Establish a Common Framework for Evaluating Data-Center Projects

As artificial intelligence (AI) drives a new wave of data-center development, policymakers face a more complicated economic-development question than they did when these facilities attracted relatively little public scrutiny. Data centers can bring substantial investment, tax revenue, and economic activity, but they can also require significant investments in electricity generation, transmission, water systems, and other infrastructure. Concerns about electricity prices, grid reliability, land and water use, and the distribution of economic benefits are increasingly shaping decisions about where and how developers build data centers. States should adopt a common, industry-informed framework for evaluating major data-center projects, determining whether public incentives are justified, and allocating infrastructure costs fairly. A consistent approach would help communities assess projects on their merits, give developers greater regulatory certainty, and reduce the risk of a patchwork of state requirements.

Federal policy increasingly reflects the need to balance infrastructure expansion with accountability for its costs. The White House has pursued faster federal permitting for data centers and related energy infrastructure, including transmission, while securing commitments through its 2026 Ratepayer Protection Pledge to shield ordinary electricity customers from costs associated with new data-center demand. These efforts address complementary concerns: ensuring that developers can build the infrastructure needed for AI and that households are not left paying for costs attributable to new data-center demand. States face a related challenge in deciding whether projects warrant public support and how to evaluate their broader costs and benefits.

Consider electricity infrastructure. If a new data center requires a major transmission upgrade or additional generation, policymakers need clear rules for allocating those costs. Developers should pay an appropriate share of the costs attributable to their projects, rather than shifting those costs to households through higher electricity bills. At the same time, utilities and regulators need predictable processes for assessing infrastructure needs and connecting new projects to the grid. Similar questions arise when projects require public investments in water systems, receive tax incentives, or promise local economic benefits. Policymakers need reliable, project-specific information to determine who pays, who benefits, and whether public support is justified.

State legislatures should direct a designated state agency to establish an assessment process for major data-center projects seeking public incentives or discretionary government approval. Rather than developing separate methodologies, states should draw on a common framework developed in consultation with data-center operators, utilities, local governments, and other stakeholders. Industry participation would help ensure that the methodology reflects the operational and economic realities of data-center development, while public agencies would establish disclosure requirements and determine how assessments inform decisions.

The framework should cover projected electricity demand, grid and water infrastructure requirements, environmental impacts, tax revenues, employment, public incentives, and proposed community benefits. It should distinguish temporary construction jobs from permanent facility employment, account for public infrastructure costs and foregone tax revenue, and separate direct fiscal benefits from broader estimates of economic activity. Developers should provide the necessary project-specific information, and the responsible agency should publish its assessment before officials commit public incentives or other discretionary resources.

Policymakers should use the assessment to determine whether incentives are necessary to secure a project, whether expected public benefits justify their costs, how infrastructure expenses should be allocated, and what commitments developers should make in exchange for public support. Agreements involving specific promises about investment, employment, tax revenue, or community benefits should include measurable obligations and reporting requirements. This would allow officials to evaluate whether projects deliver their promised benefits and use that information to inform future decisions about incentives and development policies.

A common framework would make projects easier to compare across jurisdictions, reduce duplicative reporting requirements, and give developers greater certainty about what information they must provide. It would not require states to reach identical conclusions or surrender their authority over siting, utilities, and incentives. Instead, it would establish a consistent basis for evaluating projects while allowing states to account for differences in energy systems, water availability, fiscal priorities, and local economic conditions.

The objective is not to guarantee public approval of every project or give local opposition an informal veto over development. It is to establish predictable rules that help policymakers assess who benefits, who pays, and whether public support is justified. Developers would gain greater certainty about the requirements for receiving incentives, while communities would gain better information about projects that affect them.

Expanding America's computing capacity and protecting the public interest are compatible goals. A common assessment framework, combined with predictable permitting and fair infrastructure cost allocation, would help states attract investment while ensuring that data-center development supports long-term economic growth and America's technological competitiveness.

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