A landmark permitting reform bill has united U.S. senators from both parties, but it is dividing the artificial intelligence data center sector. Some industry leaders say it would make data centers easier to build, while others worry it would make them substantially more expensive.

The Bipartisan American Affordability and Jobs Act is being called “the most significant permitting reform bill in years” — intended to accelerate the build-out of major infrastructure and other large-scale projects across the U.S. The bill enjoys support on both sides of the aisle and is expected to clear the Senate during the lame-duck session following November's midterm elections.

If it is signed into law, BAAJA would likely have significant implications for the data center industry, potentially rewriting the federal rulebook on how data centers purchase electricity and connect to regional grids. But industry insiders are split on whether the legislation would ultimately be a net positive for the sector or usher in disaster for at least some firms pursuing large-scale digital infrastructure projects.

Some within the industry — and some critics of the sector — say BAAJA is poised to fuel further acceleration of the AI data center boom by flattening permitting hurdles and codifying a clear pathway to acquiring power.

But others say consumer protection provisions in the bill will make acquiring power much more expensive, adding significant development costs early in projects that could push smaller operators to the sidelines.

“Upfront capex, especially speculative, is a death knell,” said Harmol Samra, CEO of AI data center provider Host Digital. “This is just going to slow everyone down.”

BAAJA is centered on measures intended to speed up the construction of energy assets, power transmission and other infrastructure, plus other major industrial projects for industries like manufacturing and mining. To do so, the bill would impose firm deadlines for permit approvals, exempt more projects from lengthy reviews, limit how long approvals can be challenged and give previously approved projects greater legal protection. Controversially, it would also make significant changes to the National Environmental Policy Act, the Clean Water Act and the Endangered Species Act.

Those provisions have drawn vocal opposition from some environmental groups, with the Center for Biological Diversity calling it a “back-door deal” meant specifically to accelerate data center development.

“This would be a golden ticket for huge AI data centers and tech billionaires. Gutting environmental safeguards means opening the floodgates for more gas-powered data centers fouling the air and draining communities’ water supplies,” said Camden Weber, senior climate and energy policy specialist at the Center for Biological Diversity.

While other environmental groups have been more receptive — particularly to provisions aimed at accelerating transmission infrastructure that could bring more renewable generation onto the grid — there is truth in the notion that data centers will benefit from faster permitting.

Large campuses can face federal delays when projects affect wetlands or trigger environmental or historic preservation reviews. More consequentially, faster approvals for new transmission and generation could shorten the wait for electricity in markets where developers can wait years for grid connections.

Yet beyond its permitting reforms, BAAJA also contains a separate set of provisions aimed squarely at data centers, specifically at one of the sector’s most contentious issues: who ends up paying for the billions of dollars of new power infrastructure needed to provide them with electricity.

The measures, which apply to data centers larger than 20 megawatts, are intended to ensure that regular electricity customers don’t get stuck with the bill for new power plants and infrastructure for electric transmission built specifically for data centers.

Concerns that homeowners, businesses and other existing customers are effectively subsidizing grid improvements driven mainly by data center demand have become a central talking point in a rising wave of opposition to data center development. And lawmakers from both parties have been eager to show they are taking these concerns seriously.

The Trump administration’s Ratepayer Protection Pledge, announced in March, aimed to address the same concern, with major tech firms committing to cover the full cost of power delivery and grid updates needed to serve them. But what constitutes “full cost” has remained a matter of interpretation.

A report released this month by four Democratic senators found that tech giants generally accept responsibility for the cost of infrastructure built exclusively for them, such as a substation serving a single data center campus. But the answer is murkier when the new infrastructure also benefits other customers, such as a transmission line built primarily to deliver power to a new campus that also improves reliability elsewhere on the grid.

Consumer advocates have argued that in such a case, the data center should bear all costs that would not have existed “but for” its arrival. Tech giants and other developers, according to the report, have generally only been willing to cover, at most, a portion of such shared costs and have fought with state regulators to shoulder as few of such shared grid costs as possible.

