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Data Centres: Boom and Backlash
7JUL

Tax fight kills Virginia projects early

3 min read
09:27UTC

Compass Datacenters walked away from two Greensville County and Emporia sites before filing a single planning application, with Finance Secretary Mark Sickles telling the Senate Finance Committee tax uncertainty alone drove the exit.

IndustryDeveloping
Key takeaway

State fiscal uncertainty is now cancelling data-centre projects upstream of the permitting process entirely.

Compass Datacenters halted its search for two sites in Greensville County and Emporia, Virginia, and Finance Secretary Mark Sickles told the Senate Finance Committee the projects were lost to tax uncertainty alone, before a single planning application was filed. 1 Virginia's state budget has been stalled since early March over whether to end the data-centre tax exemption eight years early. Senate Finance chair Louise Lucas wants it gone by 2026; the House wants it extended to 2035. For Southside counties that means jobs averaging $100,000 a year walked away from places where the median household earns $56,759.

The Virginia Court of Appeals voided Prince William's Digital Gateway rezoning earlier in the spring, and Compass withdrew there too ; the county then dropped its appeal, extinguishing a 2,000-acre plan . Those fights bit at the planning stage. The Compass exit this time happened before any application existed, which shows the constraint moving upstream of permitting entirely.

Virginia built its cluster on a 2035 abatement commitment . Unwinding it retroactively makes the state legally unreliable for anything committed from 2026 on, and it puts the forward pipeline of the world's most concentrated data-centre market at risk through fiscal policy rather than zoning refusal.

Deep Analysis

In plain English

Virginia has been offering data-centre companies a special tax break on the equipment they buy, exempting them from sales tax on servers and networking gear. This exemption runs until 2035 and was a major reason Virginia became home to the world's largest concentration of data centres, around Loudoun County near Washington DC. Senate Finance chair Louise Lucas wants to end the exemption in 2026, eight years early. The House wants to keep it to 2035. The two sides have been deadlocked since March, stalling the entire state budget. Compass Datacenters was quietly scouting two sites in Southside Virginia, a poorer rural area south of Richmond, for new campuses. Before filing any formal applications, it stopped looking. Finance Secretary Mark Sickles told a Senate committee those two opportunities were lost purely because of the tax uncertainty. At $100,000 average salary, those jobs matter enormously in counties where households earn a median of $56,759.

Deep Analysis
Root Causes

Virginia's 2035 abatement commitment was extended in 2018 as a competitive response to Amazon's HQ2 site search, making it part of the implicit contract that drew $100bn-plus of campus investment into Northern Virginia over seven years.

The fiscal-backlash pressure is directly proportional to the cluster's success: every new campus that opens increases the abatement's annual cost to the state's general fund, making it politically visible to constituents outside the data-centre corridor. Senator Lucas's district in Portsmouth is not a data-centre beneficiary, which structurally positions the Senate Finance chair as a voice for the abatement's cost rather than its benefits.

What could happen next?
  • Risk

    If the abatement is cut retroactively, projects already announced but not yet under construction could trigger force-majeure clauses in site agreements, unwinding investment that Virginia's economic development pipeline has already counted.

  • Consequence

    Southside Virginia counties, which have weaker alternative economic attractors than Northern Virginia, absorb the greatest employment loss from pipeline cancellations.

First Reported In

Update #4 · Grid wins power to switch off data centres

Cardinal News· 26 May 2026
Read original
Causes and effects
This Event
Tax fight kills Virginia projects early
A retroactive tax change reaches projects that have not reached planning at all, threatening the pipeline of the world's most concentrated data-centre cluster through fiscal means rather than zoning.
Different Perspectives
Global hyperscale operators
Global hyperscale operators
Operators are still filing gigawatt-scale campuses and Meta is proceeding with its $10bn Lebanon, Indiana site despite the county-level bans nearby, betting Q2 capex outruns the patchwork of restrictions. Industry framing casts New York's freeze, Oregon's surcharge and Indiana's bans as taxes and levies that push build-out toward faster-permitting jurisdictions such as India and the Gulf.
EirGrid
EirGrid
EirGrid set a 900 MW instantaneous demand-loss ceiling because a single voltage dip can trip many data centres onto backup power at once, risking imbalance above 1,150 MW. It wrote the limit into a standing procedure rather than waiting for an emergency to force one.
US host communities and ratepayers
US host communities and ratepayers
Prince William residents backed the 8-0 denial of Dulles South over the Occoquan watershed, drinking water for eight million people, while Oregon's approved tariff cuts residential bills 1.3% by charging large loads 29% more. Their position: consent and cost-attribution belong in law, not left to a developer's or a utility's discretion.
Hassan Allam Digital Infrastructure
Hassan Allam Digital Infrastructure
Hassan Allam Digital Infrastructure, an Egyptian conglomerate rather than a foreign hyperscaler, reportedly secured a domestic hyperscale licence with a $400m first phase, per single-source reporting still to be verified. It reads as home-grown sovereign compute ambition, building national capacity rather than importing a US or Gulf operator's campus.
Damac Digital
Damac Digital
Damac Digital keeps building toward roughly 6,000 megawatts of hyperscale capacity across 13 countries while Virginia taxes power and New York weighs a freeze. Every dollar or month of delay a US state adds is capacity a Gulf developer can site somewhere with faster permitting and no equivalent levy.
Acequia communities, Santa Fe County
Acequia communities, Santa Fe County
Santa Fe County commissioners voted unanimously on 2 July to freeze any data centre over one megawatt, citing the acequia irrigation commons that has shared scarce water since Spanish colonial rule. They expect the low threshold to draw the same Fifth Amendment challenge RCM Hill brought against Hill County, Texas.