COMMENTARY: Selected US States Offer Enormous Advantages for AI Data Centers – Yogi Schulz

By Yogi Schulz

The characteristics of some US states offer significant advantages over others in the competitive race to attract AI data centers. Contact your member of Congress to express your support for realizing this economic development opportunity for your state.

Ohio and Pennsylvania are the states with the most advantages in this analysis.

How big is the opportunity?

Amazon, Alphabet, Meta, and Microsoft are investing hundreds of billions in AI data centers. Their 2025 capital expenditures are expected to total roughly $370 billion, and they anticipate this number will continue to rise in 2026. Smaller AI software companies, cloud service providers, and their suppliers are also making multi-billion-dollar investments. Some commentators are projecting that the AI boom will trigger trillions of dollars in capital investment.

Source: Big tech 2025 capex may hit $200 billion as gen-AI demand booms, Bloomberg Intelligence, October 4, 2024

In a recent call with analysts, Bernstein analyst Mark Moerdler asked whether Microsoft was spending into a bubble. Chief Financial Officer Amy Hood responded that AI-related demand still outpaces Microsoft’s spending. “I thought we were going to catch up. We are not,” she said.

Here’s a summary of the topics where advantages can attract AI data centers to specific US states. Turning these advantages into reality can bring prosperity to your state.

Proximity to natural gas reserves

The US has extensive natural gas reserves. The EIA’s updated natural gas reserves for 2023 show that reserves have tripled since 2003, reaching 600 trillion cubic feet. AI data center proponents require access to affordable, reliable natural gas for electricity generation for decades to come.

Natural gas reserves are crucial to AI data centers because building natural gas-fired electricity generation is the fastest and most cost-effective way to develop and operate electricity generation facilities. Other alternatives are more polluting, intermittent in output or require too much land.

Source: US Crude Oil and Natural Gas Proved Reserves, Year-end 2023, EIA, June 25, 2025

In the map above, the ten states colored dark blue will have the advantage in keeping operating costs for natural gas low.

Proximity to natural gas pipelines

The US has an extensive network of natural gas distribution pipelines. The advantage for AI data center proponents is that they don’t have to build their own connector pipeline before they can start an AI data center.

Source: Where are the Pipelines? API

In the map above, states near one of these lines will have the advantage. More specifically, the primary natural gas-producing states of Texas, Louisiana, Oklahoma and New Mexico will have the advantage in keeping capital costs for a connecting pipeline low.

Generating electricity

In most cases, AI data center proponents will invest in dedicated electricity generation facilities because it will give them:

• The high 24/7/365 availability they need.
• Control over energy costs.
• Shortened permitting and construction timelines.

States that are prepared to act expeditiously on the required development permits will have the advantage.

Colder climate

The advantage of the colder climate and ample water resources is that proponents of AI data centers can reduce their cooling costs.

Source: Average Annual Temperature for Each US State, Current Results Publishing Ltd., 2025

States with a lower average temperature, shown in blue on the map above, will have an advantage in reducing operating costs for AI data centers.

Electricity reliability

Ideally, proponents of AI data centers want to purchase electricity and connect their data centers to the local electricity distribution grid. That’s unlikely in many states because:

• AI data centers consume vast amounts of electricity, and most distribution grids lack sufficient excess capacity to accommodate this demand.
• The regulatory permitting process for adding capacity takes years, and AI data center proponents don’t want to wait that long.
• Local electricity consumers are suspicious that an AI data center will increase their electricity costs, leading to approval gridlock.

Source: 2024 Summer Reliability Assessment, NERC, May 2024

If an AI data center proponent plans to consume electricity from the electricity distribution grid, the many states in the grey areas on the map above provide an advantage.

State business environment

US states that operate a business-friendly environment, consisting of the following, will have an advantage:

• A pro-business, pro-investment government attitude.
• A well-defined, predictable regulatory environment.
• An entrepreneurial business community.
• A pro-economic growth mindset.
• Modest business taxes.

The US ranks favourably in terms of an attractive business environment.

Source: Economic Intelligence Unit, April 18, 2023

However, there are significant variations in the attractiveness of the business environment from state to state, as shown in the map below.

Source: Inside North Carolina’s rise to No. 1 in America’s Top States for Business, CNBC, July 25, 2025

The ten states, in blue above, that have an attractive business environment will have an advantage in simplifying the permitting, construction and operation of AI data centers.

US livable cities

US livable cities offer the following advantages compared to other cities that are competing for AI data centers:

• Presence of multiple, credible post-secondary education institutions.
• A significant population with advanced degrees.
• A substantial community of experienced information technology professionals.
• A culture of respect and acceptance.
• Proximity to outdoor amenities.
• A well-functioning state with reliable utilities, superior transportation alternatives, clean air, affordable schools, and low crime.
• Immediate access to superior health care.
• Affordable housing and land prices.
• Availability of a wide range of cultural amenities.

Source: The 10 most livable cities in the US ranked, Daily Mail, July 6, 2024

These ten states with livable cities will have an advantage in attracting the staff of AI data centers.

Superior natural gas

Natural gas customers, including AI data centers, prefer to buy from suppliers that can demonstrate the following:

• High ESG rating, sometimes with an ESG Certified Gas certification.
• Competitive prices.
• Reliable delivery performance.
• Predictable regulatory framework.
• Rule of law to resolve disputes.

Source: Canada’s Oil Industry Leads the World in ESG – But What Does That Mean?, November 4, 2021, EnergyNow Media

Superior natural gas enables AI data center proponents to demonstrate their environmental consciousness. States with a high ESG rating will have an advantage.

State infrastructure

US states that operate a well-developed infrastructure, consisting of the following, will have an advantage:

• Excellent roads and bridges.
• Widely available high-speed telecom.
• Airports, preferably with excellent connections.
• Low road congestion compared to other states.
• Lots of cheap land.
• Reliable utilities.

Source: States With the Best Infrastructure – 2021 Edition, July 15, 2021

The advantage of these states is that AI data center proponents don’t have to build their own infrastructure before they can start construction of an AI data center.

Conclusion

Ohio, Pennsylvania, North Dakota, and Wyoming are appealing states for AI data centers due to their significant natural gas reserves, extensive pipeline infrastructure, and colder climates. Will state policymakers execute the attraction strategy at the speed these tech giants demand? States that hesitate will find themselves competing for second-tier projects within an estimated 18 months.

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Yogi Schulz has over 40 years of experience in information technology in various industries. He writes for Engineering.com, EnergyNow.ca, EnergyNow.com and other trade publications. Yogi works extensively in the petroleum industry to select and implement financial, production revenue accounting, land & contracts, and geotechnical systems. He manages projects that arise from changes in business requirements, the need to leverage technology opportunities, and mergers. His specialties include IT strategy, web strategy, and systems project management.

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