US Local Governments Ban NDAs to Regulate AI Data Centers

Local governments across the United States are increasingly banning nondisclosure agreements (NDAs) and implementing construction moratoriums to manage the rapid expansion of AI data centers. At least 300 municipalities have paused approvals to assess how these facilities affect electrical grids, water supplies, and local tax structures.

In Oregon, the Salem City Council banned NDAs on September 14 and approved a four-month pause on data center construction, which halted a project by the tech company Verrus. This move follows a broader trend seen in Texas, New York, and Florida, where yearlong moratoriums have been approved. At the state level, Pennsylvania Governor Josh Shapiro signed an executive order on August 18 banning NDAs for data center development.

Industry advocates, including the Data Center Coalition, argue that NDAs are necessary to protect proprietary information. However, critics and legal experts warn that these agreements muzzle local officials and bypass public record laws. In Louisiana, Meta used NDAs with officials to accelerate the approval of a large AI data center and avoid opposition, while similar practices have been reported in Virginia through the use of technology districts that allow development without public input.