El Paso tightens rules on data center development, bars tax incentives

El Paso's city council unanimously approved a data center policy framework Monday that eliminates tax subsidies and establishes stricter public oversight for any future artificial intelligence data center developments within city limits, according to El Paso Matters.

The framework does not ban data centers but makes them harder to develop. It requires a minimum 300-foot buffer between data centers and residential neighborhoods or ecological sites, mandates noise mitigation measures, and requires developers to obtain a special permit subject to City Council approval and public disclosure.

Under the previous process, developers could secure a "by right" permit in industrially zoned areas without City Council involvement. The new rules shift that authority. "Before, we didn't have any power," Mayor Renard Johnson said of the old system. "But this at least gives us some power to work and do the job we need to do as city council." Johnson was not in office when the city approved a 2023 tax break agreement with Meta to construct a data center in Northeast El Paso.

The policy requires data center developers to submit detailed plans covering projected water and energy use, emissions, noise and water treatment. Performance standards mandate use of the most efficient cooling technologies to limit water consumption. The city paused all tax incentives for AI data centers and instead will prioritize community benefit agreements requiring legally binding commitments from developers to fund workforce education, community projects or neighborhood programs.

The framework also mandates greater oversight and transparency of data centers' water and energy usage to ensure costs are not shifted to existing utility ratepayers. Beyond the 300-foot property buffer, data centers must be set back 100 feet from property lines and maintain a 30-foot landscaping buffer.

City staff noted the framework is a "living document" subject to change as state or federal governments potentially impose new data center regulations. The policy document cites concerns that hyperscale data centers will increase air pollution and greenhouse gas emissions contrary to the city's climate action plan adopted earlier this year. El Paso estimated electricity generation for data centers could increase the city's carbon dioxide emissions by 21% compared with 2019 baseline levels.