Nebraska Reins in Data Center Perks Amid Resource Scrutiny

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Nebraska Reins in Data Center Perks Amid Resource Scrutiny
The incentives era is giving way to infrastructure realities. Nebraska’s action highlights how power access and resource impacts now drive where, and whether, large campuses are built.
Nebraska Gov. Jim Pillen has signed an executive order blocking new data center projects from receiving tax incentives under the ImagiNE Nebraska Act, intensifying debate over what communities should demand in return for hosting power- and water-intensive digital infrastructure.
Signed on July 21, the order applies to all new data center applications; existing projects are not affected. It also directs state economic development, revenue, water, and energy agencies to evaluate proposals jointly and establishes a task force focused on protecting land, water, and electricity resources.
“This is not a moratorium on data centers,” Pillen said. “However, if a local entity chooses to engage in the development of a data center, it must now be developed in accordance with guidelines included in the executive order.”
Grid Capacity, Not Tax Policy, Is Steering Site Decisions
Ashish Nadkarni, IDC group vice president and general manager and global domain lead for enterprise infrastructure, said the move reflects growing political pressure to ensure residents are not subsidizing the resources data centers consume.
“Utilities and natural resources are important, and if someone wants to build a data center, they need to pay market price to procure them,” Nadkarni told Data Center Knowledge. “That way, the taxpayers don’t need to foot the bill or carry the burden.”
Across the industry, power availability is increasingly outweighing tax policy in site selection. Permit freezes, tax rollbacks, and tougher utility mandates have emerged as political responses to the backlash over data center energy demands, as communities question whether local grids and resources can absorb AI infrastructure’s rapid growth.
In a June 10 directive, Texas Gov. Greg Abbott ordered the Public Utility Commission of Texas to shift more grid connection costs to developers while shielding residential customers from the AI boom’s infrastructure needs. On July 14, New York became the first state to pause certain permits for data centers using at least 50 MW of capacity while regulators assess their impacts on the grid, water, and communities. Meanwhile, a July draft Department of Energy study found that AI data centers are driving US electricity demand growth and reshaping grid expansion plans.
The Nebraska State Capitol Building in Lincoln, Nebraska. Nebraska’s move fits a national pattern of states prioritizing grid capacity and resource safeguards over incentives. (Image: Getty Images)
Industry leaders say incentives still matter, but cannot overcome basic constraints. “The conversations are centered on three things: power, available land, and the network infrastructure needed to connect these facilities,” said Bill Major, CEO of fiber infrastructure provider FiberLight. “If those fundamentals aren't in place, tax incentives alone won't make a project viable.”
Nebraska has already enacted legislation allowing large industrial customers to work with private companies on behind-the-meter generation – an approach that state officials say can support major projects without shifting the costs of new electricity demand to existing ratepayers.
Opposition to the incentive freeze is building. Five days before the executive order, the National Taxpayers Union and Platte Institute released a report arguing that data centers could expand Nebraska’s tax base and create construction, supplier, and technology jobs. The groups urged the state to encourage privately owned generation, increase transparency around electricity pricing, and tax data centers under the same principles applied to other businesses.
The Platte Generating Station (PGS) in Grand Island, Nebraska. At full capacity, PGS produces 100 MW, according to the City of Grand Island Utilities Department. (Image: Getty Images)
How Opposition Is Reshaping Data Center Buildouts
Nadkarni said Nebraska’s decision could foreshadow similar action elsewhere as communities scrutinize how data centers affect utility capacity and natural resources. “It is the start of a trend which I think more states will sign onto,” he said.
That trend may not stop construction, but could redirect projects toward locations with clearer permitting rules and sufficient infrastructure. It may also produce more sophisticated utility agreements, tougher resource reviews, and stronger community benefit requirements.
“The ‘not in my backyard’ trend is a double-edged sword,” Nadkarni noted. “On one hand, it means the US risks losing out on the AI innovation side. On the other hand, it also means companies will be more pragmatic with buildouts. And that there will not be a deluge of data center capacity.”
Developers can adapt by becoming more active participants in energy markets, said Seyed Madaeni, CEO of clean energy software company Verse, adding on-site generation, storage, and flexible operations rather than acting as passive electricity consumers.
Community benefit agreements are also likely to become more common as local governments seek infrastructure investment, jobs, and protection against utility price increases.
“The most successful projects won't be those that simply secure land and power,” Madaeni said. “They'll be the ones that align all of the stakeholders needed to deliver reliable infrastructure responsibly.”

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