Written by Andrew Sharkey
Published November 2nd, 2026
INTRODUCTION
As AI and other technology-related industries continue to expand, developing additional data centers is essential to support their growth. Although data centers are necessary to house the servers that make the technology we rely on possible, their proliferation has sparked debate over their environmental and economic impact on local communities and has revealed a lack of federal regulatory infrastructure. The energy required to operate these data centers continues to strain power grids while polluting communities across the country. However, at the Politico Energy Summit on June 10, 2026, Environmental Protection Agency (EPA) administrator Lee Zeldin announced that the agency will not pursue national environmental requirements. Instead, the agency announced that states and local communities should determine regulatory practices. As a result, state legislators are scrambling to determine the best approach with limited federal guidance. Moreover, citizens and public interest groups are filing a flurry of lawsuits seeking to slow their growth and apply federal law, such as the Clean Water and Clean Air Acts, to data centers. North Carolina is one of the few states growing closer to establishing a comprehensive regulatory framework that supports all parties. The recent filing of House Bill 1180, along with Senate Bills 257 and 1026, reflects the North Carolina General Assembly’s dedication to finding a solution. Despite the larger discourse community surrounding data centers nationwide, little commentary exists on North Carolina’s legislative plan of action. This piece will examine how the state is balancing community concerns and business interests, and whether the legislation serves as a model for how states should handle data center regulation, particularly if tax incentivization continues, and potential legal challenges as regulations are implemented. Because states lack a comprehensive regulatory framework, data centers and their affiliated groups continue to exploit legal gaps to further their interests, often at the expense of quality of life for surrounding disadvantaged communities.
ECONOMIC IMPACT
While data centers may have logical reasons to exist, many development plans are misrepresented to communities. Many of these communities are also vulnerable to exploitation due to their economic standing, especially in North Carolina. North Carolina grants tax exemptions for building in Tier 1 or Tier 2 counties. One aspect of being an “eligible internet data center” for certain exemptions is building within Tier 1 or 2. Fulfilling this, along with certain other criteria, grants the data center certain sales tax exemptions. Tier 1 includes the 40 most economically distressed counties, while Tier 2 includes the next 40 most economically distressed. This makes the idea of “more jobs” especially appealing to these counties, compared with counties with stronger economic standing. Despite data center proponents advocating heavily on the platform of increased jobs, the search showed only a significant increase in employment in the data processing sector: 56%. As the Brookings Institute notes, data centers require some of the least labor among many modern companies, with many offering only a few dozen to a few hundred permanent workers. Even with a temporary jump during construction, this decreases soon after because of data centers’ technological autonomy. These centers require little human labor, so they create fewer jobs for local communities than advocates suggest. Since the largest job gains are in the data processing sector, and because this sector typically requires some sort of certification or degree, it helps only those with the means to earn them. This is a small proportion because data centers are typically in Tier 1 or Tier 2 counties that have the fewest resources.
LEGISLATURE
In North Carolina, a constantly developing legislature keeps trying to address data center challenges by filing new bills. Many of these define certain aspects and characteristics because the centers are new. House Bill 1180 addresses whether North Carolina taxpayers should bear additional taxes from data center expansion. The bill proposes a new plan using special tariffs, which would be required for any data center over 20 megawatts (MW). In this context, tariffs are defined as the rules that guide how utilities provide and bill customers. The customers then receive energy based on their needs. For example, if a data center needs large amounts of energy, then supporting infrastructure must be built first. However, if the data center does not use the allotted amount or shuts down early, someone still has to pay for the infrastructure built. One major concern is that utilities will then try to recover this money by raising rates for their remaining customers. This would leave disadvantaged counties to cover these costs, despite being the least equipped to do so. The most significant implication of this bill is repealing the remaining special sales tax exemptions. These include the software exemption, the property exemption, and the equipment exemption (SB 257 already repealed the electrical exemption). By proposing a repeal of the current tax exemptions, the North Carolina legislature takes a moderate stance that limits incentives but does not ban or hinder development. The legislature has not signed this bill into law.
However, Senate Bill 1026 looks to better categorize data centers and create long-term contracts between electric utility companies and data centers. Under this bill, 50MW centers are considered large-load customers, and 100 MW centers are considered very large-load customers. Utilities must file special electricity tariffs with the North Carolina Utilities Commission. While contracts may vary, they must meet certain requirements. Beginning with minimum length, SB 1026 requires a 20-year minimum contract length. An additional clause states that the customer must “take or pay for a certain percentage of the customer’s maximum contracted demand following commencement of service”. This clause implies that even if data centers do not use a certain amount of their contracted electricity, they must still pay for it. Similar to HB 1180, this would eliminate the possibility of additional community costs resulting from data center failure. Additionally, data centers must provide utilities with enough information to determine whether their electricity demands are realistic. This bill also requires annual reporting of both electricity and water usage to the Utilities Commission and the NC Department of Environmental Quality, addressing the environmental aspect. This bill has also yet to become law.
