Data Centers—Overview of State Policies and Regulatory Considerations

This memorandum provides an overview of state policies and regulatory considerations related to data center development and operations. States have taken varied approaches to attract data center investment while addressing concerns related to energy demand, water consumption, utility costs, environmental impacts, and community effects. This memorandum summarizes key policy trends and compares state approaches across several categories.

Background on Data Centers

Data centers are large facilities that house computing equipment used to store, process, and transmit digital information. Data centers are used any time we utilize the Internet. Growth in cloud computing, artificial intelligence, and digital services has increased demand for new data center construction nationwide. States have responded to the increase in demand through a combination of economic development incentives, utility regulation, environmental oversight, and planning measures.

Over 4,500 data centers are in existence and operating in the United States, as of June 2026. This Data Center Map shows at least 37 of these data centers are located in Kansas.

Types of Data Centers

Generally, there are five types of data centers:

Hyperscale data centers or public cloud data centers (also called cloud computing data centers) are warehouse-sized facilities that store advanced servers capable of handling massive processing workloads. Hyperscale facilities typically host at least 5,000 servers, but many contain far more and have footprints measuring tens of thousands to hundreds of thousands of square feet, with the largest hitting 1.0 million-plus;
Enterprise data centers, which are located on-premises and owned and operated by businesses for their private data storage and computing needs;
Colocation data centers and managed data facilities, which rent their facilities to individual businesses;
Edge data centers, which are smaller, highly distributed data centers located closer to end-users or specific devices to reduce latency;¹ and
Modular data centers, also known as portable data centers, are self-contained, transportable units that allow businesses to deploy computing capacity where it is needed. These systems are designed on a “plug-and-play” basis, integrating all necessary components into a compact, fully functional data center that can operate independently upon deployment.

Cooling Methods

Generally, there are two types of data center cooling systems to remove heat from servers. These include two categories:

Air cooling systems, which typically rely on fans, chillers, and air handling units to circulate cool air through the facility. Another form of air cooling is referred to as free cooling, which is a method where outside cold air is drawn into the facility to cool the equipment. This is often referred to as “open-loop” data center cooling; and
Liquid cooling systems absorb and remove server heat using specialized fluids. These systems are particularly essential for cooling high-density environments like modern artificial intelligence and cloud computing infrastructure. This can include closed-loop cooling systems² and immersion cooling.

Kansas Legislative History

The Kansas Legislature has passed four pieces of legislation regarding data centers in the past three legislative sessions:

2026 SB 92—regarding extending exclusions regarding large-load facilities;
2025 SB 98—regarding qualified data center sales tax exemptions; and
2025 Sub. for HB 2149—regarding distributed energy and parallel generation; and
2024 House Sub. For SB 291—regarding state cybersecurity.

No legislation regarding data centers was passed in the 2021, 2022, or 2023 Legislative Sessions.

Economic Development and Tax Policy

The National Conference of State Legislatures (NCSL) finds that, as of June 2026, 38 states offer some kind of tax incentive meant to attract data centers ³, with Kansas being the latest addition. According to NCSL, nearly every Midwestern state and almost every state in the Great Plains, except for Nebraska and South Dakota, offer some tax incentive for data centers. Six states are considering implementing a new tax relating to data centers in attempt to raise revenue⁴.

Energy Infrastructure and Utility Regulation

Data Center Energy Demand—Estimated and Projected Energy Consumption

According to a report by Lawrence Berkeley National Laboratory, U.S. data center annual energy use in 2023 (not accounting for cryptocurrency) was approximately 176 terawatt-hours (TWh), which was approximately 4.4 percent of the U.S. annual electricity consumption for that year.

According to the Pew Research Center, in 2024, U.S. data centers consumed 183 TWh of electricity, which is roughly equivalent to the annual electrical demand of the nation of Pakistan. The Pew Research Center estimates that by 2030, this figure should grow by 133.0 percent to 426 TWh.

The International Energy Agency (IEA) estimates a typical AI-focused hyperscale data center annually consumes as much electricity as 100,000 households and predicts the larger data centers currently under construction are expected to use 20 times as much.

