New Jersey gave data centers $500 million, then pretended to protect residents from them

By James J. Devine

There is an extraordinary before-and-after photograph buried in New Jersey’s statute books.

In 2024, Trenton was offering artificial intelligence companies and large-scale AI data centers access to as much as $500 million in state tax credits.

Two years later, New Jersey was passing laws intended to keep those same enormous facilities from shifting electricity costs onto ordinary ratepayers, requiring them to disclose how much water and energy they consume and eliminating the remaining $250 million in uncommitted tax credits.

The change does not prove that every data center is economically or environmentally harmful, but the explosive growth of AI-driven data centers is raising electricity bills, threatening the water supply, polluting our environment, and disrupting our communities.

Industry representatives argue that the facilities provide essential digital infrastructure, jobs, and investment—although they admit that they also carry the risk of causing human extinction.

“Data centers are the latest chapter in a long history of corporate pollution,” said Food & Water Watch organizer Charlie Kratovil. “They are coming for our energy, land, and water with little or no regard for communities and the environment.”

But it does document a remarkable reversal in state policy: New Jersey first created a substantial financial incentive to attract the industry and subsequently enacted safeguards aimed at costs and resource demands associated with its expansion.

Call it the $500 million lesson in subsidizing first and asking questions later.

When Data Centers Were the Next Big Thing

On July 25, 2024, then-Gov. Phil Murphy signed S3432/A4558, the Next New Jersey Program Act, P.L. 2024, c. 49.

The law established an NJ Economic Development Authority program intended to attract artificial intelligence investment, including large-scale AI data centers. Eligible projects generally had to invest at least $100 million and create at least 100 full-time jobs. The law made as much as $500 million available to the program from tax-credit capacity otherwise allocated to the Aspire and Emerge economic-development programs.

There was nothing shy about the sales pitch.

Murphy said New Jersey was “capitalizing on this moment” and seeking to become a leader in generative AI. Sen. Raj Mukherji spoke of “incredible return on our investment.” Assemblyman Chris Tully called the legislation “a bold step forward.”

The Senate vote was 40-0. The Assembly approved it 60-14. Almost all of those lawmakers will be on the ballot next year, but very few of them are vulnerable in the November elections.

Gerrymandering makes primary elections the only consequential voting in New Jersey’s legislative races. Successfully challenging incumbents usually means gearing up now.

This was not a policy that slipped through Trenton unnoticed. It passed the Senate unanimously and won three-quarters of the Assembly.

The law even permitted an individual award of as much as $250 million. The NJEDA subsequently approved precisely that amount for CoreWeave: $50 million annually for five years, subject to the company satisfying the program’s requirements.

By April 2026, however, the political conversation surrounding data centers sounded considerably different.

New Jersey lawmakers were considering bills aimed at preventing data centers from increasing utility costs for other customers, requiring disclosure of their energy and water consumption and imposing additional environmental and transparency requirements.

Communities including Harrison Township, Logan Township and Millville had moved toward restrictions or bans, while opposition in New Brunswick helped derail a proposed project.

The same state that had rolled out financial incentives to attract the industry was beginning to construct guardrails around it.

From “Come to New Jersey” to “Pay Your Fair Share”

The change in vocabulary is striking.

In 2024, the words were innovation, investment, opportunity and leadership.

By 2026, state officials were talking about higher energy costs, strained infrastructure, water consumption, grid reliability and making data centers pay their fair share.

Gov. Mikie Sherrill’s administration said in May that data centers were “among the biggest drivers of energy costs” and announced a four-part plan covering electricity costs, resource reporting, community protections and employment standards.

Then came legislation.

On July 7, Sherrill signed the Data Center Fair Share legislation, S731/A796. The law creates a separate rate structure for data centers and is intended to prevent costs associated with their enormous electricity demands and grid infrastructure from being shifted to households and small businesses.

In August, Sherrill signed S3379/A4096, requiring data-center operators to report their water and energy consumption to the Board of Public Utilities twice a year.

The required information includes electricity consumption, on-site power supplies, water consumption and water sources. Facilities receiving state incentives face additional reporting requirements concerning sustainability performance.

That legislation became P.L. 2026, c. 75 on Aug. 27.

Think about the sequence.

First, the government offered public financial incentives to persuade an industry to come.

Then the government required the industry to disclose how much electricity and water it consumes.

Then the government changed utility rules to protect everyone else from paying costs attributed to that consumption.

And then lawmakers went back to the incentive program itself.

