Data Center Siting Poses Environmental, Land Use Challenges

While artificial intelligence, cloud computing, and other digital services have accelerated demand for data centers across the United States, the environmental and land use challenges data centers may pose have in some instances led to a backlash in certain communities. As developers apply for project permits and local governments evaluate applications, both parties must balance business needs and a web of potential environmental concerns, all while ensuring compliance with applicable laws and regulations.

Legal issues facing data center development often fall into three general categories: environmental review; moratoria; and land use. When local governments have approval authority, they can regulate development through their land-use authority, but outdated zoning frameworks, classification questions, and compatibility concerns can create significant risks when approving or restricting projects. Further, project review may require both the developer and local government to evaluate a wide variety of issues spanning water supply, energy, air quality, wildlife habitat, environmental justice, and procedural compliance. In response to the increased complexity surrounding these projects, municipalities may choose to enact moratoria to provide additional time to address concerns, but moratoria have been challenged on grounds of limited local authority, due process, regulatory takings, and vested rights.

I. Environmental Review and Permitting

The environmental review required for data center development presents several complex legal concerns spanning federal, state, and local regulatory frameworks. Whether proceeding under the National Environmental Policy Act (NEPA) for projects with a federal nexus, or under state-level counterparts, the environmental review process is intended to determine if a project may cause a significant environmental effect. Legal concerns arising during environmental review include assessing compliance with applicable environmental legal frameworks, addressing intensive resource and utility demands, mitigating environmental and human health impacts, and navigating due process requirements.

Water Supply and Water Quality 

Conventional data centers require an immense amount of water, making water rights and resource depletion central points of legal contention and public opposition during the environmental review process. Water-quality concerns also arise, often connected to cooling-system chemicals, wastewater disposal, thermal effects, and discharges to impaired water bodies. The Clean Water Act may require a National Pollutant Discharge Elimination System permit for qualifying point-source discharges, and state analogues may impose additional requirements.¹

Some states have already revised or adopted regulations adapting the environmental review process, such as data-center-specific water requirements.² Litigation is also developing alongside these concerns. For example, in Pearson v. Amazon Data Services, Inc., plaintiffs allege that wastewater associated with data-center and other operations contributes to nitrate pollution in groundwater in the Lower Umatilla Basin Groundwater Management Area.³

Energy

Electricity demands can also shape environmental review. Relevant questions include whether sufficient generation and transmission capacity exist, whether costs may be shifted to other customers, and how the load affects reliability and long-range utility planning. Various statutes adopted across several states reflect the regulatory attention directed at energy use.⁴ Data center energy demands may become relevant in challenges alleging that environmental review failed to adequately consider a project’s associated power-generation or transmission infrastructure and related environmental impacts. For example, in litigation over the proposed Farmington Technology Park in Minnesota, residents alleged that the project would result in unprecedented electricity use and require costly new infrastructure.⁵

Air Pollution 

Backup generators associated with data centers can bring the Clean Air Act and state air-quality programs into the environmental review process. Issues may include preconstruction permitting, New Source Review, major-source status, hazardous-air-pollutant requirements, and compliance with ambient air-quality standards. The Clean Air Act also contains a citizen-suit provision that opens the door to litigation. A pending example is NAACP v. X.AI Corp., in which plaintiffs allege that equipment serving a data-center operation required a major-source air permit.⁶ 

Habitat and Species Impacts

A large project footprint and associated infrastructure can also impact surrounding habitat and wildlife. If a federal action may affect listed species or critical habitat, review requires compliance with the Endangered Species Act. When federal requirements are not triggered, state environmental-review laws may independently require consideration of wildlife and habitat impacts under state authorities.⁷

Environmental Justice 

Projects proposed near overburdened communities may receive additional scrutiny concerning cumulative pollution, distribution of benefits and burdens, and opportunities for meaningful participation. These concerns may appear within NEPA or state environmental-review claims, but some states have also enacted more specific statutory requirements.⁸ 

