Va. Senate ‘impact fee’ proposal for data centers meets pushback as budget negotiations move forward
Virginia lawmakers are debating an "impact fee" proposal for data centers as part of ongoing budget negotiations, aiming to replace a contentious sales and use tax exemption. Environmental groups are pushing back against the fee, arguing it does not address the core issues of unconstrained data center growth and are calling for a pause on new development. The budget deadline is approaching, with a potential government shutdown if an agreement is not reached.
Virginia's state legislature is grappling with budget negotiations, with a new proposal emerging to implement an "impact fee" on data centers. This fee, based on backup diesel generators, is put forth by Senate Democrats as a compromise to resolve a months-long stalemate over the industry's sales and use tax exemption. State Senator Creigh Deeds indicated a tentative agreement on key budget pieces is close.
However, the proposal faces significant opposition from environmental groups across the Commonwealth, including the Piedmont Environmental Council (PEC), Southern Environmental Law Center, Chesapeake Bay Foundation, Appalachian Voices, and the Sierra Club Virginia Chapter. These groups argue that the impact fee does not adequately address the rapid, unconstrained growth of data centers, citing concerns about 51 gigawatts of load growth, transmission lines, substations, and environmental impacts like air pollution and water consumption. They are collectively calling for a pause on all new data center development in Virginia.
The data center industry, business groups like the Virginia Chamber of Commerce, and labor unions such as the International Brotherhood of Electrical Workers 26, oppose both the elimination of the tax exemption and the proposed impact fee. They argue that changing existing agreements could jeopardize billions in private investment and jobs. The budget is due by June 30, and failure to reach an agreement could lead to Virginia's first partial government shutdown.