The $250 Million Retreat

The Legislature called the bill the “End Data Center Tax Credits Act.”

The name leaves little room for ambiguity.

S4390 reduced the Next New Jersey authorization by $250 million — exactly the amount that remained uncommitted after NJEDA’s $250 million CoreWeave award.

The Senate Budget and Appropriations Committee explained the arithmetic plainly: $500 million had been available; $250 million had already been awarded to one project; the legislation removed the remaining $250 million.

Sherrill signed the measure Aug. 27 as P.L. 2026, c. 77.

But taxpayers should understand what the legislation did not do.

It did not rescind CoreWeave’s previously approved $250 million award.

And eliminating the remaining authorization did not create a $250 million windfall for the Treasury. The Office of Legislative Services concluded that the money represents tax-credit capacity reallocated to the Aspire and Emerge programs.

So the history is more revealing than the shorthand “New Jersey repealed the subsidy.”

New Jersey authorized as much as $500 million.

One company received approval for half of it.

Then lawmakers shut off the other half.

The Resource Problem Was Not Exactly Invisible

None of the fundamental physics arrived by surprise.

Data centers are warehouses full of computing equipment operating continuously. Electricity powers the processors. Electricity and water can be used to manage the heat they generate. Larger AI facilities can require extraordinary amounts of power.

By 2026, reporting on New Jersey’s data-center expansion noted that some AI facilities could consume electricity on a scale comparable to tens of thousands of homes and require millions of gallons of water annually for cooling.

The proposed CoreWeave campus illustrates the scale.

The project was described as a roughly 392,600-square-foot facility representing about $1.8 billion in investment and potentially requiring as much as 250 megawatts of electricity when fully operational.

That does not establish that the project is undesirable. Electricity consumption is not, by itself, evidence that an economic activity lacks value. Hospitals, factories, transportation systems and other productive infrastructure consume substantial resources too.

It does establish something policymakers should have understood before committing public incentives: attracting large-scale AI computing infrastructure necessarily means planning for very large electrical loads and, depending on facility design, potentially substantial water demands.

Those consequences were not hidden in the fine print of artificial intelligence.

They were part of the machinery.

The Greedy Parasites Have a Case, Too

Data-center companies dispute the portrayal of their facilities as little more than resource drains.

The Data Center Coalition argues that data centers support employment, investment and the digital services modern society depends upon.

The organization said the industry supported more than 96,000 jobs and contributed more than $17 billion to New Jersey’s economy in 2023. Those figures come from the industry’s trade association and should be understood as such.

The coalition has also disputed arguments that data centers necessarily increase electricity prices and has said the facilities can contribute toward grid improvements.

That is the legitimate policy debate: What benefits do these projects deliver, what costs do they impose, who receives the benefits, who bears the costs, and should taxpayers subsidize projects that companies might build anyway?

The facilities are essential to the growing artificial intelligence industry, which insiders warn could kill us all.

Prominent artificial intelligence insiders warn that rapid advancements and uncontrollable recursive self-improvement present a significant risk of human extinction within the decade.

After Jacob Coxon resigned from Anthropic, warning that companies are gambling with lives, Evan Hubinger and Geoffrey Hinton confirmed his estimate of the risk of extinction.

Those questions deserved rigorous answers before New Jersey authorized half a billion dollars in incentives.

Subsidize First, Ask Questions Later

That is what makes the chronology so difficult to ignore.

The Next New Jersey Act was not passed in some distant technological era before anyone understood that computing requires electricity.

It was enacted in 2024.

Less than two years later, New Jersey officials were describing data centers as a significant source of electricity demand and writing legislation intended to prevent their costs from being passed to families.

The state imposed special utility rules.

It required water and energy reporting.

It developed community-impact safeguards.

And lawmakers terminated the unused half of the very tax-credit program that had been created to entice AI businesses and data centers into New Jersey.

There is a useful lesson here that extends far beyond artificial intelligence.

Economic-development incentives are often sold with nouns that are almost impossible to oppose: jobs, innovation, investment, competitiveness, growth.

The costs tend to arrive later, expressed in less glamorous nouns: megawatts, transmission lines, substations, water, pollution, infrastructure and utility bills.

Government’s responsibility is to put both columns on the ledger before it signs the check.

New Jersey did it in the opposite order.

In 2024, the state offered the carrot.

In 2026, it started measuring the water, protecting the ratepayer, writing the rules — and taking half the carrots back off the table.

That chronology, more than any slogan from either side of the data-center debate, is the enduring record of the Next New Jersey experiment.