Senate Bill 257 is the most monumental of these North Carolinian bills, because it was actually signed into law on July 7, 2026. This bill repealed the electricity tax exemptions for data centers, allowing the state to generate more revenue through the taxes the centers must now pay. This benefits the state, but it is also a drawback corporations will likely consider when deciding which state and county will generate the most profit. Although data centers still qualify for other aspects of sales tax exemption, this law marks a step toward a more neutral stance on data centers. By passing this bill into law, North Carolina legislators demonstrate a willingness to listen to their constituents and reverse previously enacted policy. This sets a strong precedent for future data center reconsideration and confirms that communities can enforce change not only through the courts, but also through their local legislators.
LAWSUITS
Despite the accumulation of legislation attempting to address the centers, recent lawsuits continue to be filed across the country and in North Carolina. At the national level, the NAACP is suing xAI and its subsidiary group, MZX Tech LLC, in Mississippi, alleging violations of the Clean Air Act. The case, National Association for the Advancement of Colored People and Mississippi State Conference of the NAACP v. X.AI Corp. and MZX Tech LLC, specifically accuses them of illegally operating gas turbines, causing pollution. While xAI had been approved to operate turbines without the typical permits required under the Clean Air Act, the NAACP argues that xAI did not properly follow the conditions put forth, declaring that just because a turbine is put on a portable vehicle does not make it a mobile source when it proceeds to sit in the same place and supply electricity. The case illustrates the many ways data centers seek to circumvent rules and regulations to perform their desired functions more efficiently. The lack of a comprehensive regulatory framework makes similar loopholes even more apparent.
A petition local to North Carolina was detailed in a press release from the Southern Environmental Law Center. On September 25th, 2026, the Southern Environmental Law Center partnered with the Richmond County Coalition for Justice and Black Empowerment to dispute Amazon and Duke Energy for operating 649 diesel generators at a large data center in Hamlet, North Carolina, in the case Richmond County Coalition for Justice and Black Empowerment v. N.C. Department of Environmental Quality, Division of Air Quality. Shaun Ingram, a co-founder of the Richmond County Coalition for Justice and Black Empowerment, questions the harms of these generators: “In our community already exposed to multiple air pollution sources and struggling for access to healthcare, what happens to people when one of the world’s wealthiest companies spews even more harmful pollution from 649 diesel-fired generators for its data center?” The petitioners argue that, instead of granting two separate minor source air permits, the North Carolina Department of Environmental Quality should have granted a single major source permit. They cite Duke Energy generators and the Amazon generators being on the same property as the reason for this request. Additionally, if categorized as a single major source, they would face stricter air quality regulations. This demonstrates another attempt to evade regulations, further highlighting how easily data centers exploit current legislation.
Another suit currently in litigation regards the proposed Project Delta in Stokes County. In this case, the Southern Coalition for Social Justice and the Southern Environmental Law Center are representing the National Hairston Clan, CleanAIRE NC, 7 Directions of Service, and local residents. The case, The Hairston Clan, Inc., et al. v. Stokes County, was filed March 12, 2026, and is currently pending in Stokes County Superior Court. Residents are frustrated over the rezoning of 1,800 acres for a proposed data center. Despite the previously listed cons of data centers, the Stokes County commissioner counters with the possibility of increased county revenue from the proposed data center. During a public hearing, she declared: “I want my grandkids to be able to stay here and work and get good jobs. I want us to have modern schools and appropriate fire and police protection… Do I want a data center? Not so much. But I do want the things revenue can bring to our county.” This response poses an interesting dilemma for many lower-income counties where data centers are being proposed/built. While Cox does not seem to love data centers, allowing them to operate as they please could boost the revenue of their struggling community. As she notes, this remains a major topic of discussion for many local leaders as they weigh the quality-of-life cons against the economic pros.
CONCLUSION
As the situation continues to evolve, North Carolina demonstrates its awareness and commitment through its constantly evolving legislature. Although it has not yet finalized a comprehensive regulatory framework, it is making strides toward one. The many lawsuits against data centers exploit numerous loopholes. An interesting approach many counties have taken is establishing moratoriums to slow development. Moratoriums are government-imposed pauses on permitting that grant time for additional research and therefore more informed decisions. Because of the complexity of this issue, a statewide moratorium could be a strong solution that allows the current legislature to both resolve current civil suits and formulate a strong set of regulations. Because data centers have both pros and cons, a moratorium would allow legislators to find a middle ground that satisfies both sides.
This piece was written by Andrew Sharkey, a Sophomore at Wake Forest University.
The views expressed in this publication are those of the individual authors alone and do not reflect the positions of the WFULR. As an independent, student-run organization, the WFULR does not represent the views of Wake Forest University.
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