Proactive Risk Management in the Face of Opposition to Data Centers and Crypto Mining

The rapid growth of artificial intelligence (AI), cloud computing, and cryptocurrency continues to drive unprecedented U.S. demand for energy. This acceleration is encountering an increasingly organized wave of opposition, particularly to the siting of electric generation assets required to operate data centers and crypto mining facilities. A new report from the Environmental Integrity Project (EIP), A Pollution Footprint the Size of Texas, sharply criticizes the permitting of new natural gas power plants in Texas — many of which are being built for proposed to power data centers and crypto mines.

The EIP report comes on the heels of a recent Data Center Watch report concluding that opposition efforts over the last two years prevented development of $64.4 billion in U.S. data center projects. These reports may signal an inflection point for data center developers and crypto miners who may face a more adversarial permitting and litigation environment.

EIP Report Alleges Unlawful Permitting of Power Plants in Texas

The EIP report asserts 130 proposed gas-fired power plants across Texas that, if completed, could emit an estimated 115 million metric tons of greenhouse gases per year — what the reports asserts is the equivalent of emissions from 30 coal plants or nearly 27 million passenger vehicles. According to EIP, 108 of these are new projects being fast-tracked using streamlined permitting procedures.

Environmental groups, including EIP and Sierra Club, have requested that the U.S. Environmental Protection Agency (EPA) intervene and that Texas change its approach, arguing that the Texas Commission on Environmental Quality (TCEQ) is unlawfully allowing major sources of air pollution to avoid public notice and comment periods and emissions controls. In a recent letter to the EPA and TCEQ, EIP identified at least three gas plants they believe directly power data centers. EIP asserts that these facilities and others should be treated as “major sources” requiring Prevention of Significant Deterioration (PSD) permits, which require Best Available Control Technologies (BACT).

The EIP report is notable because in the more than 20 years since the organization was founded, this is its first comprehensive report targeting data centers. EIP has previously focused its research on other industry sectors, such as petroleum refining, and its past research has been hotly disputed by targeted industry sectors. Nonetheless, EIP’s analysis has often served as a launch point for allied NGOs to engage in litigation and advocacy campaigns against targeted sectors.

Parallel Attacks on Data Centers Themselves

EIP’s focus on upstream power supply comes amid a broader wave of local and national activism directly targeting data centers, including noise complaints. According to Data Center Watch:

• 142 advocacy groups across 24 states are actively organizing to block or delay data center construction.
• An estimated $64 billion in affected projects includes $18 billion in outright cancellations and $46 billion in delays.
• Motivations range from concerns about noise, water use, and aesthetics to energy demand, climate impact, and tax policy.
• Local activism is gaining traction: for example, Virginia saw town council elections overturned and legislative proposals advanced in response to data center projects.

An Exponent analysis of the report notes that while not all project disruptions are attributable solely to environmental opposition, the combined effect is a chilling of investment momentum in multiple high-growth regions.

Implications for Data Center Developers and Investors

Developers and investors should anticipate heightened public scrutiny not just for data center siting and design, but also for supporting power infrastructure — particularly if tied to new or expanded fossil fuel-based power generation. Risk factors related to power generation facilities should be considered during data center project planning.

Key risks to monitor include:

• Permitting Delays and Litigation: Power plants supplying data centers face a heightened risk of Clean Air Act litigation over permitting, particularly those that do not require PSD obligations, such as BACT.
• Local Political Shifts: Recent local elections show that public opposition can translate into rapid shifts in local government and policy that directly impact project approvals.
• Emerging Regulatory Frameworks: Growing state and local legislative interest stemming from community opposition signals an intent to regulate cumulative environmental impacts of data center development.

Next Steps for Stakeholders

Developers planning power-intensive AI campuses and crypto mining should consider several steps to mitigate these risks.

• Risk assessment: Plan early for potential litigation to increase the defensibility of environmental permitting. Monitor and assess legal risk tied to associated power generation facilities, and incorporate these considerations into planning for the project timeline. Relying on the assurances of a friendly state or local regulator may not be sufficient.
• Building a record with litigation in mind: High-profile, large scale projects are under heightened risk of attack in litigation, which can create delays, cost uncertainties, and, at least according to Data Center Watch, project cancellations. Pre-planning potential defenses to these legal attacks is essential. Community engagement, strategic litigation planning, and development of a robust administrative record are all essentials in this new environment.
• Engaging federal stakeholders:  The Trump administration has made it a policy priority to promote data centers and crypto mining. In particular, AI is viewed as a national security priority in light of the perceived competition with China over this emerging technology. Even EPA Administrator Lee Zeldin identified “making the United States the AI capital of the world” a priority of the agency. As part of its efforts, the administration is considering policy changes that promote certainty, which could better protect investments against attacks from project opponents. Developers should engage with policymakers early in the development process to help inform these efforts.

Sidley’s Environmental, Health, and Safety team is actively advising clients navigating this rapidly shifting landscape.

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.