The Nickel Report

Demand for data center capacity is rewriting the rules of site selection. With interconnection queues stretching for years, power has become the scarcest input, and properties once discounted because of known or suspected contamination can offer infrastructure support that greenfield sites often cannot. This includes large tracts of industrially zoned land that already have transmission, substations, water, and transportation access. Additionally, federal, state, and local funding and tax benefits may be available to encourage development of these brownfield sites. For many developers, the question is no longer whether to consider a brownfield, but how to do it without inheriting its problems.

Across the country, municipalities are reassessing how existing zoning rules apply to large-scale data centers, including facilities designed to support artificial intelligence and other computing-intensive applications. As developers move to secure suitable sites, adequate power capacity, and necessary approvals, cities and towns are considering whether current ordinances adequately address the scale, infrastructure demands, and operational features of these projects. In some jurisdictions, that process has led to the enactment of moratoriums, zoning amendments, or use restrictions. In others, it has prompted litigation. For practitioners advising developers, municipalities, and landowners, this is a space worth watching closely. Many of the issues surfacing now are familiar land-use questions in a new setting: how local governments classify emerging uses, when they may revise zoning rules in response to new development pressures, and what process is required when those changes affect pending or anticipated projects.

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. 

On June 18, the Federal Energy Regulatory Commission (FERC) took long-anticipated action to speed the interconnection of data centers, other large loads, and the generation resources necessary to power them to the interstate transmission grid. FERC has responded to a late 2025 proposal from the Department of Energy by issuing “Show Cause Orders” to each of the six Independent System Operators and Regional Transmission Organizations (ISOs/RTOs) subject to its jurisdiction. The Show Cause Orders find that ISO/RTO tariffs appear to be unjust, unreasonable, and/or unduly discriminatory because they do not clearly, consistently, or completely address key large load interconnection issues. Each ISO/RTO must file a response that explains why FERC’s concerns are invalid or describes reforms that FERC could impose under section 206 of the Federal Power Act.

The Virginia Department of Environmental Quality has recently published guidance that addresses data center backup power and what constitutes an “emergency” justifying the use of emergency generators.