Key takeaways

• The Bureau of Land Management (BLM) approved the first-ever data center on public lands near Boulder City, Nevada, by amending a prior solar/battery right-of-way rather than conducting a fresh National Environmental Policy Act (NEPA) review, a decision now facing an Interior Board of Land Appeals (IBLA) challenge.
• The U.S. Department of Energy’s $100 billion Paducah AI campus followed a competitive solicitation and a Ratepayer Protection Pledge commitment, offering a more durable model than Townsite’s procedural shortcuts.
• The U.S. Department of Defense (DOD) is advancing a multi-installation Army and Air Force leasing process that is drawing opposition over grid and water capacity, national-security supply-chain risk, and community proximity.
• Congress is weighing measures ranging from a full ban on federal-land AI data centers to narrower DOD-specific compliance requirements, with bipartisan pressure for greater transparency.
• Developers should treat environmental-review documentation and community engagement as legal risk-mitigation tools, not just process steps, given active litigation and pending legislation.

Two announcements this month have put federally managed land squarely at the center of the AI data center boom. On June 26, 2026, the BLM approved the Townsite Data Center, the first data center ever authorized on public lands, by amending a prior right-of-way grant for a solar and battery-storage project near Boulder City, Nevada. Three days later, on July 29, 2026, the DOE announced a $100 billion, privately funded AI campus at the former Paducah Gaseous Diffusion Plant in Kentucky. The Paducah project followed a competitive DOE solicitation, and its developers have committed to the White House’s Ratepayer Protection Pledge to shield existing ratepayers from the cost of new infrastructure. DOD has pursued a parallel but more incremental, multi-installation leasing process across Army and Air Force bases, detailed further below.[1]

These announcements trace back to Executive Order (EO) 14318, “Accelerating Federal Permitting of Data Center Infrastructure,” which directed the agencies to identify federal land for data center development and streamline the environmental review that would otherwise apply. This alert examines the agencies’ actions, including litigation risk the Townsite approval has already generated, and the legislative headwinds building in Congress.

Agency actions and objections

DOI/BLM

BLM recently approved the first-ever data center to be sited on public lands pursuant to its authority under the Federal Land Policy Act Management Act, by amending a right-of-way previously granted for a 19 MW solar project plus a 35 MW Battery Storage System near Boulder City, Nevada. The BLM’s decision relied on a prior environmental analysis conducted for that battery energy storage system (BESS) and solar project in the original grant’s 88.5 acres, a materially different land use than high-density 24/7 computing facilities, rather than evaluating the potential environmental impacts of the data center, including, for example, water resources and air emissions. Objections to the approval were immediately raised by Boulder City and the adjoining communities, along with environmental organizations, who challenged the failure to conduct a new NEPA review for the impacts of a materially different use,[2] the exclusion of the city from the decision-making process, diversion of a revenue stream initially intended for the city, and the concern that the decision could become a template for authorizations across BLM land in the western United States.[3]

DOE

Following a spring 2026 request for information soliciting public feedback regarding the potential use of 16 areas for data center development, DOE announced its designation of four areas for potential data center development in July 2025.[4] In March 2026, DOE announced that it had entered into a public-private partnership to redevelop the Portsmouth Gaseous Diffusion Site in Piketon, Ohio, including a planned 10-GW AI data center campus and associated energy infrastructure. The project includes a $4.2 billion investment in transmission infrastructure. On July 20, 2026, DOE’s National Nuclear Security Administration (NNSA) announced it had selected a developer to enter into negotiations for a phased lease to develop a 1-GW AI data center supported by approximately 2 GW of on-site energy generation initially powered by natural gas bridging to advanced nuclear energy.[5]Idaho National Laboratory and Oak Ridge have issued solicitations but have not yet selected a developer.

Most recently, DOE announced that it had entered a partnership with a coalition of companies to lease and redevelop the Paducah Gaseous Diffusion Plant site into a data center campus. Alongside that development, dedicated generation for the project (up to 2 GW of natural gas and up to 2.6 GW of battery storage) would be built either on or near the Paducah campus. The project, which includes utility partners, is targeted for completion by 2031, supporting compute capacity exceeding 1.8 GW and backed by up to 4.6 GW of total dedicated power resources.

