The Nickel Report

Across the country, municipalities are reassessing how existing zoning rules apply to large-scale data centers, including facilities designed to support artificial intelligence (AI) 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.

The Massachusetts Snapshot

Recent developments in Massachusetts illustrate the dynamic clearly. As concerns over electricity demand, water use, noise, emissions, and land-use compatibility grow, some municipalities are responding with zoning amendments, temporary moratoriums, and prohibitions.

As data center proposals advance, Massachusetts municipalities are taking varied approaches to uses that many existing zoning codes do not expressly address. Holyoke was among the first cities in the state to adopt restrictions targeting large AI data centers above a specified megawatt threshold. In Mansfield, voters similarly approved a substantial restrictions on data center development at the annual town meeting. Meanwhile, Westfield adopted a moratorium while evaluating the potential effects of a proposed 2.7 million-square-foot data center project reportedly estimated to cost more than $4 billion. These measures reflect a common issue: many local zoning codes were written before data centers emerged as a distinct land use. Municipalities must therefore determine whether these facilities fall within existing industrial, warehouse, utility, or technology-use categories—or whether additional standards are warranted.

Massachusetts has not enacted a comprehensive statute governing AI data centers, leaving municipalities with a central role in local land-use review. Governor Maura Healey’s Executive Order No. 658 adds a statewide layer of oversight for newly built or expanded data centers exceeding specified electricity-demand thresholds.¹ The order requires certain large projects to meet state development standards and submit a community benefits agreement and provides guidance for municipal review. The order therefore signals growing state involvement while leaving local zoning and land-use requirements in place. As a result, siting requirements and outcomes are likely to continue to vary by municipality unless the Commonwealth adopts a more uniform statutory framework.

From Town Hall to Federal Court

These dynamics are already playing out in federal court. Several recent cases challenge moratoriums, zoning changes, and related land-use decisions affecting proposed data center developments. Although the factual settings differ, the complaints raise similar questions: whether data centers were previously treated as permitted uses, whether municipalities changed course after public opposition emerged, and whether the procedures used to adopt new restrictions complied with applicable law.

A recently filed Michigan case shows how litigation may arise when a municipality reverses course in its treatment of a proposed data center. The complaint alleges that the city and its consultants repeatedly confirmed that the proposed campus was “a permitted, by-right use” but later adopted a moratorium and proposed restrictions that the developer contends would make the project—and potentially similar developments in the city—nonviable.² The developer asserts claims for exclusionary zoning and violations of equal protection and procedural and substantive due process.

Other recent cases raise comparable issues. In a New Jersey case filed in September 2026, plaintiffs allege that Monroe Township first approved data centers as a permitted use on the property but later reversed course amid public opposition.³ The township first considered standards addressing noise, water use, emissions, utility capacity, and related impacts but then pulled that standards ordinance and introduced both a property-specific ban and a town-wide ban.⁴ The plaintiffs seek damages exceeding $300 million.⁵ In Ohio, a developer and related property owners allege that the city annexed and rezoned land for data center development but later adopted an emergency moratorium after the plaintiffs had invested more than $19.6 million and submitted a site plan application.⁶ Likewise, in another Michigan case, developers allege that a proposed data center qualified as a permitted, by-right use under the city’s existing ordinance, but that the city later imposed a moratorium and suspended review of their application.⁷

These cases remain in their early stages and have not yet produced substantive rulings. Even so, they highlight several issues likely to recur in data center siting disputes, including whether a project qualifies as a permitted use, whether the municipality followed required procedures, whether data centers were treated differently from comparable industrial uses, whether developers reasonably relied on prior municipal representations, and whether interim restrictions exceeded lawful bounds.

The Legal Landscape

Several recurring legal theories are beginning to take shape. One is exclusionary zoning. Developers may argue that certain moratoriums, bans, or restrictive ordinances cross the line from regulating data centers to effectively excluding them from a municipality or from any location where development is practicable. Whether that argument succeeds will depend on applicable state law, the ordinance’s practical effect, and how the local zoning scheme classifies data centers.

A second recurring theory is equal protection. These claims focus on differential treatment. A developer, for instance, may argue that data centers are being singled out for restrictions not imposed on other intensive industrial uses, utilities, substations, warehouses, or manufacturing operations. Municipalities, in turn, are likely to argue that large-scale data centers have distinct operational characteristics—including concentrated electricity demand, cooling needs, water usage, backup generation, and utility impacts—that justify different treatment. Whether a comparator is persuasive will likely turn on how similar the uses actually are and what evidence supports the distinction.

