One of the most significant bills passed by the Kentucky General Assembly in 2025 was legislation giving massive tax breaks to data centers — the enormous and energy-guzzling facilities hosting artificial intelligence services that lawmakers want to entice to Kentucky.
State lawmakers are already indicating that data centers will again be a major focus in the 2026 legislative session that kicks off in January, addressing the opportunities, challenges and fears that have been unleashed this past year. ...
The months that followed the passage of the data center tax break bill in March showed its immediate effects.
Kentucky’s largest energy utility sought and received permission from state regulators to spend $3 billion on building two new gas power plant units with a combined generation capacity of 1.3 gigawatts. Louisville Gas & Electric and Kentucky Utilities say this is necessary mostly due to the giant amount of energy they forecast would be needed by future hyperscale data centers they anticipate coming to the state.
There were also new data center projects popping up across rural Kentucky seeking permission to build and making grand promises of jobs and local tax revenue — but facing heavy opposition from skeptical residents and local governments.
Proponents of data centers stress that Kentucky needs to compete with other states for the multi-billion dollar investment of companies in AI, which will boost local tax revenues and economies where they are located. ...
Those skeptical of the rush for data centers point to setbacks faced in other states where hyperscale facilities have been operating, including increased energy bills caused by utilities’ expansion of power generation to serve the data centers, as well as local concerns over noise, water or air pollution near the massive campuses. Consumer and environmental advocates also point to the speculative nature of data center forecasts and fear of an AI “bubble,” a burst of which could leave residents holding the bag to pay for the new power plants with higher bills.
Much of the opposition packing public forums that has pushed local governments to block data center zoning requests this year in Oldham, Simpson and Meade counties has centered around the lack of transparency from developers. Companies leading the proposals in those counties — as well as another pending project in Mason County — would not reveal the identity of the large tech company who would be the end user of the data center, fostering a lack of trust in the promises being made about its benefits and risks.
“I think a lot of these (companies) are looking for — for a lack of a better way to say it — these little Podunk communities where they think everybody’s going to be ignorant or illiterate and just willing to accept everything they say is the gospel,” said Simpson County Judge-executive Mason Barnes, a strong critic of the data center proposal there. “And thankfully, that's just not happening.”
Legislative leaders in Frankfort have referenced this in recent months, stressing that while Kentucky must get into the data center game, any legislation they advance should take account of local concerns.
Read the rest at LPM News.
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