DOE’s earlier Portsmouth partnership has drawn substantial opposition based on allegations of unresolved radioactive contamination and elevated local cancer rates tied to the site’s history as a Cold War-era uranium enrichment plant, and on environmental groups’ projections that the co-located 9.2-GW natural gas generation buildout at Portsmouth will emit more than 53 million tons of CO₂ annually, with associated public-health costs.[6] Objections to the Paducah announcement have so far focused on inadequate advance notice to local officials.

DOD

Using its Enhanced Use Lease authority, the Army has conditionally selected companies to develop projects at Fort Bliss and Dugway Proving Ground, with requests for proposals still open for Fort Hood and Fort Bragg. The Air Force has run two solicitations: (1) a five-base solicitation covering Arnold, Edwards, Joint Base McGuire-Dix-Lakehurst, Davis-Monthan, and Robins and (2) a separate Alaska solicitation covering Joint Base Elmendorf-Richardson, Eielson, and Clear Space Force Station. In September 2025, an energy solutions provider announced that it had signed an agreement with the Navy to add data center use powered by on-site generation to an existing 2016 enhanced use lease at NAS Lemoore.[7] These sites are facing opposition due to grid and water capacity, risk to national-security supply chain, absence of a mandatory pre-deal impact assessment, proximity to civilian population, and regional energy-supply constraints.[8]

Legislative developments

Congressional scrutiny of federal-land data centers has intensified since the Townsite approval became public, though no restriction has yet been enacted. Proposals range from Rep. Rashida Tlaib’s No AI Data Centers on Federal Lands Act—which would permanently bar AI data centers on federal land, including military installations, and require removal and remediation of existing facilities—to narrower measures such as Rep. Cory Mills’s NDAA provision barring DOD from leasing land to developers using adversary-sourced equipment (passed the House) and Rep. John Garamendi’s amendment (rejected in committee) that would have required DOD to assess energy, water, noise, and security impacts before finalizing any data center lease. Pushback has been bipartisan: Lawmakers have pressed the Pentagon and DOE for greater transparency on the resource and community impacts of federal-site data centers, even as DOD officials and some Republicans warn that added conditions could slow the military’s AI buildout.

Litigation risk

Immediate exposure: The Boulder City approval

The pending IBLA appeals are a genuine, near-term test case. The plaintiffs' core theory—that a DNA tiered to a 2023 solar-project environmental assessment cannot lawfully substitute for new environmental analysis of a data center's materially different effects—tracks well-established NEPA principles requiring fresh analysis whenever a project’s environmental profile materially changes. Plaintiffs also have alleged that BLM’s failure to allow public comment on the data center proposal, together with an internal press release documenting the approval that was drafted but never published, are evidence that the agency’s process was not based on reasoned, transparent decision-making. A stay ruling or IBLA decision in the coming months will be an early bellwether for whether a DNA can substitute for new NEPA review elsewhere on BLM land.

Additional exposure

• DOD categorical exclusions: To the extent Army or Air Force projects rely on streamlined NEPA pathways under EO 14318 rather than full review, they invite the same procedural challenge now pending against BLM, particularly near Fort Bliss, Fort Hood, Fort Bragg, or the Alaska installations.
• State and local water-rights claims: In water-stressed jurisdictions (e.g., El Paso, Nevada, and Alaska), disputes over water allocation for cooling and backup generation could generate independent state-law claims alongside federal administrative challenges.
• Legacy contamination and remediation liability: Redevelopment of legacy DOE nuclear or industrial sites, such as Portsmouth, carries CERCLA and state-law tort exposure tied to historical contamination, and remediation-cost allocation between the federal government and the private developer should be treated as a heavily negotiated lease term.
• Emissions- and health-based community opposition: As with the gas-fired generation buildout at Portsmouth, pairing a data center with on-site fossil-fuel generation invites objections based on projected CO₂ emissions and public-health costs, a recurring risk factor developers should expect at other sites even absent a filed legal challenge.
• Legislative risk: If enacted, H.R. 9939 would require removal and remediation of already-built qualifying facilities, and even if it does not proceed, risk could remain for project financing, insurance underwriting, and lease negotiation.

Conclusion

While federal land could offer genuine advantages for data center developers, the Townsite approval shows that speed achieved through procedural shortcuts, rather than a defensible environmental record, creates real and currently litigated legal exposure. DOE and DOD lands are not free from controversy, even with competitive solicitations. Even with constrained NEPA review after the administration and agencies’ deregulatory initiatives, risks will remain for any data center developer based on environmental resource issues, community opposition, political concerns, and other federally mandated restrictions on the use of their property.

Endnotes