A third is due process. Procedural due-process claims focus less on the substance of a municipality’s land-use judgment and more on how that judgment was reached. Developers have challenged moratoriums adopted without adequate notice, hearings held on compressed timelines, shifting standards applied after applications are filed, and public statements suggesting that the outcome was predetermined. If supported by the record, those allegations may shift the dispute from the merits of the municipality’s policy judgment to the fairness of the process used to reach it.

For municipalities, that means the central question is often not whether they may regulate data centers at all, but whether the process and factual basis for doing so will withstand scrutiny. Courts reviewing other zoning disputes have similarly examined whether local land-use regulation bears a reasonable relationship to legitimate governmental objectives. Whether a particular data center ordinance meets that standard will likely depend on details such as the ordinance text, the planning record, the procedural steps followed, and the stage a project had reached when the rules changed.

What Practitioners Should Watch

What happens next may depend on three pressure points:

First is whether increasing variation among local approaches leads states to establish more uniform rules. In other infrastructure contexts, including the regulation of cell towers and utility-adjacent uses, inconsistent local requirements have sometimes prompted state legislatures to impose common standards or procedural limits. A similar response may emerge for data centers if municipal regulations continue to vary significantly, and siting disputes become more frequent.

Second is the legal uncertainty surrounding projects already in development when local rules change. Whether a project may proceed under existing standards may depend on when the developer acquired the property, submitted its application, or obtained approvals, as well as the protections afforded under applicable state law. At the same time, municipalities considering new restrictions should carefully follow required procedures and develop a record supporting the regulatory change. These fact-specific issues are likely to remain central as zoning frameworks for data centers continue to evolve.

Third is whether federal support for AI infrastructure can be reconciled with increasingly cautious local land-use policies. Executive Order 14318 seeks to accelerate qualifying data center projects through streamlined federal permitting, avenues for financial support, and access to federal land.⁸ Most siting decisions, however, remain subject to local zoning and approval requirements. The resulting tension may increase pressure for statutory guardrails, incentives, or other reforms intended to align federal infrastructure priorities with local land-use concerns.

Until a more uniform framework emerges, data center siting disputes will continue to be shaped largely at the local level. Developers should carefully evaluate applicable zoning provisions, permitted-use classifications, and timing considerations before acquiring property or submitting an application. Municipalities should ensure that any moratorium or ordinance is properly noticed, supported by an adequate record, and tailored to the concerns being addressed. For practitioners on all sides, data center siting is becoming a quickly developing area of land-use law—and the legal playbook is already taking shape.

[1] Exec. Order No. 658, Establishing Requirements for Responsible Data Center Development and Operations in Massachusetts to Protect and Support Ratepayers, Communities, and the Environment (Mass. Sept. 8, 2026).

[2] Complaint ¶¶ 1–4, 178, Wixom Industrial One, LLC v. City of Wixom, No. 2:26-cv-12754, ECF No. 1 (E.D. Mich. Aug. 7, 2026).

[3] See Amended Complaint ¶¶ 16, 18, 20, 27, 33–35, HEXA Builders, LLC v. Mayor & Township Council of Monroe Township, No. 1:26-cv-08284-ESK-EAP, ECF No. 11 (D.N.J. Sept. 18, 2026).

[4] Id. ¶¶ 22–25, 31–34, 37.

[5] Id. ¶¶ 420–83, Prayer for Relief ¶ MM.

[6] Complaint ¶¶ 1–3, 39, 51–52, 60–63, Thor Equities, LLC v. City of Urbana, No. 3:26-cv-00196-MJN-CHG, ECF No. 1 (S.D. Ohio June 19, 2026).

[7] Complaint ¶¶ 1, 24–25, 50–58, 87–100, CAL Realty, LLC v. City of Gibraltar, No. 2:26-cv-12893-RJW-APP, ECF No. 1 (E.D. Mich. Aug. 17, 2026).

[8] Exec. Order No. 14318, Accelerating Federal Permitting of Data Center Infrastructure, 90 Fed. Reg. 35,385 (July 28, 2025).