Procedural Challenges

A rising source of litigation in data center developments involves procedural challenges. Typical allegations include incomplete documentation, failure to study relevant impacts, segmentation of connected actions, insufficient public participation, defective notice, and an administrative record that does not support the ultimate finding. Procedural violations such as bypassing public review processes or failing to fulfill environmental review requirements before granting zoning approvals can result in courts voiding development decisions.⁹

Cases in Minnesota and Missouri illustrate the range of procedural claims. In Minnesota, plaintiffs have challenged local governments’ use of allegedly inadequate or streamlined environmental-review processes for proposed data centers, while litigation in Missouri has alleged violations of open-meetings and public-records requirements in connection with a proposed data center development.¹⁰ In Illinois, residents have filed a claim against the City of Joliet and developers of a proposed 795-acre data center, challenging the city’s approval based on defects in public notice, open-meeting procedures, and land-use approvals while pointing to the project’s substantial water and electricity demands and other impacts on surrounding communities.¹¹

As the legal and regulatory framework governing data centers continues to evolve, municipalities should proactively evaluate their local ordinances, infrastructure capacities, and environmental review processes before making any formal decision on a project application.

II. Moratoria and Other Development Restrictions

Some municipalities have responded to data center proposals with pauses, moratoria, or use-specific prohibitions.¹² Justifications for these pauses or moratoria on development commonly include studying infrastructure capacity, updating outdated zoning rules, evaluating water and energy demand, and creating standards before reviewing project applications.

Before adopting a moratorium, a municipality should identify the precise statutory source of authority and any state-law limits on moratoria. Local governments should also determine how the measure applies to pending applications, permits, development agreements, and projects with claimed vested rights. 

The risk of acting without clear authority is demonstrated by the 2026 Hill County, Texas dispute.¹³ After the county adopted a one-year pause on new data-center construction in unincorporated areas, a developer sued, alleging that the county lacked authority and the measure constituted a regulatory taking. The county later rescinded the moratorium and adopted a new checklist and review process for data center developers. As of the latest update on this matter in July 2026, it is unclear whether the developers plan to continue litigation against the new checklist. Other common challenges to development moratoria are listed below.

Due process, equal protection, and arbitrariness claims 

Developers may challenge a ban or restriction on data center development as arbitrary, unreasonable, unsupported by a legitimate public purpose, or selectively targeted. For example, challenges to local bans in New Jersey, including measures in Andover, Montgomery, and Monroe, have alleged that municipalities acted arbitrarily or without adequate land-use planning.¹⁴

Takings and property-rights theories 

A development restriction may also prompt a regulatory takings claim, like the case in Hill County, Texas. Developers may argue that the measure interferes with reasonable investment-backed expectations, deprives property of economically viable use, or imposes an unfair burden.

Local government can reduce this risk by tailoring the measure to the planning problem, identifying what work will be completed during the pause, and explaining why ordinary project review would not adequately address the issue. 

Vested rights and pending applications 

Some of the most difficult disputes arise when a developer has already submitted an application, obtained approvals, entered a development agreement, or made substantial expenditures. Vested-rights rules vary substantially by state. A municipality should determine the legally relevant vesting event and avoid assuming that adoption of a moratorium automatically extends to pending applications. 

In Gibraltar, Michigan, developers of a proposed data center challenged a one-year moratorium alleging that it improperly targeted an application submitted before the pause.¹⁵ These disputes illustrate the importance of explicit transition rules and an accurate inventory of pending projects before a moratorium is enacted. 

III. Land Use and Zoning Challenges

State enabling laws give counties and municipalities authority to adopt comprehensive plans, zoning maps, development regulations, and project-review procedures.¹⁶ The challenge is that many existing documents governing local land use were not written with the data center regulation in mind.

