Developer Scraps Sydney Data Centre Amidst Community Opposition and Regulatory Shifts

Goodman Group has withdrawn its proposal for a substantial AI data centre, dubbed 'Project Mars,' in Sydney's Lane Cove West, following significant community opposition and evolving regulatory conditions. The developer confirmed on Monday that it would no longer pursue the construction of the three-storey, 90-megawatt facility.

The proposed site, located at the edge of an industrial area bordering bushland and a residential zone, drew widespread criticism. The development application had garnered a record 374 public submissions, with only nine expressing support. A primary concern among residents and local officials was the data centre's projected daily water consumption of 1.4 million litres and its significant electricity demands.

Liberal frontbencher Sarah Henderson characterized the project as "wholly unreasonable" and "frankly a grossly irresponsible proposal which shows contempt for local residents" during a Senate hearing on artificial intelligence. The close proximity of the proposed facility to residential homes, situated just 20 meters away, and Lane Cove West Public School, 160 meters away, amplified these concerns.

Mayor of Lane Cove, Councillor Merri Southwood, stated that the community's effort demonstrated that Goodman Group lacked social license for the project. "This is a win for our community," Southwood said. "Hundreds of residents took the time to understand a complex proposal, write submissions, attend meetings and make their voices heard, and today that effort has paid off."

Lane Cove MP Anthony Roberts described the withdrawal as a "common sense win," emphasizing the need for data centres to be appropriately located and planned with surrounding communities in mind. Sydney Water had previously indicated that its existing infrastructure would face limitations in supporting the project's water requirements.

The NSW Government had introduced a framework requiring AI developers to fund additional water and energy supplies in response to growing community concerns. Goodman Group cited "changes in regulatory environment" as one reason for its decision, alongside the strong community feedback received during the planning process.

Australia has been actively seeking to attract investment in AI development, with several other data centres already existing or proposed in the Lane Cove West area. A report by the Climate Council indicated that as of August 2026, Australia had approximately 165 data centres, with at least 225 more proposed, more than doubling the previous year's figure. Data Centres Australia projected that the electricity and clean water usage by data centres in Australia could more than triple by 2030.

While federal legislation governing data centres is not expected until early 2027 and is unlikely to be retrospective, the NSW framework signifies a move towards greater developer responsibility for infrastructure impacts. The Department of Industry, Science and Resources stated it welcomes "responsible investment" in AI development.