Data Centers Face Growing Environmental and Litigation Risks

The environmental regulatory and litigation landscape for data centers has shifted. In the past several weeks, states with significant existing or planned data center development have announced new requirements affecting environmental permitting, water use, backup generation, electricity demand, and local approvals. At the same time, environmental groups are increasing their litigation toolkits — primarily, through Clean Air Act citizen suits — to challenge data centers and the power generation supporting them.

Recent developments vary by state, but reflect two broader trends: states are increasingly establishing bespoke regulatory or policy requirements for data center developments, and environmental plaintiffs are taking an active role against this rapidly expanding industry using traditional private enforcement playbooks.

Recent State Updates – Environmental and Permitting Oversight

Several key markets for data center developments have taken action in recent weeks.

Virginia. On September 18, 2026, Governor Abigail Spanberger signed Executive Order (EO) 22 and announced a “Data Center Accountability Framework,” which her administration described as “the most comprehensive and aggressive data center accountability effort in the country.”

The Framework combines actions implemented through EO 22 and other immediate agency directives with proposed legislation for the 2027 General Assembly. Among other measures, it calls for stronger standards addressing water use, air emissions and backup generation, noise, and land impacts; elimination of by-right approval for data centers using more than 25 MW; and removal of future large data centers from Virginia’s fast-track permitting process. EO 22 immediately directs immediate review of diesel and other backup-generation operations, and it calls for accelerated development of data center noise regulations and restrictions on state agencies’ use of nondisclosure agreements for data center projects. The Framework builds on state legislation enacted earlier this year addressing, among other things, generator emissions, water use, and local review of data center development.

Texas. On September 14, Governor Greg Abbott directed the Texas Water Development Board to enforce water-use reporting requirements against major water users, expressly including data centers, and to work with the Electric Reliability Council of Texas (ERCOT) to audit data center water consumption and supply.

One week later, Governor Abbott directed the Texas Commission on Environmental Quality to halt the issuance of new permits for data centers pending completion of broader state audits related to grid reliability and natural resources protection. The directive significantly expands earlier actions focused on large-load interconnections and (pending any further clarification) could affect air, water, and other environmental permits for projects regardless of whether they are large ERCOT loads. As discussed in a recent post on Sidley’s Energy and Infrastructure Pulse, the directive creates potentially significant timing issues for projects with pending permit applications and raises questions regarding the scope of the order — including whether it extends to generation facilities that serve (or primarily serve) data centers.

California. Also on September 21, Governor Gavin Newsom signed seven data center bills addressing electricity, water, rate structures, reporting, and environmental review. Among other provisions, the legislation requires additional disclosures regarding projected water use and electricity demand. It also conditions the availability of streamlined environmental review opportunities on satisfaction of requirements relating to energy, water, and fuel use.

Pennsylvania. Governor Josh Shapiro similarly issued an executive order in August integrating the Governor’s Responsible Infrastructure Development (GRID) requirements into environmental permit review for data centers. The framework addresses environmental protection, energy infrastructure, community engagement, and water conservation, and removes data centers from the state’s permit fast-track program unless the developer commits to various measures including electricity reliability, environmental permitting conditions, and workforce development, among others.

Citizen Suits Create a Parallel Source of Risk

Environmental groups are also increasingly challenging data center projects through litigation.

On September 21, Public Citizen and Sierra Club filed a Clean Air Act citizen suit concerning two San Antonio-area data center campuses, alleging that their dedicated behind-the-meter gas generation and backup diesel generators should have been permitted as major stationary sources rather than through Texas’s permitting mechanism for smaller sources. The plaintiffs seek, among other relief, to halt construction and operation pending compliance with the permitting requirements they contend apply. The case applies familiar Clean Air Act issues — including source aggregation and major-source preconstruction permitting — to the increasingly common use of on-site generation to serve data center loads.

This Texas case follows other recent environmental challenges to data center generation and permitting. In April, the NAACP filed a Clean Air Act citizen suit challenging allegedly unpermitted gas turbines serving data center operations in Mississippi. And in Wisconsin, Sierra Club filed a petition for review in July challenging the state environmental review for a proposed data center.

What to Watch

Taken together, these developments point to an expanding and increasingly jurisdiction-specific environmental landscape for data centers. State oversight now extends beyond traditional air and water permitting to encompass projects’ broader demands on electricity, water, land, and surrounding infrastructure. Environmental planning therefore increasingly cannot be separated from a project’s power, water, and land-use strategy, and developers should account for rapidly changing state requirements throughout the development cycle.

At the same time, recent lawsuits showcase the heightened opposition that projects are increasingly facing through litigation, and the resulting development risks. Although these cases remain at an early stage and courts generally have not ruled on the plaintiffs’ allegations or legal theories, developers should consider how permitting decisions — and issues such as on-site and backup generation, water demand, and relationships among co-located facilities — may be scrutinized not only by regulators and local communities, but also through citizen-suit and other environmental litigation. Litigation also presents timing risk for these projects.

As state policies continue to evolve and environmental groups test existing environmental laws against data center projects, these issues are likely to remain an important component of data center siting and development.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.