One common issue is that the average data center does not fit neatly into existing zoning classifications, and how a data center is classified may determine whether it is permitted outright, allowed conditionally, prohibited, or subject to rezoning. A decision in either direction could evoke opposition. Data center opponents may argue that the approved use is not authorized under the local ordinance, requires a rezoning or conditional-use permit, or the municipality bypassed procedures associated with the correct classification. On the other hand, developers may contend that a proposed facility fits within an existing permitted-use category and that the government is improperly imposing additional review. Municipalities can reduce risking additional challenge by defining the use directly and specifying the applicable approval pathway. 

The classification issue also underscores the importance of ensuring data centers are compatible with existing land uses. Certain data characteristics that could threaten current use, including sound from mechanical equipment and substations, light and visual impacts, backup-generator emissions, and demand for water and electricity, can be mitigated through certain requirements like setbacks, buffers, screening, and noise limits. Such conditional-use requirements may all be useful, but they must also be supported by the record and drafted so they can be administered and enforced.

Similarly, large data-center developments may not fit comfortably within adopted zoning ordinances or growth management plans and therefore require a comprehensive-plan amendment, a rezoning, or both. But amendments may invite challenges as well. In Oak Valley Homeowners Ass’n v. Prince William County Board of Supervisors, neighboring landowners challenged a comprehensive-plan amendment facilitating data-center development, claiming impacts such as noise, visual and light effects, diminished property values, and stormwater pollution.¹⁷ The dispute shows why municipalities should explain not merely that an amendment advances economic-development goals, but how the amendment relates to the plan as a whole and how identified conflicts will be mitigated. 

Procedural pitfalls risk challenges in the land use arena just as much as in the environmental review process. Common allegations include inadequate public notice, defective hearings, and undisclosed impacts.¹⁸

IV. Conclusion

As demand for data-center development grows, local governments will continue to face difficult choices involving land use, environmental impacts, infrastructure, and community priorities. No single policy approach eliminates legal risk: approvals, denials, moratoria, and restrictive zoning measures can all invite challenge. Municipalities can best manage that risk by grounding their decisions in clear legal authority, sound environmental review, reliable information, enforceable standards, and careful adherence to procedural requirements. Whether a community chooses to encourage, condition, pause, or restrict development, the strongest approach is one that reflects local priorities while resting on lawful authority and a well-supported record.

For more information, please contact Emma Lautanen, James Tupper, or Jeff Kray.

1 In Washington state, chapter 90.48 RCW provides a separate state water-pollution-control framework. Water allocation itself remains largely a matter of state law, including Washington’s surface-water and groundwater codes in chapters 90.03 and 90.44 RCW. 

2 Florida law requires certain permit applications by large-scale data centers seeking an average daily allocation of at least 100,000 gallons to identify water sources, amounts, and losses and to include a conservation plan. Fla. Stat. § 373.262. Utah requires notification to water agencies and providers before approval of a new large data center and requires reporting concerning anticipated and actual withdrawals under specified circumstances. Utah Code Ann. § 73-5-8.3. South Dakota requires a determination concerning compatibility with local water supply and authorizes limits designed to preserve water for residential and essential public services. S.D. Codified Laws § 49-50-4.

3 Pearson et al. v. Amazon Data Services, Inc., No. 2:26‑cv‑00633 (D. Or. Mar. 31, 2026).

4 Indiana requires a joint study and certification concerning anticipated electricity use before certain foreign companies may construct data centers. Burns Ind. Code Ann. § 8-1-45-7. Nebraska requires annual data-center reporting that includes electricity demand, water use, energy-efficiency and load-management measures, and renewable-energy commitments. R.R.S. Neb. § 70-1506. These provisions do not provide a single national model, but they underscore the importance of obtaining reliable demand information before approvals are finalized. 

