AI Industrial Strategy Under Trump 2.0, Part III
How federal executive action and state preemption laws are attempting to blunt local resistance to data centers
The AI boom has turned data centers into one of the fastest growing categories of industrial development, with a resource footprint that is hard to hide once it arrives as buildings, substations, transmission corridors, diesel generators, and new water demands. Federal analysts now estimate that data centers used about 4.4 percent of total US electricity in 2023 and could reach roughly 7 to 12 percent by 2028, depending on how quickly AI-driven demand grows and what happens to overall national load.
Over the past year, community resistance to data centers has stopped being a niche zoning or permitting dispute and become a recurring national storyline (if not a growing political liability):
The Wall Street Journal has treated opposition as a social and political story, including a May 18, 2025 report on a small West Virginia community organizing against what residents were told could become one of the world’s largest data center complexes.
The Washington Post has followed Northern Virginia backlash as both a legal fight and an electoral issue, including court action that invalidated Prince William County’s approvals for the “Digital Gateway” project and reopened a debate about the region’s development model.
Bloomberg has framed the same region as a global capital of data centers where residents feel increasingly boxed in, with quality-of-life conflict pushing localities toward tighter rules and limits.
Financial Times has elevated resistance as a national political economy story, including a recent report on a multibillion-dollar proposal in Georgia that drew opposition organized around water use, road burdens, and fears about who pays for grid upgrades.
Most recently, on December 12, 2025, Chandler’s City Council unanimously rejected a rezoning request that would have enabled New York developer Active Infrastructure to build a 422,000-square-foot AI data center campus, ending a high-profile local fight marked by intense community opposition and heavy outside lobbying. The dispute drew national attention after former Senator Kyrsten Sinema publicly urged approval while warning officials that “federal preemption” would soon limit local control. The rejection came one day after the Trump administration signed an executive order that adopts a preemption-style posture toward state AI regulation. Even though it does not directly override data center siting rules, it provides fresh rhetorical and legal leverage for proponents of rapid data center and energy expansion.
Yet there is a broader and much more contested battlefield within the national AI and energy buildout. Tax incentives for data centers are having a major impact on state budgets (not to mention energy costs). Meanwhile, dozens of states are moving in different directions, with different institutional structures, different partisan coalitions, and different positions over data center and energy siting. As communities begin to resist more and more, that resistance is now colliding with a governance regime designed to reduce the practical power of local refusal.
This article is the third in a series on AI industrial policy under Trump 2.0. Part I outlined early moves to define AI through a national security lens. Part II tracked a program of infrastructural acceleration and techno-industrial enclosure. Here, the focus narrows to the state and local politics of data center expansion, and to the legal and institutional tools that increasingly bypass local authority. Preemption is the key instrument in this shift, not as a technical doctrine, but as a way of reorganizing who gets to decide how the AI economy is built.
Preemption as a governing regime in the AI buildout
In the United States, “local control” has been an important aspiration in political culture but is always conditional. Municipal authority exists because states delegate it. States can thus retract it or constrain its practical power. In earlier eras states used preemption to advance projects framed as public necessities, including highways, pipelines, large energy systems—and even more recently for housing. Similar arguments are returning under the aegis of AI competitiveness, grid reliability, and national economic security. In a political climate that currently promotes deregulation (read: corporate or market power), accelerated permitting, and industrial expansion, preemption becomes less an exception and more a governing regime. It aims to convert land and infrastructure into platforms for rapid buildout, while reducing the friction of local negotiations that can slow projects or raise costs—at least for the investors and corporate actors involved.
Preemption also operates selectively. In some policy domains, it is justified as a way to prevent local exclusion, as in state overrides aimed at loosening barriers to housing. In the AI and energy arena, it often functions as a ceiling rather than a floor. It blocks cities and counties from adopting stricter environmental standards, labor requirements, or climate-oriented energy rules. It also reflects a political calculation about influence. State-level policymaking is easier for concentrated industries to shape than hundreds of local hearings, ordinances, and planning commission meetings. The result is a governance pipeline that makes AI infrastructure more deployable at scale.
That pipeline is now visible because the local stakes have become too large to ignore. The AI economy is not landing softly on existing territory. It is arriving through discrete, bulky interventions, in the form of rezoning requests, new substations, new generation permits, and new transmission lines. The conflicts that follow are not simply about aesthetics or parochialism. They are about who bears costs, who captures benefits, and what democratic voice means in a buildout framed as urgent and strategic.
The current wave of state preemption is not a single instrument. It is a family of strategies that reorganize where decisions happen and whose decisions matter. Three patterns stand out.
