Data Center Backlash Hits GOP Before Midterms

Commerce Secretary Howard Lutnick dismissed the water complaints on CNBC on Wednesday, calling them "propaganda by our adversaries to try to slow us down." He added: "One of my favorite things is when people talk about data centers using water. The No. 1 product in America that uses water is cattle. I mean, data centers don't use water." PennLive reported the remark drew a wave of criticism, with one response calling him "nothing but a liar."

Republicans in Congress are moving the other way. "They are major drivers of investment, economic growth, job creation, the development of our nation's digital infrastructure," Rep. Gary Palmer (R-Ala.), chairman of the House Energy and Commerce environment subcommittee, said at a hearing Thursday. "However, those benefits should not come at the expense of families and small businesses through higher water rates."

Microsoft is backing the Water Cost Accountability Act, which would direct states to block public water systems from recovering data center hookup costs from anyone but the developers or owners. "This legislation represents an important step toward building the infrastructure needed for America's future while strengthening trust with the communities that host it," said Fred Humphries, the company's corporate vice president of U.S. government affairs.

House Ways and Means Chairman Jason Smith (R-Mo.) called the Democrats' opportunity-zone attack a "huge stretch," telling Politico the zones "control, like, everything — from child daycare centers to manufacturers. Can data centers be used in them? Yes. But so can everything else."

Rep. Ro Khanna (D-Calif.), whose district includes Silicon Valley, told Politico that Trump "has made it an issue by saying that he wants data centers reigning everywhere," and that Democrats "can be on the side of local cities, rural communities, factory towns, suburbs — places that don't want Big Tech coming and telling them what to do."

Business groups say a ban is the wrong answer. Courtney Coolidge, executive vice president of the Arizona Chamber of Commerce & Industry, said Mayes raised legitimate concerns but that the fix is to "solve these problems," adding: "Data centers are not popular right now, so I don't relish being the data center defender, but it's politically expedient to call for a moratorium." Jason Hayes of the Heritage Foundation's Center for Energy, Climate and Environment called data centers "essential digital infrastructure" and said Arizona should build more reliable generation, such as nuclear or natural gas, rather than pause construction.

The opposition does not sort neatly by party. Citizen Free Press flagged a Wall Street Journal piece noting that Bernie Sanders, Alexandria Ocasio-Cortez and Steve Bannon have landed on the same side of the fight. And Shapiro is taking fire from his right: the center-right outlet Broad + Liberty called his data center policy "heavy-handed" and a "flip-flop" that is bad for Pennsylvania.