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.
Second Federal Court Strikes Down New York’s Climate Change Superfund Act
On September 23, 2026, a second federal district court struck down New York’s Climate Change Superfund Act (the Act), this time in a lawsuit brought by the United States and the U.S. Environmental Protection Agency (EPA). In United States v. State of New York, Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York held that the Act is preempted both by the Clean Air Act (CAA) and, independently, by the federal government’s exclusive authority over foreign affairs. The Court declared the Act unconstitutional and permanently enjoined New York officials from enforcing it.
EPA Issues Final Rule Repealing Most 2024 Power Plant GHG Standards and a Proposal That Would Eliminate the Remaining Power Plant GHG Standards
On September 14, 2026, the U.S. Environmental Protection Agency (EPA) took two related actions to substantially change the federal framework for regulating greenhouse gas (GHG) emissions from fossil fuel-fired power plants under Clean Air Act Section 111.
EPA Proposal Could Reduce New Source Review-Related Delays for Major Construction Projects
The U.S. Environmental Protection Agency (EPA) recently proposed a rule that could allow project developers of data centers, energy projects, and other facilities to begin certain site-development and infrastructure activities before obtaining a Clean Air Act (CAA) New Source Review (NSR) permit. The proposed rule, published on May 11, 2026, would clarify that certain non-emitting activities may occur before an NSR permit is issued, potentially providing greater flexibility for project development without altering the substantive air permitting requirements applicable to pollutant-emitting equipment. (more…)
Parent Company Liability Under the Clean Air Act: Federal District Court Applies Bestfoods and Imposes $100 Million Penalty and $20 Million in Mitigation
In a February 17, 2026 decision with significant implications for corporate parents, the U.S. District Court for the Eastern District of Michigan held in United States v. EES Coke Battery, LLC that parent company DTE Energy Company and two affiliates were liable as “operators” under the Clean Air Act (CAA) for New Source Review (NSR) violations at a subsidiary’s coke battery facility. In a case of first impression, the court applied the standard for direct parent company liability established in United States v. Bestfoods to a source under the CAA. Moreover, the ruling includes a $100 million civil penalty, one of the largest CAA penalties issued by a court to a stationary source. The court ordered an additional $20 million in community mitigation, and also ordered EES Coke to obtain an NSR permit that may require the source to install costly new pollution controls.
EPA, Departments of Interior and Energy Announce New Coal-Friendly Policy Initiatives
On September 29, 2025, the Trump Administration unveiled a sweeping set of policy initiatives aimed at revitalizing the U.S. coal sector that spans multiple federal agencies and includes measures such as increased funding and financial incentives, relief from environmental regulatory requirements, and increased access to public lands. In the unveiling, the Administration emphasized the importance of American “energy dominance” and the increased demand for electricity to power artificial intelligence (AI) in order to ensure that the United States wins “the AI arms race” — two themes commonly highlighted by the Administration and its top officials.
EPA Proposes Overhaul of Greenhouse Gas Reporting Program
On September 16, 2025, the U.S. Environmental Protection Agency (EPA) published a proposed rule that would fundamentally reshape the federal Greenhouse Gas Reporting Program (GHGRP). 90 Fed. Reg. 44591 (Sept. 16, 2025). If finalized, this action would mark a further shift in federal greenhouse gas (GHG) policy and advance the administration’s broader deregulatory agenda.
D.C. Circuit Restores Emergency Affirmative Defense for Title V Permit Holders
The D.C. Circuit recently reversed EPA’s rescission of a 1990s rule that established an emergency affirmative defense under the Clean Air Act for Title V permit holders that exceed an emission limitation due to an emergency. Our team breaks down what this means for facilities facing unexpected emissions exceedances.
D.C. Circuit Upholds U.S. EPA’s HFC Cap-and-Trade Program Under AIM Act
On August 1, 2025, the U.S. Court of Appeals for the D.C. Circuit upheld the U.S. Environmental Protection Agency’s (EPA) authority under the American Innovation and Manufacturing (AIM) Act to phase down hydrofluorocarbons (HFCs) through a cap-and-trade program. In IGas Holdings, Inc. v. EPA, No. 23-1261, a unanimous panel rejected constitutional and administrative law challenges from refrigerant industry members, finding that the AIM Act provides a clear “intelligible principle” to guide EPA’s allowance allocation. The Court also held that EPA’s decision to exclude 2020 market data from its allocation methodology was not arbitrary and capricious.
PG&E Agrees to First-Ever Accidental Release Reporting Settlement
On July 28, 2025, the U.S. Environmental Protection Agency (EPA) announced a settlement with Pacific Gas & Electric (PG&E) for failing to promptly report an accidental release. This is the first-ever settlement for the failure to comply with the U.S. Chemical Safety and Hazard Investigation Board (CSB) Accidental Release Reporting Rule (Reporting Rule).
