Key takeaway #1
EPA’s decision not to set nationwide environmental standards for AI data centers eliminates a potential layer of regulatory complexity but does not suspend existing environmental obligations.
Key takeaway #2
With EPA stepping back, citizen suits under the Clean Air Act and Clean Water Act may increasingly become a tool for environmental advocates and a threat to data center developers and operators.
Key takeaway #3
Without a national permitting mandate, data center developers will likely face an increasingly inconsistent patchwork of state and local environmental, permitting, and land use requirements across jurisdictions, requiring vigilant attention to regulatory updates.
Client Alert | 4 min read | 06.23.26
The nation’s power grid and infrastructure are facing increased pressure from artificial intelligence (AI) data centers, prompting new questions around environmental regulatory design and compliance. As technology companies race to build and expand new data center factories, they face a web of permitting requirements as well as potential community opposition, and environmental litigation — all against a backdrop of rapid and still-evolving agency guidance.
The rapid growth of AI data centers has generated a flurry of activity – in litigation, in Congress, from the Executive Branch, and at federal agencies – but a cohesive regulatory landscape has yet to emerge. In May 2025, EPA issued regulatory guidance, in the form of a press release and FAQs, permitting certain emergency engines to operate up to 50 hours per year in non-emergency conditions to ensure power grid reliability for data centers.[1] In September 2025, EPA issued new guidance on New Source Review (NSR) preconstruction permitting requirements, providing flexibility to begin certain non-emissions-related building activities prior to obtaining a Clean Air Act (CAA) permit.[2] Then, in January 2026, EPA convened a roundtable with the Data Center Coalition, the trade association for the data center industry, to discuss how the rapid growth of data centers can be harnessed.[3]
Most recently, EPA in May 2026 proposed to further clarify preconstruction permitting requirements for building non-emitting components or structures prior to obtaining a major NSR permit to support power generation, data centers, and manufacturing.[4] Following that proposed rule, EPA Administrator Lee Zeldin announced at the Politico Energy Summit on June 10, 2026, that EPA will not pursue any nationwide environmental requirements or recommendations targeting the AI industry.[5]While acknowledging that technologies exist to reduce water consumption and air pollution from data centers, Zeldin stated that determining appropriate practices for each facility is a matter for states and local communities, not EPA. The announcement shifts the burden for data center environmental regulation to state and local governments, creating a potentially fragmented regulatory landscape. At the same time, civil rights and environmental advocacy organizations are increasingly using citizen suits to enforce environmental laws.
On April 14, 2026, the NAACP, the Southern Environmental Law Center, and Earthjustice filed a citizen suit under the CAA against xAI and its subsidiary, MZX Tech, alleging that the companies operated 57 unpermitted portable methane gas turbines to power xAI’s Colossus 2 data center in South Memphis without obtaining the required air permits.[6] The suit seeks substantial penalties and alleges that the unpermitted operations create added health risks for families in South Memphis and neighboring North Mississippi.[7][8] Beyond its project-specific implications, the suit is a likely harbinger of further environmental litigation against AI data centers by third-party organizations.
In a surprising move, on June 16, 2026, the Department of Justice filed a motion to intervene, seeking to throw out the lawsuit against xAI. Senior DOJ officials who signed the filing argued that the NAACP’s lawsuit poses a national security threat by seeking to shut off the power supply for AI infrastructure that directly supports the Department of War’s military operations, framing xAI’s unpermitted gas turbines as essential to American AI dominance. The DOJ further aggressively contended on constitutional grounds that the federal executive branch holds exclusive authority to enforce federal law, and that private citizens and organizations cannot pursue CAA citizen suits over the government’s objections.[9] If accepted, DOJ’s theory would seriously inhibit citizen suits under the CAA, weakening Congress’s grant of a private right of action. DOJ’s theory also raises separation of powers concerns – allowing the executive branch to control which cases reach the judiciary. While it’s unlikely that the court will accept DOJ’s novel theory, its consequences would be extremely broad, making this an essential case to watch.