Additionally, because data centers are often geographically concentrated, these facilities can put a strain on power grids, according to the Electric Power Research Institute. For example, in 2023, data centers consumed about 26.0 percent of the total electricity supply in Virginia and significant shares of the supply in North Dakota, Nebraska, Iowa, and Oregon. According to Electric Choice, data centers currently consume approximately 0.4 TWh of electricity annually in Kansas.

Energy Usage

The Congressional Research Service (CRS) has found that roughly one-half or greater of the electric power demand of data centers stems from the operation of electronic information technology (IT) equipment, and the rest stems from cooling.

Electric Choice provides the following chart as an overview of data center electricity consumption across states surrounding Kansas.

2026 Midwest Data Center Power Consumption (as of June 2026)
State	Terawatt Hours of Electricity consumed per year (TWh/year)
Arkansas	0.3 TWh/year
Colorado	1.8 TWh/year
Iowa	3.8 TWh/year
Kansas	0.4 TWh/year
Missouri	1.2 TWh/year
Nebraska	2.1 TWh/year
Oklahoma	0.6 TWh/year

Chart showing data center power consumption for several Midwest states.

Energy Reporting Requirements

According to NCSL, three states are considering legislation that would require data center owners and operators report energy-related metrics regarding water consumption of their facilities:

California;
New Jersey; and
Oklahoma.

Generation and Demand

NCSL reports there are four states considering legislation that would promote the use of energy efficient technologies⁵ and certain types of electricity generation for data centers:

Colorado;
Georgia;
Kansas; and
New Jersey.

Rates, Cost Allocation, and Energy Grid Impact—Large-load Customers

Twelve states have implemented rate schedules for large-load customers through legislation or tariffs, including Kansas⁶. In November 2025, the Kansas Corporation Commission (KCC) created and approved the Large Load Power Service (LLPS) rate plan, which is designed to serve electric customers requiring 75 megawatts (MW) or more of peak power consumption. According to the KCC, the new LLPS rates will apply to any new facility beginning service with a peak load forecast of 75 MW or more, or an existing customer expecting to expand by 75 MW.

Primary Fuel Sources

According to the IEA, as of 2024, natural gas supplied over 40.0 percent of electricity for U.S. data centers. The IEA noted renewables, such as wind and solar, supplied about 24.0 percent of electricity for data centers, while nuclear power supplied around 20.0 percent and coal around 15.0 percent.

Renewable Energy and Resource Usage Reporting

California, Illinois, New Jersey, and Virginia are considering legislation or incentives for data centers to pull some of their power from renewable energy resources and report their electricity and water usage.

Water Use and Environmental Considerations

Estimated Water Usage

Data centers’ water usage can depend on a wide range of factors, which include location, climate, water availability, size, and IT rack chip densities.⁷ A study by the IEA estimates, for example, that a 100 MW U.S. data center may consume roughly 530,000 gallons per day (PDF), averaged across the various cooling strategies, with approximately 190,000 gallons per day consumed on site.

General Water Usage in Kansas

In an article in the Topeka Capitol-Journal on July 20, 2026, the Chief Engineer, Division of Water Resources, Kansas Department of Agriculture (Chief Engineer) stated that about 85.0 percent of all water consumption in Kansas goes to agricultural irrigation, noting 1.0 million gallons of water a day for a full year is approximately what six circles of corn requires to grow. He noted industrial plants and feedlots are also considerable consumers of Kansas water, and stated power plants, such as the Wolf Creek nuclear plant, with water rights use around 25.0 million gallons a day. About 8.0 to 10.0 percent of water consumption is used by Kansas municipalities.

Water Sources

Data centers can utilize water from various sources including surface water and ground water, municipal water, and purified reclaimed water. According to the University of Georgia College of Agricultural and Environmental Sciences (CAES), approximately 57.0 percent of all data centers use water from potable, or safe drinking, water supplies.

