The Nickel Report

Virginia remains at the center of the rapidly growing data center industry, with Northern Virginia representing the world’s largest data center market and significant growth occurring elsewhere in the Commonwealth. Against that backdrop, data center regulation was a hot topic during the 2026 Virginia General Assembly session. While the legislature imposed relatively few new requirements directly on data center developers or operators, several measures direct state agencies to study data center impacts or develop additional environmental requirements. Notably, the legislature tasked the State Corporation Commission (SCC) with drafting a new annual report to document data center electricity demand, water usage, and generator permitting information, creating a public record of the industry’s resource footprint in Virginia.

Electric Service Agreements

By October 1, 2026, and annually thereafter, the SCC must collect and report aggregated data on “all electric service agreements or equivalent contracted demand with data centers, including their electric load, from all electric utility providers.”¹ The Department of Environmental Quality (DEQ), all other agencies of the Commonwealth, political subdivisions, and applicable utilities must provide assistance as requested. This reporting requirement is designed to give the legislature more insight into data center electricity consumption.

Water

In order to learn more about the amount of water used by data centers, the legislature focused on increased water usage reporting requirements. As part of its annual reporting obligations, the SCC must also collect and report “all data center water usage information from municipal or private water providers.”²

Additional data center water usage information is now required under DEQ’s water withdrawal reporting requirements. Starting January 1, 2027, public water utilities and other significant water users that supply water to data centers will be required to separately report the total volumes of potable and reclaimed/non-potable water provided to data centers each month.³

Data centers in areas facing limited water supplies may be required to implement cooling technologies with lower water usage demands. By July 1, 2027, DEQ must establish criteria for determining “Cooling Water Scarcity Areas,” where the use of evaporative cooling could harm water quality or reduce the quantity of water available for other beneficial uses.⁴ Data centers in designated Cooling Water Scarcity Areas will have until July 1, 2032, to demonstrate to DEQ’s satisfaction that they have minimized the use of any type of water for cooling purposes and are employing the best available water-efficient technologies, which will include “air cooling, closed-loop systems, recycled water, stormwater reuse, non-potable reclaimed water, or other technologies approved by the department.”⁵

The legislation imposes earlier requirements in the Eastern Virginia Groundwater Management Area. New data centers there that submit a complete air permit after January 1, 2027, must demonstrate that they have minimized water use for cooling purposes and are using the best available water-efficient technologies.⁶ To help data centers plan to implement these changes, DEQ must also research and provide by October 15, 2026, a plan for retrofitting “existing data centers in the Eastern Virginia Groundwater Management Area to use air cooling systems, 100 percent recycled water and/or stormwater for cooling, or a closed loop system.”

Air

The SCC’s annual report must also include “permitting information on data center generators and tier of each generator.”⁷ The tier refers to the emissions standards classifications under the US Environmental Protection Agency’s engine emission standards framework, with Tier 4 representing the most stringent emissions limits.

For any data center air permit application submitted on or after July 1, 2026, DEQ may not issue the permit, including coverage under any general permit, unless the permit establishes emissions limits for each electrical generator/engine combination unit, known as an “engine-generator set,” or “gen-set,” that are equal to or less than the emissions achieved by a “Tier 4 equivalent.”⁸ This means a gen-set with: (i) a selective catalytic reduction system or equivalent for nitrogen oxides, (ii) a diesel oxidation catalyst system or equivalent for carbon monoxide, and (iii) a diesel particulate filter or equivalent for particulate matter.

Noise

Responding to concerns about noise from data centers, DEQ must adopt and is authorized to enforce regulations establishing the “lowest achievable noise for a data center” by December 31, 2029.⁹ Beginning January 1, 2030, a data center in violation of these regulations could face civil penalties of up to $32,500 per day from DEQ or the locality in which the data center is located.

Waste Heat

The Virginia Department of Energy was tasked with researching beneficial uses of heat generated by data centers. The department was required to submit its report by September 1, 2026, identifying “opportunities for beneficial use of waste heat from data centers” and best practices for facilitating communications between data centers and potential heat users.¹⁰ The report has not been submitted as of the date of this publication but is expected shortly.

Siting

Starting on July 1, 2026, industrial facilities requiring 100 megawatts or more from an electric utility will be subject to additional site assessment requirements in applicable rezoning applications, special exceptions, or special use permits.¹¹ For example, an applicant must prepare a “sound profile” of the facility’s impacts on “residential units and schools located within 500 feet” of the facility’s property boundary. Localities may also require the site assessment to examine the facility’s effect on “(i) ground and surface water resources, (ii) agricultural resources, (iii) parks, (iv) registered historic sites, and (v) forestland” on the site and directly adjacent land. As part of the siting approval, the electric utility must also submit a form describing any new or existing substations that will be used to serve the facility and the anticipated transmission voltage.

Looking Ahead

Taken together, these legislative developments signal increasing environmental scrutiny of Virginia’s data center industry. Although many of the 2026 measures do not impose immediate new requirements on data center developers and operators, they establish a framework of study, reporting, and rulemaking that will shape the regulatory landscape in the years ahead. Key upcoming deadlines include:

• October 1, 2026: First SCC annual report on data center electricity, water, and generator data
• October 15, 2026: DEQ retrofitting study for existing data centers in the Eastern Virginia Groundwater Management Area
• January 1, 2027: Water reporting authority takes effect; new Eastern Virginia Groundwater Management Area data center cooling requirements triggered
• July 1, 2027: DEQ Cooling Water Scarcity Area regulations due
• December 31, 2029: DEQ data center noise regulations due
• July 1, 2032: Deadline for data centers in Cooling Water Scarcity Areas to demonstrate use of best available water-efficient technologies

As Virginia’s data center industry continues to mature and grow, these issues are likely to play an increasingly important role in the development and operation of data centers in the Commonwealth. If you have questions about how these new laws, regulations, and developments may affect your operations or reporting requirements, please contact us.

[1] H.B. 30, Item 477(D), Spec. Sess. I (Va. 2026).

[2] H.B. 30, Item 477(D), Spec. Sess. I (Va. 2026).

[3] Va. Code § 62.1-44.38(C); 9VAC25-200-30(A); 9VAC25-200-40(B)(3) (“For purposes of this subdivision, ‘reclaimed water’ means water that has been treated and repurposed from wastewater or nonpotable sources.”).

[4] H.B. 30, Item 366 (M.1), Spec. Sess. I (Va. 2026).

[5] H.B. 30, Item 366 (M.2), Spec. Sess. I (Va. 2026).

[6] H.B. 30, Item 366 (M.2), Spec. Sess. I (Va. 2026).

[7] H.B. 30, Item 477(D), Spec. Sess. I (Va. 2026).

[8] Va. Code § 10.1-1322.6.

[9] H.B. 30, Item 367(E), Spec. Sess. I (Va. 2026).

[10] H.B. 323, Reg. Sess. (Va. 2026).

[11] Va. Code § 15.2-2209.5.