Spanberger proposes slate of data center regulations, puts first directives in motion

Virginia Gov. Abigail Spanberger last week unveiled a package of legislative proposals to rein in the data center industry in the commonwealth, with goals to tighten environmental regulations, increase cost allocation for the industry and make the proposal process more transparent by barring non-disclosure agreements between localities and data center developers.

The plan does not include a moratorium on data center development while the details of the plan are refined, a step several environmental and advocacy groups and citizens have demanded in recent weeks.

Dubbed the “Data Center Accountability Framework,” Spanberger’s plan outlines five pillars as key priorities: transparency, environmental protections, lowering energy costs, promoting clean energy and focusing on local workers.

“The framework is a thorough plan to end data center secrecy, protect our environment, lower energy costs for families, bolster our clean energy economy and make sure Virginia workers have the protections and assurances they deserve,” Spanberger said as she announced the plan at the Virginia State Capitol.

Spanberger also signed Executive Order 22, which will kick-start her plans for clamping down on the industry ahead of the legislative session that begins in January.

Transparency

Perhaps the most concrete of the directives is a measure to ban nondisclosure agreements between data centers and executive branch agencies, departments, state boards and commissions. It also bars those agencies from requiring such agreements for data center projects.

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The order does not impact the use of nondisclosure agreements by localities, but the governor said she plans to work with the General Assembly to pass a law banning the agreements at the local level.

Spanberger’s package also proposes eliminating by-right local approvals of data centers that use more than 25 megawatts of power.

Many counties have taken steps toward requiring conditional-use permits, which require public hearings and a vote of approval from local leaders.

Additionally, the governor wants to remove data centers from Virginia’s fast-track permitting process on permits for projects in “business ready” locations. The fast-track process is a remnant of Gov. Glenn Youngkin’s administration, which encouraged and supported rapid build-out of the state’s data center industry to boost Virginia’s business reputation.

Environmental protections

The framework directs lawmakers to develop policies to create data center standards for energy efficiency, water use and land impacts.

Budget language that passed the General Assembly in June directed the Department of Environmental Quality to identify “water scarcity areas” where data centers’ water use for cooling could put drinking water availability at risk. Data centers in those areas, mainly east of Interstate-95, will have to reduce their water use.

The framework also outlines a plan to expedite noise regulations included in the budget language, but does not set a deadline for them to be in place. Currently, DEQ has until 2029 to research the lowest possible sound levels data centers could operate on and make that the standard across the board.

Lower energy costs

Spanberger’s framwork requires utilities to make data centers pick up more of the energy infrastructure costs incurred by the industry.

Dominion Energy has already taken action on that front, creating a new GS5 rate class that mostly includes data centers and large manufacturers. The State Corporation Commission approved the new rate class last November.

Like the recommendations in Spanberger’s framework, the new rate class includes 14-year contracts and specific cost allocations for energy generation, distribution and transmission.

The SCC also recently directed Dominion to create a new tariff to directly assign the cost of high-voltage transmission lines that are only necessary due to data centers to those customers. Spanberger supported the tariff, which is reflected in her framework.

Tech giant Microsoft has already put the State Supreme Court on notice that it could appeal that order. Microsoft representatives said in an email this month that the company hopes “any rates ultimately put in place are transparent, fair, and reflect the costs each customer creates.”

By filing notice of appeal, they continued, “Microsoft preserves its ability to challenge any implementation that does not meet these expectations.”

Elevating clean energy, hiring Virginia workers

Spanberger’s plan would also limit the amount of power data centers can produce on-site through natural gas generators and other “behind the meter” methods that don’t draw from the electric grid. But it would make it easier for data centers to bring clean energy options on-site, by reforming utility charges for clean-energy investments.

PJM, the regional grid operator for 13 states, including Maryland and Virginia, recently proposed a new rule to direct data centers to pay for their power generation or cover their energy needs by backstop power purchases. This would help bring more power on the grid when it’s strained on very hot and cold days.

Several recent proposals by data centers in the commonwealth show the industry’s growing interest in building its own gas turbines to power data facilities. That method skirts the Virginia Clean Economy Act, which requires utility companies to retire carbon-emitting power sources by 2050.

The framework prioritizes hiring local workers to build data centers and using local businesses for procurement and contractors.

Lawmakers, environmental groups, data centers react

Several lawmakers and environmental groups spoke up in support of Spanberger’s framework.

“Governor Spanberger’s Data Center Accountability Framework is a step in the right direction,” said a statement from the Virginia House Democratic Caucus. “We look forward to continuing to work with Governor Spanberger in the upcoming 2027 legislative session to develop thoughtful legislation that holds data centers accountable.”

Many of these policies would require legislative approval, and many are prospective, meaning they will apply to new data center applications but not the more than 600 centers already operating or being built statewide.

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“For those that are up and running and already operating, we have the ability and intention to continue to make sure that into the future we are holding them to greater and greater standards,” Spanberger said.

Representatives from the Chesapeake Bay Foundation, Sierra Club, and League of Conservation Voters joined Spanberger for the announcement, calling it a strong first step toward legislation to cement the framework’s goals.

Other organizations criticized the framework for not including an outright pause on data center development.

“It does not address the continued connection of data centers to the grid, despite inadequate power and the many impacts on air quality, water supply, electric bills, and people and communities,” the Piedmont Environmental Council said in a statement. “Not to mention the hundreds of miles of proposed transmission lines, solely to support data centers.”

“We must stop the madness and issue an immediate pause on approvals until these protections – and more – are fully implemented,” said Chesapeake Climate Action Network Director Victoria Higgins.

The Data Center Coalition, the leading national group that lobbies for the industry, said it is waiting for more details on the plan.

“(We) are ready to engage with policymakers to ensure workable, balanced policies that keep Virginia competitive and honor prior commitments by the Commonwealth and its localities,” coalition representative Nicole Riley said.

Spanberger did not answer directly when asked why she did not impose a data center development moratorium while lawmakers consider her framework, but reiterated that some localities are considering pausing data center development.

“While [localities are] looking at what’s available to them as a potential option, it is up to our communities …
But the state has to show leadership,” Spanberger said. “We are in a place where day by day, community members are demanding action.”

The framework, she added, “is an opportunity for us to take action and ensure that we are moving forward.”

— This article originally appeared in Virginia Mercury, which is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: [email protected].