While Zeldin’s announcement removes the immediate prospect of nationwide environmental mandates and controls, it creates new uncertainty as states and localities step in to regulate and may prompt additional citizen suits by environmental organizations to enforce federal laws. Thus, while state environmental agencies, public utility commissions, and local land use authorities may become the primary regulators of data center environmental impacts, compliance with federal law can mitigate the risk from citizen suits and to environmental enforcement from future presidential administrations.
These factors drive the need for careful consideration of the implications of a federal regulatory vacuum. Voluntary adoption of best practices — including permitting and adoption of efficient technologies such as closed-loop cooling systems — may become an important hedge against state regulatory action and reputation risk. Data center operators powering facilities with gas turbines or other combustion equipment should carefully assess whether their operations trigger major source permitting thresholds and subsequent citizen suits.
While EPA’s decision to forgo nationwide environmental standards for AI data centers simplifies the development process, it does not eliminate environmental risks or litigation. To remain compliant and ahead of rapid changes, companies should consider:
The Crowell & Moring team will continue to monitor updates and post updates to assist companies navigate this fast-developing legal landscape.
[1] EPA, “EPA Issues Clarification to Help Power Data Centers, Ensure U.S. Is the AI Capital of the World,” May 1, 2025, https://www.epa.gov/newsreleases/epa-issues-clarification-help-power-data-centers-ensure-us-ai-capital-world.
[2] EPA, “EPA Announces Permitting Reform to Provide Clarity, Expedite Construction of Essential Power Generation, Reshore Manufacturing,” September 9, 2025, https://www.epa.gov/newsreleases/epa-announces-permitting-reform-provide-clarity-expedite-construction-essential-power.
[3] EPA, “EPA Hosts Roundtable Discussion with Data Center Coalition on Clean Air Resources and Energy Reliability,” January 23, 2026, https://www.epa.gov/newsreleases/epa-hosts-roundtable-discussion-data-center-coalition-clean-air-resources-and-energy.
[4] EPA, “EPA Proposes Redefining “Begin Actual Construction” to Remove Unnecessary Impediments to Building and Advance Economic Progress,” May 11, 2026, https://www.epa.gov/newsreleases/epa-proposes-redefining-begin-actual-construction-remove-unnecessary-impediments.
[5] Guillen, Alex, “EPA won’t set nationwide standards for data centers,” Politico, June 10, 2026, https://www.politico.com/news/2026/06/10/zeldin-data-centers-states-00956574.
[6] Nat’l Assoc. for the Advancement of Colored People v. x.AI Corp. and MZX Tech., LLC, No. 3:26-cv-74-MPM-JMV (N.D. Miss.), gov.uscourts.msnd.52261.1.0.pdf (“Complaint”).
[7] Complaint at ¶ 5.
[8] Id. at ¶¶ 221-29.
[9] See also DOJ’s press release announcing the intervention: https://www.justice.gov/opa/pr/justice-department-files-intervene-and-dismiss-lawsuit-would-hamper-americas-ai-innovation
Shennie Patel
Senior Counsel
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Tyler A. O'Connor
Partner
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Olivia Venus
Associate
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Client Alert | 7 min read | 06.24.26
DOJ’s National Security Division Announces First Declination Under New Corporate Enforcement Policy With Parallel BIS Settlement
On June 17, 2026, the U.S. Department of Justice’s (DOJ( National Security Division (NSD) announced that it had issued a declination for Robert Bosch GmbH (Bosch) relating to potential violations of the Export Control Reform Act, 50 U.S.C. § 4819 (ECRA). Specifically, the DOJ declined to criminally prosecute Bosch’s violations of the Export Administration Regulations’ (EAR) Foreign Direct Product Rule (FDPR), which apparently resulted from two Bosch subsidiaries’ export of products and software manufactured with equipment that was the direct product of U.S. software or technology to Huawei Technologies Co., Ltd. and its “Entity List” affiliates, including Huawei Tech. Investment Co., Ltd., Hong Kong (collectively, Huawei). The same day, the U.S. Department of Commerce Bureau of Industry and Security (BIS) announced a parallel civil administrative settlement with Bosch.
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