Some states explicitly remove local authority. West Virginia offers one of the clearest examples. Its One-stop Shop Permitting Program (HB 2002) centralizes and accelerates permitting timelines while its Power Generation and Consumption Act (HB 2014) promotes “high-impact data center” development tied to on-site generation and microgrid districts—exempting projects from county and municipal zoning and limiting the reach of local ordinances related to noise, lighting, and land use. Residents in Tucker County learned about a proposed gas-linked complex only after a permit notice circulated. The organizing that followed was intense, but the local government’s formal leverage had already been removed. In this structure, public participation is reduced to mere expression rather than a deliberative feature, a way to register harm without the power to condition it.
Louisiana pursued a similar outcome through deal-specific lawmaking designed to secure Meta’s roughly $10 billion Hyperion campus. Legislators rewrote tax rules to create data-center-specific exemptions and advanced a site that had already cleared environmental review, limiting the scope of new local scrutiny. Entergy Louisiana was fast-tracked to build three gas plants and a transmission corridor through a state-centered process with constrained local input. The effect is not only a project approval. It is the creation of a de facto entitlement zone for digital infrastructure, where the state pre-arranges the conditions of development.
Other states have considered similar moves. Pennsylvania has recently proposed legislation that would fast-track data center permitting and craft special Commonwealth Opportunity Zones for AI infrastructure, among others. North Carolina’s 2023 “energy choice” law takes a different route by barring local restrictions on particular fuel sources in buildings, preempting municipal efforts to steer electrification or decarbonization. Across these cases, the language of reliability and competitiveness does political work. It redefines the “public interest” in ways that consolidate authority upward.
A second strategy is a de facto bypass through utility and grid governance. Even where local zoning remains intact, states can hollow out local influence by placing the most decisive approvals inside utility commissions, grid operators, and energy permitting channels. Virginia, home to the world’s largest concentration of data centers, shows this split clearly. Counties such as Loudoun and Prince William can tighten zoning for data center parcels, but the approvals that matter for power plants, transmission lines, and network upgrades sit with the State Corporation Commission and related state-level institutions. This is why resistance in Virginia so often becomes a fight about the broader development model, not a single building, and why court challenges to land use approvals can still leave the larger growth pressures intact.
Texas illustrates a variant of this as well. Counties often have limited zoning authority, and statewide planning levers run through electricity regulation and interconnection governance. Where the decisive approvals sit inside grid institutions, the distribution of power shifts. Developers that can finance new generation, negotiate special arrangements, or move quickly through interconnection queues gain leverage. Communities sometimes respond by seeking the limited tools available to them, including incorporation or changes in municipal status, simply to gain basic land use authority. When the state’s strongest levers sit in energy regulation and economic development, local control exists at the margins of a system built to prioritize capacity and investment.
A third strategy works through fiscal dependence and legal pressure. Incentive architectures can discipline local governments even without formal preemption. Indiana’s data center tax exemption, which can run up to fifty years, removes key local revenue streams and encourages counties to compete for projects even when public benefits are limited. Near Indianapolis, residents opposing Google’s proposed 460-acre campus won a temporary victory, but the state’s incentive logic makes repeat proposals likely. Fiscal dependence does not merely reward compliance. It trains local governance to anticipate compliance.
Courts can tighten the vise. In Georgia, developers have used litigation to challenge local denials and force approvals. After Monroe County rejected a billion-dollar rezoning, the developer sued, arguing the denial was arbitrary and inconsistent. Meanwhile, counties that approved comparable projects have faced resident lawsuits alleging procedural violations. This two-sided legal squeeze narrows the practical space for democratic contestation. Local governments face risk whether they approve or deny, and that risk itself becomes a disciplining force.
The distributive stakes of accelerated siting
Once decisions are relocated upward, the equity implications become harder to avoid. The burdens of large energy and tech projects land where the infrastructure is built, while the financial upside often flows elsewhere to firms, state budgets, and distant consumers. Preemptive siting can therefore function as an extraction mechanism that is legal rather than illicit. It externalizes costs tied to land conversion, air emissions, water demand, and the wear placed on local services, while preserving a narrative of statewide competitiveness and national necessity.
Fiscal design is one obvious fault line. West Virginia’s approach is instructive because it makes the revenue question explicit. Reporting on the state’s microgrid and data center program describes a structure in which host counties receive only a minority share of property tax revenue from facilities, with a large portion routed into state-controlled funds. Even if formulas shift under public pressure, the underlying message remains. Localities will host the industrial footprint, but they should not assume they will capture the fiscal return that would traditionally justify industrial development. That mismatch is not a side effect. It is often part of the deal architecture that makes projects attractive to investors.
Utility governance creates a second channel for cost shifting. When data centers drive new generation and transmission investments, the central question becomes who pays. If utilities spread upgrade costs across all customers, households subsidize corporate operations through higher rates. That concern is now prominent enough to shape state politics, not only local hearings. Georgia’s surge in proposed capacity additions and the controversy over whether ordinary customers will be left with the bill have become central to public debate, with regulators and advocates explicitly contesting the allocation of infrastructure costs.
