Data Centers Under Fire for Forcing Local Officials to Sign NDAs
State leaders and lawmakers across the US are cracking down on data center developers' use of nondisclosure agreements (NDAs) with local officials, citing concerns about transparency and community impact. Governors in Massachusetts, Delaware, and Pennsylvania have issued executive orders, while state legislatures in New Jersey, Illinois, and New York are pursuing bills to ban or restrict NDAs. This push for transparency comes amid growing community opposition and concerns over electricity demand, water use, and environmental effects of data center expansion.
State leaders are increasingly scrutinizing the use of nondisclosure agreements (NDAs) by data center developers with municipal officials, aiming to prevent secrecy surrounding new projects. Governors Maura Healey of Massachusetts, Matt Meyer of Delaware, and Josh Shapiro of Pennsylvania have recently issued executive orders to curb this practice.
Simultaneously, legislative efforts to ban NDAs are gaining traction in statehouses across the country, though federal action remains minimal. The US House of Representatives passed the Ratepayer Protection Act (H.R. 9340) to protect energy bills from data center-related rate hikes, but its progress in the Senate is expected to stall. Critics argue that NDAs leave communities uninformed about projects that can significantly impact local resources like electricity and water, as well as the environment and taxpayer costs. Technology and political strategist Sam Silverman highlighted the erosion of trust caused by such agreements.
In response to mounting backlash and lawsuits, some industry players are shifting their strategies. Microsoft Corp., for instance, announced in March its decision to stop requesting NDAs, prioritizing transparency. However, Mona Dajani, a partner at Cooley LLP specializing in infrastructure and energy, believes a broader industry-wide adoption of a no-NDA policy is unlikely, though confidentiality agreements may become narrower in scope. Eric Bonds, a sociology professor, found that 25 of 31 proposed data center projects in Virginia involved NDAs, including one for Amazon.com Inc., raising concerns about the broad scope of information covered.
New Jersey, Illinois, and New York lawmakers are actively pursuing legislation to prohibit NDAs and mandate greater public transparency for data center developments. New York State Senator Kristen Gonzalez has made transparency a core part of her advocacy, and Governor Kathy Hochul previously enacted a moratorium on new data center permits in July. A specific case in point is the proposed Stream U.S. Data Centers campus in Genesee County's town of Alabama, New York. Despite Stream's claims of transparency and economic benefits, residents like Adrienne Yocina express frustration over the difficulty in obtaining basic project information, fueling feelings of being marginalized in crucial community decisions.