Kansas Water Sources

According to the KDA’s chief engineer, there are three options for data centers to obtain water:

The data center could directly purchase water from city utilities, whom already obtain water rights from the state;
Apply for a new water right in an area of Kansas where water is more plentiful; or
Purchase water rights from other users.

Water-related Concerns

According to CAES, among the various concerns related to the construction and operation of data centers, the top water-related concerns include aquifer depletion, groundwater quality issues, surface water withdrawals and surface thermal pollution, chemical discharge, and electricity demand.

Reporting Requirements

According to NCSL, 13 states require data centers to report water usage to the state or in public documents⁸. Some of the states that have these requirements include:

The Virginia General Assembly passed two pieces of legislation ⁹ aiming to obtain clarifying information regarding how much water data centers use;
The Minnesota Legislature passed 2025 HF 16, which requires data centers using more than 100 million gallons of water annually to obtain a permit if usage is considered by the state;
The Nebraska Legislature recently passed 2026 LB 1010, which requires data centers report their annual water usage; and
The Utah Legislature passed 2026 HB 76, which requires new large data centers to notify the local area water provider of the data center’s anticipated water consumption so that the water provider can determine if the anticipated water consumption is compatible with the selected location of the new data center. Additionally, the bill requires the new data center report water withdrawal annually to the state’s Division of Water Quality.

Currently, 13 states are also considering legislation relating to water usage studies or reports and public documents¹⁰. Additionally, though not mandated, the Texas Public Utility Commission announced in February 2026 that it will require data centers to report direct water usage, each site’s cooling technologies, and which power plants provide these businesses with electricity.

Community and Local Government Considerations

Community and local government considerations play a key role in the planning, development, and construction of new data centers. These key factors may include land use compatibility, infrastructure capacity, economic development opportunities, environmental considerations, and engagement from local stakeholders.

Community Benefit Agreements

According to the Columbia Law School, Community Benefit Agreements (CBAs), also known as Community Benefit Plans, are legally binding contracts between project developers and host municipalities and/or local community groups, under which the developer agrees to provide specified benefits to the community in which it wishes to operate, and, in return, the community agrees to not oppose or to support the project. CBAs usually involve multiple steps including public education, community negotiation, contract drafting and signing, and implementation and enforcement.

Several states are considering legislation that require data centers to enter CBAs, including:

Moratoriums and Studies

As of June 2026, various states have introduced legislation requiring studies on potential impacts of data centers within the state. Some states are also considering moratoriums on data centers to prohibit the development of any new data centers until the studies have been finished. States that are considering legislation regarding moratoriums include:

Georgia;
Indiana;
Michigan;
Minnesota;
Nebraska;
New Mexico;
New York;
Ohio;
Oklahoma;
Pennsylvania¹¹;
South Carolina;
South Dakota;
Vermont; and
Virginia.

Though many states have not taken a statewide motion to effectuate moratoriums on data centers, many local governments of various states¹² are attempting to or have enacted ordinances preventing the future development of new data centers, particularly hyperscale data centers.

Federal Legislation

In 2026, two pieces of legislation have been introduced regarding moratoriums that would create a temporary prohibition on the construction of new data centers and the expansion of existing data centers until Congress passes comprehensive legislation to address the economic, environmental, and safety impacts of artificial intelligence¹³.

Decommissioning

The decommissioning process of a data center is a multi-step process including the physical removal of equipment and infrastructure, data sanitization, disposal and recycling of hardware, documentation and reporting, and asset value recovery. Decommissioning can involve partial decommissioning of certain systems or full-scale decommissioning by closing an entire facility. Michigan, Nebraska, South Carolina¹⁴, and South Dakota are all considering legislation regarding the process of retiring, dismantling, and repurposing IT infrastructure.

