A proposed data centre has been withdrawn by its developer after it became a flashpoint amid opposition to the AI infrastructure development across the country.
Goodman Group confirmed on Monday it had told the NSW Department of Planning it would no longer proceed with its $1.2 billion Project Mars in Sydney's north shore, citing "changes in regulatory environment".
The Project Mars development is among a new generation of data centres forcing the federal government to walk a tightrope between enticing investment from AI companies and quelling community concerns about their environmental impacts.
While not as large as some other proposed projects, the three-storey project situated in Lane Cove attracted controversy as it sought planning approval from the state.
The project was approximately 20 metres from the nearest house and 160 metres from Lane Cove West Public School.
In a statement, developer Goodman said the decision to shelve the project came after hearing from the local community and in response to changes in regulation.
"During this time, the policy and regulatory environment for large-scale data centre development has evolved significantly," it said.
"Goodman has carefully considered these changes together with feedback received through the planning process, including the views of the local community."
Goodman's decision comes after NSW introduced a new fast-track program for data centres that met certain requirements, and in anticipation of new federal rules for data centres that the Prime Minister now says will be introduced into Parliament by the start of this year.
Local community groups opposed the project, taking umbrage with its expected impacts.
These groups appeared before the first hearing of the federal senate inquiry into data centres and artificial intelligence last week, along with Goodman's general manager of developments Ben McGilp.
Liberal senator Sarah Henderson repeatedly pressured Mr McGilp to withdraw the proposal on the spot.
Henderson said the project was a "wholly unreasonable proposal… that shows contempt for local residents".
Sweltering Cities senior campaigner Sanaa Shah, who spoke before the committee, told the ABC she was glad to see the project shelved.
"It's a clear testament to the large scale community resistance that's forming to data centres. It's something we're observing across the country," she said
Last month, consultancy CT group told its clients that local opposition to data centres had become a risk to their development.
Advocacy group Data Centre Australia recently warned Australia risked losing data centre developments to neighbouring countries.
"Some of that is the approval processes, some of that is supply chain issues, some of that is physically getting in there or social licence issues," CEO Belinda Dennett said.