Some states are experimenting with ways to limit cross-subsidies by requiring very large loads to internalize supply costs. Utah’s 2025 SB 132 is an example. It defines large loads at the scale of 100 megawatts or more and establishes a process in which the utility evaluates whether it can serve the request without major new investments, with the option for the customer to procure supply elsewhere if the utility cannot. In principle, this shifts risk away from existing ratepayers. Yet it can also deepen a privatized energy landscape where new generation is sited to serve private campuses, potentially increasing localized pollution burdens even as broader grid pressures ease. A policy meant to stop cross-subsidies can still produce local externalities, only now through more privatized power islands.
Environmental impacts sharpen the distributive conflict because they concentrate in place. West Virginia’s fights have featured residents describing how a gas-linked data center complex would alter air quality, noise, and the sensory life of a scenic region with an outdoor recreation economy. Under a preemptive framework that removes zoning leverage, accelerated siting becomes a kind of relocation. It moves decision-making away from those who live with the consequences, while leaving them with the everyday burdens of the built result.
Water politics intensify the same dynamic in arid regions, where scarcity makes every new demand legible as a trade-off. Tucson’s Project Blue fight turned on exactly this leverage. A proposed $3.6 billion development required annexation and municipal water access, prompting Amazon to back out and the city to halt annexation talks after public outcry and to pursue stronger local conditions on large water users. The struggle was not simply about a single facility. It was about whether water, once treated as a background utility, can remain a public governance object in an era when compute tries to behave like an entitled industrial load. Nevertheless, the data center developers are hoping to continue with the project by seeking Pima County and Arizona Corporation Commission (ACC) approval.
The Great Salt Lake Basin shows what happens when the accounting itself is contested. In Utah, recent reporting on proposed transparency legislation notes that an analysis cited in legislative debate found the National Security Agency’s Bluffdale facility consumed more than 23.5 million gallons of water in a single month, a figure that becomes politically explosive when set against the region’s broader drying crisis. The basin’s vulnerability is not theoretical. An economic analysis for the Great Salt Lake Advisory Council estimates annual monetized costs in the range of roughly $1.7 to $2.2 billion associated with declining water levels, driven in part by dust and health impacts from exposed lakebed. When water use is treated as proprietary and disclosure is weak, the public cannot evaluate whether sustainability claims match reality or whether a shared resource is being quietly converted into an industrial input.
These material patterns are why the AI boom is extractive. Value and strategic advantage flow outward, while pollution, landscape change, and service burdens stick locally. Data centers can deliver short-term construction spending, but their long-term job base is often thin relative to their land, water, and power demands. The computing they produce is sold to distant firms and markets, so the main beneficiaries are rarely the host community. Data center expansion is also an environmental justice story about leverage. Affluent, well-networked places can hire counsel, mobilize quickly, and slow projects down, while rural and lower-income jurisdictions are often pursued precisely because land is cheaper and resistance is easier to contain.
Federal preemption as tailwind, not bulldozer
The politics of preemption extend beyond statehouses. An executive order titled “Accelerating Federal Permitting of Data Center Infrastructure” was already made back in July. On December 11, 2025, President Trump signed another executive order titled “Ensuring a National Policy Framework for Artificial Intelligence,” aimed at challenging or deterring certain state AI laws and pushing toward a single federal posture. The order does not directly rewrite local zoning codes or automatically override state statutes. Its practical impact depends on agency action, funding conditions grounded in statutory authority, and litigation outcomes. But its political effect is immediate. It frames a fragmented state landscape as a national competitiveness problem and offers a federal vocabulary that states and industry can use to discipline local resistance.
The order directs the federal government to identify state AI laws it considers “onerous,” including laws that require AI models to alter “truthful outputs” or that compel certain disclosures, and it establishes a posture of coordinated federal challenge through the Department of Justice and related agencies. It also signals a fiscal approach, instructing Commerce to review whether certain federal funds can be conditioned on state compliance, a move that has already generated legal debate about federal authority and constitutional limits.
This is where the connection to water and energy transparency laws becomes plausible even if it is not explicit. The executive order does not name water, energy, data centers, or environmental reporting as direct targets. Yet it does target a category of state rules framed as compelled disclosure, and at the same time statehouses are actively debating transparency requirements for data center water use. At least eight states introduced legislation in 2025 to require data centers to report water use, precisely because communities and regulators are struggling to govern what they cannot see. The likely near-term effect is therefore not federal field preemption that sweeps away local authority overnight. It is a federal tailwind that strengthens the hand of state-level centralizers and industry advocates by treating local and state constraints as obstacles to a national AI project.
Preemption aligns state power with a new generation of energy-intensive, capital-heavy infrastructure, and it redefines the public interest in terms of speed, scale, and investor certainty. The question this raises is not simply whether communities can plan better. It is whether democratic control over territory can survive an industrial policy that increasingly treats land, energy, and water as inputs to a national AI project, while relocating decision-making away from the places asked to absorb its costs.