developers speak of "powered land": While there is undeveloped land everywhere in the U.S., not all of it can host a data center. There needs to be enough power connectivity to support a hyperscaler.

Not yet a top market

Ben Alingh, CEO and co-founder of data-center developer Monarch Energy (which has no relation to a data center called Monarch Compute that is being planned in West Virginia's Mason County), has closely followed the situation in the state. Part of his job is to stay focused on what different states are doing "to attract data centers or to push data centers away," he said.

West Virginia is not what he would consider a top market for data centers, at least not yet, Alingh said. Those are Northern Virginia, the Dallas-Forth Worth area and cities like Columbus and Phoenix, which are home to "legacy" developments, he said.

"West Virginia does have a lot of good things going for it in the form of available energy resources," Alingh said. But the state is part of PJM Interconnection, the largest U.S. grid operator, which is in the midst of re-evaluating how it will connect data centers with power producers.

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"It's a time of transition in PJM, and so there's a lot of questions about what the rules are going to be to interconnect new [power] generation and new large loads. And so, during a time of uncertainty, there may be other markets that are a little more attractive," he said.

At the same time, the so-called Tier 1 markets are seeing signs of saturation, as there are fewer good sites left. So developers such as Monarch are trying to steer clients toward newer areas. These include places such as Indianapolis, Kansas City and Salt Lake City, and parts of Alabama, Louisiana, Oklahoma and Pennsylvania, Alingh said.

Besides proximity to power sources, many of the emerging locations offer attractive tax incentives and smoother permitting processes.

"West Virginia is not a place that we're seeing at the very top of the list, but really anywhere that you can get power these days is interesting. And the industry is becoming more geographically flexible," he said.

Alingh thinks that opposition to data centers has reached "peak backlash," with developers working to address the concerns of communities such as water use, power use and noise levels and presenting themselves as willing to be good neighbors.

"Once you get through the midterms, my expectation is that the temperature drops a bit, and then hopefully cooler heads prevail and folks are able to have an honest conversation about the pros and cons of data-center development that's less based on emotion and more based on the facts," he said.

'Incredible' capital intensity

The United States is just beginning to understand the magnitude of the data-center build-out, according to Stijn Van Nieuwerburgh, a finance professor at Columbia University's Graduate School of Business.

In a recent research paper, Van Nieuwerburgh said that despite AI being described as an intangible revolution, its near-term economic footprint is "strikingly physical." The AI boom is not just a software and hardware story, but also a large-scale infrastructure-investment cycle. And that cycle is shaping up to be so large as to dwarf those that came before it, by his calculations.

A 200-megawatt AI training campus costs roughly $8.2 billion, about two-thirds of that amount going for IT equipment and about one-third toward real estate and associated power infrastructure costs, according to Van Nieuwerburgh's research.

He estimated that 183 gigawatts will be completed by 2032, with a further 118 gigawatts completed after 2032 - a pipeline that will trigger about $10.3 trillion dollars of investment over through 2032.

At an average of 3.6% of U.S. gross domestic product a year, he calculated that the projected build-out would be larger relative to the U.S. economy than major undertakings of the past 200 years - including building the U.S. canal and railroad networks in the 19th century and the nation's highway system in the 20th century.

"That just underscores the incredible capital intensity of this build-out," he said, adding that he tried to be relatively conservative in his assumptions but still arrived at "enormous" figures.

It's hard to say if AI will be more transformational than the previous infrastructure cycles, he said. Railroads and highways opened and connected the country, and in many ways the AI boom is also an investment in a network. Unlike previous booms, however, everybody can immediately use it - there's no need for special equipment, the way many of us needed to buy a PC to surf a nascent internet, he said.

"We can open the computers we already have and just launch ChatGPT," he said. And people need the data centers to do all these computations, with much still to do in terms of investments to fully take advantage of the technology, he added.

When asked whether West Virginia's centralized approach to data-center development made more sense than the way most states are doing it, Van Nieuwerburgh called it "interesting."

Developers may prefer that centralization, he said, since in theory it creates more certainty about approvals and signals that the state wants their business.

"For them that is a very welcome signal given the current environment. ... All we ever hear about is moratoriums in this state, and in that city, and here's a state going in the opposite direction," Van Nieuwerburgh said. Many locations rolled out subsidies to attract data centers before the backlash and are now walking back some of those incentives and tightening their permitting process, he added.

Van Nieuwerburgh said he didn't believe the groundswell of opposition would do much to put the brakes on future development of data centers because demand for AI is strong, and it makes economic sense to build them. "My view is that they will find a way," he said.

Opposition, however, has not been in vain, he said. It's good that people have questioned what data centers may mean for their electricity or water rates, and how much noise is too much, he said. If local governments are smart, they can take the opportunity to make improvements to their communities, such as making the centers pay for electricity upgrades and using the tax revenue to invest in schools.

"If we play our cards well, we can have our cake and eat it too," Van Nieuwerburgh said.

-Claudia Assis