Virginia Reconsiders Data Center Growth

The story has shifted from mainly describing tighter controls on data center growth to a broader debate over where future expansion should go and how Virginia can reduce its impacts. A new waste-heat reuse study and stronger emphasis on redirecting projects to rural areas broaden the policy agenda beyond zoning and cost allocation.

The story has broadened from zoning and tax fights into a more explicit regulatory and cost-allocation battle over who pays for the transmission and substation upgrades data centers require. It also adds evidence that public and institutional support is shifting toward fees and away from incentives.

• Virginia State Corporation Commission now featured in transmission cost recovery disputes.
• Dominion Energy is seeking cost recovery tied to data-center load growth.
• Public polling shows weaker support for data-center incentives in Virginia.
• Support remains strong for fees offsetting data-center power demand.

The story has broadened from a Virginia state-budget fight into a wider local-siting and infrastructure constraint story, with Northern Virginia counties now actively tightening zoning and review for data centers and substations. Ohio has also become a more prominent parallel flashpoint as lawmakers revisit the unexpectedly high fiscal cost of its sales-tax exemption.

• Northern Virginia counties are making data-center siting harder.
• Prince William County projects face rezoning and special-permit fights.
• Power infrastructure is now a central planning constraint.
• Ohio's data-center sales-tax exemption costs far more than projected.

Virginia's data center policy has become more specific and more executable: the budget now sets a temporary electricity tax with a sunset, narrows which facilities are targeted, and adds follow-on water and retrofit review steps. The story is less about general tightening and more about a concrete fiscal-and-regulatory package aimed at shifting costs onto operators.

• Two-year sunset added to Virginia's data center electricity tax.
• Tax appears targeted mainly at AI-related workloads.
• Facilities serving internet access or VoIP are excluded.
• DEQ must develop cooling-water scarcity criteria.
• Budget directs a retrofit study for existing data centers.

Virginia’s story has broadened from tighter data-center permitting and taxes to a more explicit, multi-agency effort that also adds water and cooling constraints. The Ohio piece is less about isolated fiscal scrutiny and more clearly framed as a major budget problem caused by an expensive exemption.

• Virginia added water and cooling requirements for future projects in scarce areas.
• Northern Virginia counties are tightening setbacks, screening, and special-exception rules.
• Prince William County disputes now include litigation over notice and process.
• Ohio’s exemption is creating major budget pressure.
• The State Corporation Commission and Department of Environmental Quality are now key actors.

Virginia’s policy response has become more concrete: lawmakers not only preserved the data center tax exemption but also added a capped electricity consumption fee and tighter approval rules. In Ohio, the exemption’s fiscal cost has escalated into a more serious budget problem as actual losses run well above forecasts.

• Virginia lawmakers preserved the sales and use tax exemption.
• A capped electricity consumption fee was added for data centers.
• Approval rules for power infrastructure and siting have tightened.
• Ohio’s exemption costs have risen far above forecasts.

The story has broadened from a Virginia budget fight over one tax exemption into a multi-state regulatory backlash against data center expansion. Virginia is now moving toward direct fees and oversight, while Ohio’s exemption has become a separate budget problem because its cost is far higher than expected.

• Virginia is moving toward a capped electricity-use fee.
• Northern Virginia counties are tightening data center approval standards.
• Ohio's sales tax exemption is costing far more than forecast.
• Prince William County has become a major siting battleground.
• States and counties are rewriting approval and tax rules.

Virginia leaders are negotiating a state budget ahead of a June deadline while weighing whether to preserve or change the state's large tax exemption for data centers. The issue is tied to broader questions about revenue, economic development, and how much public subsidy the industry should receive. The debate is being shaped by fiscal analysis from JLARC, which is cited as finding strong economic returns from the exemption compared with other state incentives. At the same time, lawmakers face pressure to balance those reported benefits against the cost of forgone tax revenue and the possibility that some projects would have located in Virginia anyway.