The country's largest data center market tightens the rules
On September 18, 2026, Virginia Governor Abigail Spanberger signed an executive order she described as the most comprehensive and aggressive data center accountability effort in the country. The order does several things at once. It bans state executive branch employees, boards and commissions from signing non-disclosure agreements with data center operators, a practice that has drawn criticism for keeping the terms of major site deals hidden from the public. It proposes legislation that would require local government approval for any data center exceeding 25 megawatts, and it removes large facilities from Virginia's expedited state permitting track entirely, meaning new projects will face the same review timeline as any other major industrial development.
Virginia is the market for this kind of policy shift, not a marginal one. The state hosts more data center capacity than any other in the country, largely concentrated in Northern Virginia's Data Center Alley, and that concentration is precisely why the political and infrastructure strain has become acute enough to produce an order this direct. Spanberger's framing left little ambiguity about intent: 'If you don't want to meet these high standards, Virginia may not be the place for you.' That is a governor telling the industry that built much of its footprint in her state that the terms of engagement are changing.
What the order actually changes, and when
The mechanics matter here because not everything in the order takes effect immediately. The Department of Environmental Quality has 180 days to deliver findings on three specific items: accelerated noise protection protocols originally scheduled for 2029, an analysis of the fuel impact from backup generators, and criteria for designating 'cooling water scarcity areas' that would apply usage standards to facilities drawing on constrained water supplies. The NDA ban and the removal of fast-track state permitting are within the governor's executive authority and apply now. The 25 megawatt local-approval requirement and most of the more structural measures require the General Assembly to pass legislation in 2027, meaning industry has a real window to engage the legislative process before those provisions become binding.
The order also creates an AI Task Force charged with addressing workforce displacement, data privacy and cybersecurity risks tied to the broader AI buildout, extending the state's scrutiny beyond siting and into the workforce and governance implications of the industry it hosts. Industry representatives have pointed out that data centers currently account for roughly 0.5 percent of the state's water withdrawals, arguing the scale of the concern is being overstated relative to other water users. That figure will likely become a central argument in the 2027 legislative fight over how far the water and siting provisions ultimately go.
Neither side thinks this goes far enough, which tells you something
The reaction from both directions is revealing. Senate President Louise Lucas, a Democrat, criticized the order as insufficient, noting that it leaves in place roughly 2 billion dollars in state sales tax exemptions that have already been extended to data center operators, arguing the state is still subsidizing the same industry it is now regulating more tightly. Clean Virginia, an environmental advocacy group, called the order a meaningful step forward but pushed for a complete pause on new development until the legislative framework is finalized, arguing that facilities approved in the interim window will lock in weaker standards before the tougher rules take hold.
That two-sided criticism is a more useful signal for operators and investors than either side's specific complaint. It confirms the order is a genuine political compromise, not a symbolic gesture, and that neither the pro-growth nor the pro-restriction faction in Virginia politics sees it as the final word. The tax exemption fight in particular is likely to resurface in 2027 alongside the megawatt threshold legislation, and operators betting on Virginia capacity should assume the incentive structure that made the state attractive in the first place is now genuinely under review, not just the permitting timeline.
Industry's counterargument, and the carve-out clean power already got
The Data Center Coalition, the industry's main trade group in Virginia, did not reject the order outright. Its Virginia director, Nicole Riley, said the industry shares the state's goal of responsible development while protecting residents, and pointed to Virginia's below-average electric rates along with studies showing data centers already pay the full cost of the electricity they draw, without raising bills for residential ratepayers. That argument is aimed squarely at the framing that data centers are being subsidized by everyone else's power bill, a claim central to much of the political pressure behind the order. Whether it holds will likely be tested directly in the 2027 legislative session alongside the tax exemption fight Senate President Lucas has already flagged.
The order also builds in an incentive rather than a pure restriction: facilities that rely on clean backup power get preferential grid access ahead of ones that do not, while the state separately restricts on-site gas and diesel generation more broadly. That is a meaningful design choice. It tells operators the fastest path through Virginia's now-tighter process runs directly through cleaner backup power investment. Enterprise buyers weighing new capacity commitments in the state should treat that carve-out as a preview of where siting incentives are heading nationally, and price the cost of cleaner backup infrastructure into any long-term Virginia capacity plan now, before the 2027 legislation locks the preference in.
The siting risk calculus for the next wave of capacity
For enterprise buyers and investors with exposure to data center capacity in Virginia, whether through direct colocation, hyperscaler regional commitments, or real estate positions, this order is a concrete data point in a trend that has been building across multiple states over the past year: the era of data centers receiving reflexive local welcome and fast-track approval is ending in the markets that have absorbed the most capacity. Water, noise, backup generation and tax subsidy terms that used to be negotiated quietly and locked in with NDAs are moving into public, contested, legislative processes with multi-year timelines.
The practical implication for anyone underwriting new capacity commitments is to price in longer approval timelines and less certainty around incentive packages in mature data center markets, and to treat NDA-protected site agreements as an eroding option rather than a durable advantage. Diversifying planned capacity across markets with different regulatory postures, and building contract flexibility around siting delays into vendor agreements, is a more defensible posture now than betting heavily on any single state's current incentive regime holding steady through a multi-year build cycle.