“There is a significant gap between data center developers and the public regarding how much data centers should pay for shared infrastructure, and particularly for infrastructure built primarily, but not exclusively, for their benefit,” the report’s authors wrote.

The standards for what constitutes a data center’s fair share of grid costs vary significantly across the balkanized U.S. grid system. The BAAJA legislation, if passed, would establish more uniform ratepayer protection measures across the entire U.S. grid. The bill would require large data centers to pay grid costs that would not have been incurred without their demand, not just upgrades that benefit them exclusively.

For developers, the most pressing question is how much additional capital these requirements would force them to deploy before a project can secure power.

Host Digital’s Samra said these added costs are going to be a big problem for some developers. He said it is capital that has to be deployed in the riskiest stage of development while a project's viability is still far from certain, forcing developers to make massive, speculative bets that could carry serious consequences.

“Any upfront cost that you have to spend before you even know the answer if something is viable will wipe everyone out,” Samra said.

This challenge isn’t new for the industry. Utilities and state regulators have increasingly required developers seeking grid connections to post collateral, provide financial guarantees and fund expensive load studies. These requirements can total millions of dollars and are intended, in part, to weed out speculative projects from interconnection queues.

These requirements have become a major financing challenge for the sector, as developers must find liquidity at a stage when projects remain too risky for most data center lenders and investors.

Still, Tyler Ochs, partner in Ice Miller’s real estate, environmental and energy law group, said the industry’s largest players have learned to navigate this environment. They are building business models and financing structures around the need to deploy significant chunks of capital early.

At the same time, he said smaller developers, newer entrants to the sector and regional operators in states without existing large-load tariffs could find themselves on shaky ground.

“If the federal legislation gets passed, it may be a whole new world for them,” Ochs said. “But for a majority of companies that are operating across different states in the U.S., none of this is going to be new to them. For the big ones, it’s business as usual.”

Samra agreed that the sector’s largest developers can absorb the added costs — but he said this is exactly the problem. Requiring more capital up front, he said, will further advantage a relatively small group of firms with large balance sheets or access to institutional capital while shutting out developers unable to spend heavily across multiple potential sites before knowing that one can ultimately secure power.

And even for well-capitalized firms, Samra said, the added costs created by the bill will compound pressures from higher interest rates and the rising cost of construction, equipment and labor. At some point, according to Samra, tenants will resist absorbing these increases through higher rents.

“There's an upper bound to how much we can pay to build these things, because there's an upper bound to how much a tenant is willing to pay,” he said. “It will slow things down.”

Jeff Thramann, CEO of data center developer LT350, pushed back on that concern. As long as demand for AI computing remains strong, he told Bisnow that hyperscalers and neoclouds will continue paying higher rents to cover rising development costs. He said current pricing already reflects an expectation that developers will end up shouldering more of the cost of power generation and transmission.

“Pricing is going up, and while that has something to do with the cost of the GPUs going up, it also has something to do with everybody realizing that these big AI data centers are going to have to contribute to the transmission lines, they're going to have to contribute to the generation, and there's going to be more work to do up the front,” Thramann said.

Both Thramann and Ochs said that given the patchwork of state tariffs and local rules that developers must contend with, most major developers will gladly pay any added costs created by BAAJA if it offers something they consider of even greater value: certainty.

Ochs compared the current regulatory landscape to the early days of NIL in college football — a Wild West environment where no one is certain about the rules of the game they are playing. He said his clients tell him they will gladly trade higher costs for predictability.

While large data centers will inevitably shoulder a greater share of infrastructure costs, Thramann said stability in the regulatory landscape will ultimately end up unlocking development.

“Speed to certainty is going to help everybody, and there's no way around it that data centers are going to have to pay for some of the infrastructure. It's just the economics of the model, and everybody, I think, is starting to understand that,” Thramann said. “What they need is clear rules, and everybody’s going to benefit from that over time.”