Colorado data centers remain unregulated with local governments creating their own policies

Colorado lawmakers failed again this year to pass statewide rules or incentives for new data centers, leaving the fast-growing industry largely unregulated in the state.

Two separate proposals — one offering tax incentives to attract developers and another focused on environmental regulations and reporting requirements — both died before advancing out of committee during the legislative session that ended May 13.

Supporters of incentives argued Colorado risks losing major projects, jobs and tax revenue to neighboring states like Wyoming. But critics questioned offering tax breaks during a state budget crunch and raised concerns about the industry’s massive demand for electricity and water.

Environmental advocates pushed for requirements tied to renewable energy use and water efficiency, while community groups raised concerns about noise, air quality and neighborhood impacts.

The debate comes as Colorado communities increasingly confront large-scale data center proposals tied to growing demand for cloud computing and artificial intelligence.

Without statewide rules, local governments are now creating their own policies. Denver recently approved a one-year moratorium on new data center development while city leaders draft regulations. Jefferson County, Logan County and Saguache County have also enacted temporary pauses, while Longmont is considering a ban on hyperscale data centers. Logan County has recently lifted its pause after new rules were created, and Weld County has updated its ordinances.

One proposed Denver-area facility by CoreSite could eventually use as much electricity as more than 80-thousand homes and up to 805-thousand gallons of water per day for cooling.

Industry representatives say the growing patchwork of local regulations is creating uncertainty and making Colorado less attractive for future development.

Lawmakers say they plan to revisit the issue during next year’s legislative session.