Data center development: Key zoning and entitlement considerations

As data center development continues to expand across key markets in the United States, developers and investors are placing increased focus on zoning, entitlement, and litigation risk considerations earlier in the project lifecycle. Recent high-profile developments across the country highlight how substantive, procedural, and timing-related issues have become focal points for challenges to data center approvals.

Large-scale campuses typically require rezoning, special exception or special use approvals, and other discretionary reviews depending on the jurisdiction and site-specific circumstances, making early-stage diligence and planning key as projects transition from site selection through zoning approvals.

Our alert outlines considerations in the evolving landscape.

Key considerations

Public notice and hearings

Data center proposals typically involve detailed public notice and hearing requirements. These processes influence anticipated timelines and provide opportunities for organized opposition. Verifying that the locality has complied with applicable public notice requirements may help reduce the risk of later litigation challenges to zoning approvals on procedural grounds.

Appeal timelines

Where rezoning or other entitlements are required, local ordinances and state statutes may allow for administrative or judicial appeals. Approvals may also remain subject to challenge during applicable statute of limitations. For example, procedural challenges to zoning approvals in Ohio may be brought within a two-year limitations period; that can extend potential litigation exposure beyond initial approvals.

Standing to challenge approvals

The ability of individuals, community groups, or other stakeholders to challenge zoning decisions varies by jurisdiction. In some instances, challenges could be initiated by individual residents or newly formed community groups based on procedural compliance or substantive objections.

In jurisdictions with lower bars to establish standing, generalized concerns, such as traffic impacts, noise, or light exposure will further expand the universe of potential plaintiffs who may have standing to sue. The resulting proceedings may affect project costs, timelines, contractual milestones, or anticipated power commitments.

Vested rights and project timing

The timing of when development rights vest under applicable law may affect projects when regulations evolve during the development process. Establishing a clear understanding of vested rights at the outset of a project could help mitigate the risk of later challenges.

Moratoria and regulatory shifts

Many local jurisdictions and state legislatures are evaluating or implementing measures that may delay, restrict, or outright prohibit data center development and related electric infrastructure. These developments are affecting project planning, financing, and development of large-scale data center campuses, many of which may already be in an anticipated – and even funded – development pipeline.

Data center moratoria ordinances must be evaluated for permissibility under state law and constitutionality under US Supreme Court precedent in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency.

Practical implications

Given national, state, and local trends, data center developers, operators, and investors may consider the following factors:

• Evaluating zoning and entitlement complexities earlier in the site selection process
  
  
• Accounting for potential legal challenges and appeal timelines when structuring anticipated development schedules
  
  
• Determining grandfathering, vesting, and applicable statutes of limitation
  
  
• Assessing jurisdiction-specific state and local nuances, particularly regarding standing and the many potential avenues for opposition
  
  
• Identifying when and how development rights may vest and be protected under state and local statutes or judicial precedent
  
  
• Monitoring evolving local regulatory and policy developments, trends, and social media activity for opposition

These considerations are often most effectively addressed early in the development cycle, before key business decisions, contractual deadlines, and project milestones are finalized.

Learn more

For more information about these trends in the US or in your specific market, please contact DLA Piper Partner Antonio J. Calabrese and Associate Kawit Promrat (both Reston).