5 Coalition for Responsible Data Center Development v. City of Farmington, No. 19HA-CV-24-5838, Petition for Declaratory Judgment and Motion for Injunctive Relief ¶¶ 65–70 (Minn. Dist. Ct. Dakota Cnty. Nov. 29, 2024).

6 Nat’l Ass’n for the Advancement of Colored People v. X.AI Corp., No. 3:26-cv-00074 (N.D. Miss. Apr. 14, 2026).

7 See Wash. Admin. Code § 197-11-960; See, e.g., Cal. Code Regs. tit. 14, § 15063 & app. G, § IV (Biological Resources).

8 Washington’s Healthy Environment for All Act, chapter 70A.02 RCW, requires covered state agencies to integrate environmental-justice considerations into specified decision-making processes and evaluate effects on overburdened communities. New Jersey’s Environmental Justice Law, N.J. Stat. Ann. §§ 13:1D-157 et seq., requires review of environmental and public-health stressors affecting overburdened communities for covered permits and can support denial where disproportionate impacts cannot be avoided. 

9 Matter of Bigelow v. Town of Willsboro Planning Bd., 243 A.D.3d 979 (N.Y. App. Div. 2025).

10 James Nanzo, Judge Stops Google’s 500-Acre Minnesota Data Center as Lawsuit Targets Massive Power Demand, The Cool Down (May 29, 2026), https://www.thecooldown.com/green-tech/google-data-center-minnesota-restraining-order/; William Carroll, Lawsuit Opposing Data Center Alleges Numerous Sunshine Law Violations, Montgomery Standard (Feb. 25, 2026), https://www.mystandardnews.com/stories/lawsuit-opposing-data-center-alleges-numerous-sunshine-law-violations,149413.

11 Complaint, Joliet Residents for Responsible Growth v. City of Joliet, No. 2026CH000108 (Ill. Cir. Ct. Will Cnty. May 17, 2026).

12 Baltimore County, Maryland adopted a temporary pause on certain data-center permits to allow additional study, and Chandler, Arizona regulates data centers through planned-area-development approval. Other jurisdictions have considered or enacted broader bans.

13 “Illegal Under Texas Law”: Data Center Developer Files Lawsuit Against Hill County Moratorium, KWTX (May 28, 2026), https://www.kwtx.com/2026/05/28/illegal-under-texas-law-data-center-developer-files-lawsuit-against-hill-county-moratorium/.

14 Sophie Nieto-Munoz, Data Center Fight Moves to NJ Courts, with Developers Blaming Local Bans on ‘Public Hysteria’, N.J. Monitor (Aug. 20, 2026), https://newjerseymonitor.com/2026/08/20/nj-data-center-bans-courts/.

15 Brian Allnutt, Data Center Developers Challenge Gibraltar’s Pause on Facilities, Planet Detroit (Aug. 25, 2026), https://planetdetroit.org/2026/08/gibraltar-faces-data-center-lawsuit/.

16 In Washington, the Growth Management Act authorizes and requires covered local governments to plan for land uses and adopt development regulations consistent with their comprehensive plans. See RCW 36.70A.040, .070, and .120. Chapter 36.70B RCW establishes a framework for local project review, while the State Environmental Policy Act can place a local government in the role of lead agency responsible for evaluating environmental impacts.  New Jersey municipalities exercise planning and zoning authority under the Municipal Land Use Law, N.J. Stat. Ann. §§ 40:55D-1 et seq. Virginia localities rely on the Virginia Zoning Enabling Act, Va. Code §§ 15.2-2200 et seq.

17 Oak Valley Homeowners Ass’n v. Prince William Cnty. Bd. of Supervisors, No. 1144-24-4 (Va. Ct. App. July 22, 2025).

18 Bd. of Cnty. Supervisors of Prince William Cnty. v. Oak Valley Homeowners Ass’n, Inc., 2026 WL 873963 (Va. Ct. App. Mar. 31, 2026) (where landowners challenged zoning ordinances based on failure to satisfy statutory public notice requirements).