The Hidden Costs of AI Data Centers on Rural American Communities

Data center infrastructure in the United States.

In Lansing, New York, a town of roughly 12,000 just north of Ithaca, New York, hundreds of residents packed into a middle school auditorium last fall. They were there to confront representatives of a company most of them had never even heard of. TeraWulf, a digital infrastructure company, had signed an 80-year contract on 183 acres at the old Cayuga coal plant site to build a data center—a facility housing the servers that power AI—capable of consuming up to 400 megawatts, or enough to power 350,000 homes. Residents pushed back, urging the town board to impose a moratorium on large-scale development, but the company made clear it would not be deterred. TeraWulf’s chief operating officer came to the meeting with a promise: “Something is going to happen at this site, something absolutely will happen, moratorium or not.”

That sentence should terrify anyone who believes people should have a say in how their communities develop. It terrified me. I have attended protests in Lansing, alongside residents who are not activists by nature. They are teachers, students, farmers, and retirees who simply do not want an 80-year industrial contract decided for them. The story of the data center, then, is a story of the slow suffocation of democratic self-governance by corporations so wealthy that small-town zoning boards never stood a chance against.

Data supports what Lansing residents already knew intuitively. A joint study from Carnegie Mellon University and North Carolina State University found that by 2030, data center growth in the US could increase the average electricity bill by 8% nationally, with some regional markets increasing by over 25%. The mechanism is relatively straightforward: when utility companies have to build new infrastructure to serve data centers, they socialize the cost across all ratepayers. As a result, New York State Electric & Gas (NYSEG) implemented a 62% rate increase over three years starting in 2023 and recently proposed an additional 35% hike on electricity rates. 

Beyond the burden of rising electricity costs, water consumption presents another serious concern. In Lansing, residents voiced concern that TeraWulf could draw water from Cayuga Lake despite TeraWulf’s assurances otherwise. Assemblymember Anna Kelles noted that TeraWulf’s LLC structure could allow the company to publicly claim it would not use lake water, while a legally distinct but affiliated entity operating on the same property quietly holds the withdrawal permit. 

Data centers represent a new frontier of corporate power that is fundamentally corroding local democratic institutions. Consider what happened in Lansing, for example. When the town board considered a moratorium on large-scale development, TeraWulf threatened legal action, accusing board members of violating New York’s Open Meeting Law, and demanded the resignation of two elected town officials. When the local code enforcement officer determined that data centers were not a permitted use in Lansing’s industrial zones, TeraWulf filed successive appeals, first arguing that the facility was a “scientific research laboratory,” then as a “warehouse,” before winning a narrow three-to-two vote to classify the facility as “general processing.” The company then hired a Cornell professor to produce an “independent study” that emphasized the project’s economic benefits to the region, despite having no finalized agreement with the university. 

This pattern repeats itself across the country. A University of Michigan study found that data center tax breaks rarely deliver promised economic benefits and instead “[shift] financial burdens onto communities and schools.” Some states, however, have begun pushing back against data centers’ outsized energy demands. Oregon became one of the first states to require utilities to charge data centers higher electric rates, and New York’s proposed Senate Bill S6394A would mandate the disclosure of energy usage by data centers as well as community discount plans. These measures, while very welcome, will arrive years too late, after corporations have already extracted millions of dollars out of the American people. The people in Lansing cannot afford to wait that long.

Trillion-dollar corporations can outsmart and overpower the democratic process at every level. They will outbid communities for electricity. They will threaten elected officials with lawsuits for engaging with their constituents. They will hide under LLC structures to evade accountability. They will fund research favorable to their interests and hire lobbyists to rewrite local communities’ zoning codes. None of these tactics requires conspiracy. The erosion of local democracy is simply the result of capitalism itself, a system that has always prioritized the rights of capital over the rights of people.

AI data centers are already consuming our electricity and water, extracting millions from working families to power the ambitions of the wealthiest corporations in human history. If we cannot protect a town of 12,000 people from an 80-year contract signed without their consent, we have already lost something far more valuable than money. We have lost the right to govern ourselves.

Image Credit

DOE — NREL, CC0, via Wikimedia Commons