Brownfield sites, defined by the U.S. Environmental Protection Agency as properties that are underused or abandoned because of real or perceived environmental contamination, have long been viewed as challenging to repurpose. Concerns about soil and groundwater conditions and legacy permits often limit the willingness of investors and developers to consider these locations for new projects.
New analysis suggests, however, that these environmentally burdened sites could play a role in meeting future data center demand. An article in NAIOP’s Development magazine by Bracewell LLP attorneys Jason B. Hutt and Daniel J. Pope notes that brownfield locations can offer several advantages for data center developers, including adjacency to the power grid, favorable zoning, and access to existing water and infrastructure networks.
The authors caution that the level of environmental risk at brownfield properties can vary widely, from relatively minor issues to significant contamination. As a result, they emphasize that developers must undertake enhanced due diligence before committing to a project. Beyond standard site investigations, questions should focus on how historic uses have affected subsurface conditions and whether existing or legacy environmental permits could complicate redevelopment.
Hutt and Pope also highlight the importance of clearly allocating environmental liabilities in transaction documents. Because brownfield transactions are typically structured as asset sales, the parties must carefully negotiate which obligations remain with the seller and which shift to the buyer. They recommend that representations and warranties, post-closing covenants and, where appropriate, parent guarantees be structured to ensure that both sides understand their ongoing responsibilities and risk exposure.
Developers may also consider federal and state voluntary cleanup programs. The 2002 Brownfield Amendment to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), along with related agreements between the EPA and states, has encouraged the creation of state-level programs to facilitate cleanup and redevelopment of contaminated properties. Participation can offer regulatory clarity and potential liability protections, but it may also draw additional scrutiny from state agencies and extend project timelines.
The policy backdrop is evolving as well. Hutt and Pope note that executive orders issued during President Donald Trump’s administration supported U.S. leadership in artificial intelligence and led to an AI Action Plan that calls for streamlined environmental permitting for data center development, including under the Clean Water Act, the Clean Air Act and CERCLA. Still, the authors observe that it remains unclear whether Congress, the EPA or state governments will provide further incentives specifically aimed at attracting data center projects to brownfield locations.
The opportunity set is large. In 2016, the EPA reported more than 450,000 brownfield sites in the United States, while some estimates suggest the total could approach 1 million. At the same time, the American Edge Project has projected that companies could invest $3 trillion in AI-related infrastructure, including data centers, by 2030. Against that backdrop, the authors advise real estate owners, investors and data center developers to monitor policy developments that could further enhance the economics of brownfield reuse, while recognizing that a range of legal tools and cleanup programs already exist to bring data centers to these sites.
