Key Points:

• Legislative Democrats and Attorney General Kris Mayes back a statewide pause on data center development

• Gov. Katie Hobbs says a moratorium is not the right approach, but is open to other regulations

• Senate President-elect Priya Sundareshan isn’t taking a moratorium off the table just yet

Data center backlash helped propel Arizona Democrats to historic victories, but regulating the facilities could be an early source of friction for the new trifecta. 

Some Democrats support a statewide data center moratorium, which proponents argue will help lawmakers create an appropriate development framework amid skyrocketing demand. But Gov. Katie Hobbs has already publicly disavowed a moratorium, potentially setting up a showdown between the business-friendly governor and environmentally-conscious lawmakers. 

Attorney General Kris Mayes reaffirmed her support for a pause on development when speaking at a victory party on Election Night. Sen. Lauren Kuby, D-Tempe, said a potential moratorium is the “No. 1 policy initiative” legislative Democrats are currently examining. 

“We hear from everyone, Democrat or Republican, that they want to see change,” Kuby said. “Whether it’s the tax incentives or whether it’s looking at community benefit agreements or moratoriums.”

Voters across party lines favor limiting new data center development, according to an August poll from Noble Predictive Insights. But in September, Hobbs told reporters she doesn’t view a moratorium as the right approach. 

“We have to continue to focus on ways that we can grow the economy and do that sustainably,” Hobbs said. “There’s a lot of advances in technology that enable closed-loop [systems] and air cooling that are not using water, and those are the kind of things we’re focusing on in our approach to a data center policy that works for Arizona.” 

At Democrats’ celebration rally at the Capitol on Tuesday, Senate President-elect Priya Sundareshan told reporters that Hobbs’ opposition to a moratorium doesn’t exactly spell doom for the proposal.

“Some of those conversations were before we entered this new day in Arizona,” Sundareshan said. “I think what we need to see is what we can do to be responsive to the voters at the same time as recognizing that there are some benefits that the industry might bring.”

It’s unclear if the governor’s position on the issue has changed. Hobbs attended Tuesday’s rally, but has largely avoided taking questions from reporters since winning reelection on Nov. 3. 

Energy policy stakeholders and environmentalists aren’t surprised by her earlier comments. Hobbs has occasionally bucked the greener members of her own party by celebrating the construction of a new natural gas pipeline and dismissing calls to shut down a northern Arizona uranium mine. 

“I do think there is some amount of disagreement between the governor and the Legislature as far as economic development, data centers, energy, utilities, and their role and influence,” said Autumn Johnson, the executive director of the Arizona Solar Energy Industries Association. “I think there’s a bit of a split there.”

Johnson is also wary of a moratorium, arguing it could open the door for future legislators to institute similar pauses on renewable energy sources like solar and wind.

“My hope would be that we could maybe transition that conversation into an opportunity to bring your own clean power to data centers,” Johnson said, “or some mechanism for projects to move forward, but in a way that advances clean energy and reduces people’s concerns as to water or emissions or power usage.”

Kuby, a retired sustainability scientist who ran for the Arizona Corporation Commission in 2022, said Democrats are also exploring other regulatory avenues. Those include requiring data centers to use renewable energy sources and prohibiting developers from using nondisclosure agreements to shield information on their water use and carbon emissions.

Hobbs previously suggested imposing a data center water-user fee, the proceeds of which would fund Colorado River conservation efforts as the state fights federal cuts. And after securing a three-year moratorium on the tax breaks, she’s on board with making it permanent.

Sundareshan said she is also interested in legislation targeting the Corporation Commission’s response to Arizona’s data center boom. A recent analysis from a consumer advocate alleges that Arizona Public Service is shifting the costs of serving large load users like data centers onto residential utility ratepayers, but the ACC has largely denied those allegations.

“I’m looking forward to the Legislature taking more of an active role in that, especially where the Corporation Commission has abandoned its job, has abdicated its authority to regulate that in that way,” Sundareshan said. “… I know a lot of utilities have said that growth pays for growth, but I would like to ensure that we are codifying that.”

Sandy Bahr, the executive director of the Sierra Club’s Grand Canyon chapter, said that while she would prefer an outright ban on data centers in Arizona, she knows that some environmental goals may still be out of reach. 

“I don’t have expectations that everything that is our top priority will be moving through the Legislature,” Bahr said. “It’s just been a long time since there have been those kinds of conversations on bills that we think will help protect our air, our water and our climate.”