Data Centers, Regulation, and Legislation, Oh My

Data centers are industrial facilities that house technological infrastructure for storing, processing, and computing digital information. Modern data centers, especially those intended to support large-scale artificial intelligence projects, differ significantly in physical form and environmental impact than earlier, smaller manifestations. Regulation of data centers has become a salient issue due to recent economic investment in them and the potential resulting environmental and social consequences. In 2025, funding for data centers in the United States increased to $77.7 billion USD, a 188% increase from the year before. Both the market emphasis and environmental consequences of data centers are substantial. In 2025, data centers consumed 183 terawatt-hours of electricity, or 4-5% of the United States’ total electricity use. By 2028, data centers could reach 6-12% of national electricity use. According to Clean Wisconsin, a single gigawatt data center could consume electricity equivalent to 1.1 million Wisconsin homes. Clean Wisconsin also illuminates another environmental impact of data centers: water consumption. Data centers in Wisconsin could use 54 million gallons of water a day, more than the entire city of Green Bay. 70% of Wisconsin's water withdrawals are already for power generation, and increasing energy demand could lead to indirect water and emissions to support further necessary powergrid infrastructural development.

 

The adequacy of data center regulation faces new questions in light of the developmental demands of artificial intelligence and the resulting resource needs of hyperscale, modern data centers. Traditional governance has been guided by local governments in cities, villages, towns and counties through varied zoning ordinances, conditional use permits and local site-plan approvals. To the extent they are regulated at all, data center regulation falls under general statutes rather than any data center specific regime: environmental impacts are managed by Department of Natural Resources (DNR) rules for stormwater discharge and construction site erosion control permits, while generic state and federal permitting guidelines dictate standards for air emissions and water withdrawals. The Environmental Protection Agency’s own “Clean Air Act” underscores this point, as data centers are governed by EPA regulation of specific components, such as back-up diesel generators, and not as a comprehensive class of regulated facilities. Rather than a bespoke data center profile legal framework, data centers are shaped by general water law, such as in permitting for wells and withdrawals, as well as through contaminated land and waste management rules. Further local initiatives to address data centers have been complicated by the utilization of non-disclosure agreements (NDAs). In sites like Kenosha, Janesville, Menominee, Beaver Dam, and Beloit, NDAs were signed by public officials and developers before residents knew major AI data center developments were being negotiated. These NDAs obscured public knowledge about the projects creating an information asymmetry between private actors and the broader public. When projects have become known, local pushback has been swift in some instances. In Menomonie, Wisconsin, the city council annexed and rezoned land to support a proposed project, but local grassroots organizing forced city officials to cease continued plans with data center developers. 

 

The Wisconsin Utilities Public Service Commission does not directly regulate data center construction or operations, but it does regulate the utilities – water, gas, and electricity –  that serve data centers. In an online overview of its data center policy, the PSC states that while it has “no direct regulatory oversight of the development or operations of data centers”, it must ensure that the utilities it regulates can meet new demand while keeping the costs of generation, transmission, and distribution fairly distributed among customers. Even without direct regulatory oversight of data centers, the PSC has taken an active approach to explicitly address the risks that large customers, such as data centers, pose to the average ratepayer through the increased utility costs accompanying intensive energy expansion demands. The PSC overhauled Wisconsin’s largest utility’s (We Energies) original proposal for a “very large customer” tariff on data centers in an update Clean Wisconsin described as a “substantial modification” to a previous proposal. The PSC went further and lowered the “very large customer” enrollment to 100 MW and declared that data centers meeting the criteria must pay the whole costs of related updates to power generation, shielding regular consumers from the burden. Similar legislative efforts have attempted to codify these updates into a cemented legal framework.

 

Various bipartisan legislative efforts in Wisconsin have been brought forward to address data center regulation in hopes of providing a more detailed and directed regulatory landscape. The Data Center Accountability Act (AB 722, SB 729) requires 70% of electricity use to be from renewables to qualify for tax breaks, while also requiring the annual disclosure of water and energy use. This legislation would also oblige data centers to contribute fees toward energy and green innovation funds, as well as necessitate labor and wage protections to workers building the data centers. Moratorium Bill (AB 1099, SB1061) is a proposed statewide moratorium on data center development until state legislators are able to discuss and enact comprehensive standards on water and energy use, tax and subsidy incentives, as well as defined guidelines and planning for future data centers. The bill would also enable community referendums to take place, and certain environmental safeguards to be determined. The NDA Prohibition Bill (AB 1036, SB 969) would bar developers, local governments, and related actors from entering NDAs that conceal possibilities of data center projects from the public, while still guaranteeing protections to business information that is realistically sensitive. One final proposed piece of legislation is the Ratepayer / Utility Bill (AB 840, SB 843) aimed to ensure grid updates driven by data center needs would be paid for by those data center facilities, without costs shifted to normal ratepayers. This bill would also require onsite renewables, closed loop cooling systems, annual water use reports, and land reclamation bonding for the end stage of facilities. 

 

Data centers support digital infrastructure and processes, but their societal impacts are equally as material. Data centers are not just sites of virtual data, but also of struggles between economic, social, and political forces. Debates over proper regulation are necessary to address the new consequences resulting from the modern form of data centers, particularly in their environmental and financial costs to citizens in the locations they inhabit. Considerations of matters related to data centers are widespread, but Wisconsin serves as a case study for potential governance and legislative initiatives. With economic growth of data centers and the technology they support increasing, appropriate dialogue is necessary to establish a fair and effective regulatory framework.