Driven in large part by the explosion in generative AI, data centers have emerged as a central component of the modern economy. One study projects nearly $7 trillion in data center-related global capital expenditures by 2030.
With this massive growth comes a host of environmental and energy challenges related to land use, water consumption, air and noise pollution, and extreme demands for electricity. These competing considerations result in a complex regulatory landscape where incentives and perspectives can vary depending on jurisdiction.
Federal Push to Accelerate Data Center Permitting
The Trump Administration has doubled down on the buildout of AI and data centers. In July 2025, the administration issued Executive Order No. 14318, Accelerating Federal Permitting of Data Center Infrastructure and America’s AI Action Plan, which makes the case for data centers’ criticality to the nation’s economic prosperity and national security.
Among other things, the executive order calls for accelerated permitting for projects such as natural gas turbines, coal power equipment, nuclear power equipment, geothermal power equipment, and “any other dispatchable baseload energy resources, including electrical infrastructure (including backup power supply)” serving a data center project.
The US Army Corps of Engineers’ recent issuance of Nationwide Permit 39, which clarifies that “data centers, artificial intelligence and machine learning facilities” are types of commercial development that qualify for general permitting under section 404 of the Clean Water Act, is one example of an agency operationalizing the administration’s desire to expedite permitting for such facilities.
State and Local Resistance Builds
States and local jurisdictions, however, do not always share the federal government’s zeal for rapid data center growth. They have raised concerns that significant energy and resource demands can, among other things, result in increased power costs for residential consumers, draw upon limited land and water resources, and complicate states’ ability to meet clean energy and emissions goals.
Across the country, many states have proposed or enacted legislation imposing various requirements and accountability measures on data center development. These initiatives can also extend down to the local level, such as Loudoun County’s data center standards that establish local zoning ordinances and guidance for the regulation of data centers in what is known as “Data Center Alley”.
Litigation Emerges as Pressure Point
On the litigation front, conflicts regarding data center approval, permitting, and construction are also arising between and among cities, counties, and data center developers. A brewing controversy regarding a $10 billion data center project in the city of Imperial, Calif. is a prime example.
In that dispute, the city of Imperial filed a lawsuit against Imperial County and its board of supervisors, seeking to block the development of the nearly one million-square-foot data center complex that the city claims was fast-tracked without proper environmental oversight or public participation.
Specifically, the city filed a writ petition in December 2025, which challenged the county’s data center approval process. To that end, the city claims that the county failed to provide an opportunity for public input, appropriately assess environmental concerns, and follow its own procedures and ordinances. The county, however, maintains that the project requires only ministerial approval with no discretion or independent judgment, and therefore there is no need to apply the California Environmental Quality Act under which the city is suing.
In response to the lawsuit, the county filed a motion for judgment on the pleadings, which challenged the legal sufficiency of the allegations contained in the city’s petition and requested dismissal. The court granted the county’s motion in February 2026, but also gave the city leave to amend its petition to adequately plead its allegations.
Developers Push Back as Stakes Rise
In January 2026, the data center developer – Imperial Valley Computer Manufacturing – entered the fray, filing a separate civil rights lawsuit against the city of Imperial and several senior city officials in the US District Court, Southern District of California. That litigation alleges that the city led a coordinated campaign of administrative obstruction and pointed retaliation designed to halt the data center project.
The lawsuit details significant economic losses resulting from the city’s alleged interference, including the loss of over 1,600 construction jobs, 100 permanent high-tech positions, and hundreds of other jobs. The developer further alleges that the city’s actions have blocked $72.5 million in one-time sales tax revenue and $28.75 million in recurring annual property tax revenue.
Despite these ongoing controversies, the developer recently proposed a comprehensive “global settlement” to the city, which would resolve these and other legal disputes while imposing enforceable, long-term community protections on the project.
According to reports, the settlement would be court-approved and would “run with the land,” and would bind not only the current developer, but any future owners of the project. As litigation progresses and the city once again amends its petition against the county, the proposed settlement adds an interesting layer to this already complex dispute.
The multi-layered data center disputes brewing in Imperial are certainly ones to watch, but they are just a few of the controversies that currently exist or are expected to arise in the near future. Given the players and dollars at stake, interested parties would be wise to stay apprised of court rulings in these cases, as well as the evolving regulatory landscape and interplay between federal, state, and local regulations and initiatives in the data center space.
Originally published on April 9, 2026 online with Data Center Knowledge. Reprinted with permission. Further duplication is prohibited.
