INFRA Signal 435
FAS urges local governments to enforce stricter datacenter deals on taxes water noise and decommissioning
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A Federation of American Scientists report advises local officials to negotiate datacenter agreements with enforceable terms on incentives, resource use, and site decommissioning
Datacenter expansion is accelerating, but local governments often lack the expertise to secure fair terms. This guidance shifts leverage toward communities, reducing long-term risks like tax revenue loss, water shortages, or abandoned infrastructure. Engineers planning or operating these facilities may face tighter operational constraints and reporting requirements
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The report recommends capping tax exemptions at five years to prevent indefinite revenue loss for local governments
Community Benefits Agreements should include measurable limits on water use, noise, and energy demand surges
Decommissioning plans must be approved upfront due to untested enforcement provisions in existing regulations
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What the cluster adds up to.
The Federation of American Scientists report targets a structural imbalance: local governments negotiating datacenter deals often lack the technical and legal resources to match developers. The guidance focuses on enforceable terms rather than broad policy statements. For engineers, this means future projects may require detailed upfront commitments on resource use, noise levels, and decommissioning procedures. These constraints could increase initial design complexity but reduce operational surprises later
Tax incentives and exemptions are a major point of contention. The report highlights cases where states lose over $1 billion annually in tax abatements, with little long-term benefit to communities. The recommendation to limit exemptions to five years forces developers to justify ongoing value. This shift could make some proposed sites economically unviable, particularly in areas with high property value appreciation. Engineers may need to model total cost of ownership with shorter incentive windows
Resource use, particularly water and energy, emerges as a critical negotiation point. The report advises specific clauses for handling demand surges and securing additional water. One lawsuit against AWS over alleged misleading water use statements underscores the legal risks. For datacenter operators, this means stricter monitoring and reporting requirements. Noise levels, often an afterthought, are now framed as enforceable metrics with annual testing. These changes could require retrofits for existing facilities in sensitive areas
Decommissioning remains an untested area, with no known cases of formal datacenter decommissioning to date. The report recommends approving decommissioning plans before construction begins, creating a binding obligation. This could complicate site selection, as developers must now account for end-of-life costs and procedures. Engineers may need to design for modular decommissioning or include salvage value in project economics. The lack of precedent means these clauses will likely be heavily negotiated, with unclear enforcement pathways
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