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Amazon Unveils $35 Billion Data Center Expansion in Virginia

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Amazon will spend $35 billion over the next two decades to expand its Virginia data center business, the company announced on Friday, adding at least 1,000 jobs to a lucrative industry that has been growing rapidly in the state’s northern suburbs.

If approved by Virginia lawmakers, the tech giant’s cloud computing arm, Amazon Web Services (AWS), could receive up to $140 million in state economic incentives and up to 15 years of tax incentives for equipment and software. (Amazon founder Jeff Bezos owns The Washington Post.)

“AWS has a significant presence in Virginia and we are excited that AWS has chosen to continue its growth and expand its presence across the Commonwealth,” Gov. Glenn Youngkin (R) said in a statement. “Virginia will continue to encourage the development of this new generation of data center campuses in various regions of the Commonwealth.”

Youngkin’s statement said “various locations” are being considered for the new data center campuses and will be chosen at a later date. Neither AWS nor the Virginia Economic Development Partnership (VEDP) said how many sites were being considered and how many would be selected.

The data center industry has boomed over the last few decades in Northern Virginia, which is home to about 275 data centers and handles at least a third of the world’s online usage. Thanks to the region’s dense network connectivity, business-friendly policies, and easy access to land and electricity, Ashburn has come to be known as “Data Center Alley.”

Many local officials have praised this growth, saying it increases local tax revenue without increasing traffic or requiring much public infrastructure. Datacenters, which act as a physical home for cloud computing, contain hundreds or thousands of computer servers in nondescript, highly secure buildings.

But his arrival in the region it has not been without controversy. As companies like AWS gobbled up land to meet increased demand, some residents in wealthy suburbs in Prince William and Loudoun counties complained about noise, impacts on water and property values, and the high voltage transmission lines needed to power the data centers.

A struggle to turn a ‘rural crescent’ in Northern Virginia into a data center hub

Del. Mark D. Sickles (D-Fairfax), who is on the legislative committee that negotiated the economic incentives for Amazon, said the company’s expansion is aimed at bringing data center campuses to “small, rural Virginia towns,” where industry has yet to take off in a similar way.

Local legislators in each county or city considered for a campus will likely be involved in determining where the facility will be located. “Each one of them [data center campuses] it will likely spark a debate locally,” he said, “but we expect a debate on how to make this work for everyone.”

Data center companies apparently faced little resistance from residents as they established a few outposts in less prosperous parts of the state.

In Mecklenburg County, Microsoft has invested nearly $2 billion in a huge data center campus and plans to build more facilities in other parts of Southside Virginia. Facebook’s parent company, Meta, has set up a large facility in Henrico County, just outside Richmond.

Officials in Virginia Beach, where new undersea cables to Europe and Africa provide extraordinarily fast connections to data centers, recently lowered their taxes to try to attract more such facilities.

Sickles said the 15-year tax break extension is aimed at making the community a more competitive candidate for expanding the Amazon because other states have permanent data center tax breaks.

Virginia’s sales and use tax exemption for data center equipment is due to expire in 2035. The state’s agreement with AWS, pending approval in Richmond, would extend that exemption through 2040 for any company that invests at least $35 billion in Virginia data centers and create at least 1,000 new direct jobs that pay an average of at least $122,300.

If a company like AWS invests another $65 billion and creates an additional 1,500 new direct jobs, the tax breaks will remain in place through 2050.

But some economic development watchdogs criticized the deal. They said that Amazon is unlikely to be located outside of Virginia and pointed out that each data center employs no more than a handful of people when fully operational.

“The bottom line is really decoupled from the benefits happening at the local level,” said John C. Mozena of the Center for Economic Responsibility in Michigan. “If all those billions of dollars are being spent elsewhere, it doesn’t do the state any good.”

Roger Wehner, director of economic development for AWS, said the expansion will enhance Virginia’s status as a leader in the cloud computing industry and further consolidate the company’s presence in the state.

“Virginia is a world leader in innovation and cloud computing, thanks to its investment in a robust, highly skilled workforce and emphasis on long-term public and private partnerships,” he said in a statement.

Wehner added that AWS has invested more than $35 billion in the state since establishing its first data centers in Virginia in 2006. Now one of the largest private sector employers in Virginia, Amazon is building its second headquarters in Arlington, with other $750 million in grants. of the state potentially on the table.

Antonio Olivo contributed to this report.