Noise Pollution

Local Ordinances

Generally, noise pollution from data centers varies by facility, time of day, proximity to residential areas, and technology use. Noise pollution from data centers primarily comes from constant cooling systems, generators, fans and turbines, and power plants. Because this type of infrastructure runs constantly, the compounding effect of heavy industrial machinery produces a pervasive, low-frequency hum that can travel up to several hundreds of feet from the data center’s location. In an interview with Environmental and Energy Study Institute (EESI), a National Parks Conservation Association representative stated that because data center noise spans multiple frequency ranges, particularly in the low-frequency range, it is difficult to measure with a decibel meter, and without reliable measurements, it is difficult to enforce local noise ordinances for nearby residents.

According to EESI, noise pollution is usually regulated at the local and state level through zoning and ordinances. States with local governments that have considered or implemented ordinances regarding data center noise pollution include Arizona, Arkansas, Indiana, North Carolina, Ohio, and Texas.

Eminent Domain

Eminent domain, in general, is the inherent power of a governmental entity to take private property and convert it to public use upon payment of just compensation.

State of Kansas’ Powers of Eminent Domain

The State of Kansas has the power to exercise eminent domain¹⁵ to take private property for public purposes; this authority belongs exclusively to the Kansas Legislature and to the entities or individuals authorized by statute to exercise the power of eminent domain. According to Kansas law, certain private corporations serving a public interest for public use, such as public utilities holding a Certificate of Convenience and Necessity issued by the KCC, may also exercise the power of eminent domain under KSA 17-618.

Federal and Local Governments’ Powers of Eminent Domain

The federal government’s eminent domain power, governed by the Fifth Amendment of the U.S. Constitution, stipulates that the government may obtain private land without consent of the landowner if the seizure¹⁶ is for “public use” and if the landowner is provided with “just compensation.” Additionally, most state and local governments, and certain private carriers¹⁷ also have the power to initiate eminent domain.

Conclusion

Data centers are a fundamental part of the modern digital infrastructure, supporting the storage, processing, and transmission of information that powers everyday technologies and essential services. As demand for digital connectivity continues to grow, understanding the role, benefits, and challenges of data centers is increasingly important. By considering their technological, economic, and environmental impacts, individuals, businesses, and policymakers can make more informed decisions about their future development and use. This memorandum provides background information to support an informed understanding of data centers and their role in the state’s broader technological, economic, and natural resources landscape.

1 “Data center latency” generally refers to the time it takes for data to travel from one point to another. Latency is commonly measured in milliseconds.

2 MultiState reports Illinois, Michigan, Missouri, New York, North Carolina, South Carolina, South Dakota, Virginia, and Wisconsin are considering, and Oklahoma has passed, legislation requiring closed loop cooling systems in data centers. The Kansas Legislature considered 2026 SB 400, but the bill ultimately died after being referred to the Senate Committee on Utilities.

3 States: Alabama, Arizona, Arkansas, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

4Arizona, Georgia, Indiana, Pennsylvania, Virginia, and West Virginia.

5 According to the U.S. Energy Information Administration (EIA), examples of renewable energy sources include biomass energy, geothermal energy, hydropower, solar energy, and wind.

6 States: Arizona, California, Kansas, Maryland, Michigan, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Utah, and Virginia.

7 IT rack chip densities refers to the amount of electrical power consumed and heat generated by the dense microchips housed within a single data center server rack.

8 States: Arkansas, Florida, Hawaii, Idaho, Kansas, Maryland, Minnesota, Nebraska, Oklahoma, South Dakota, Utah, Virginia, and Washington.

9 See 2026 VA HB 496 and 2026 VA SB 553.

10 States: California, Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Vermont, and Virginia.

11 See 2025 SB 1359 and 2025 SB 1345.

12 States: Indiana, Iowa, Maryland, Michigan, Missouri, New Mexico, New York, Texas, Utah, and Wisconsin.

13 The Artificial Intelligence Data Center Moratorium Act was introduced in the U.S. Senate and U.S. House of Representatives.

14 See 2026 SB 867 and 2026 SB 902.

15 See Kansas Statutes Annotated Chapter 26.

16 Another term for this action is “condemnation.”

17 Governments have the capability to delegate power of eminent domain to private entities, such as power and water companies. Every state has its own laws regarding the delegation of power to use eminent domain.