At a packed public hearing in June, when the Birmingham City Council was considering new data center regulations, the mayor referred to his staff a question about whether the city could outright ban data centers.
Hunter Garrison, deputy director of the Office of Resilience and Sustainability, stepped to the podium and answered.
“We cannot,” he said. “It is in U.S. zoning law. There's been Supreme Court cases about it. If it is a legal land use in the United States, we must allow it somewhere.”
But Blake Hudson, dean of Samford University’s law school and director of its Land Use & Natural Resources Center, begged to differ when WBHM contacted him recently.
“The federal government really does not have any land use regulatory authority,” Hudson said. “There is no general federal rule requiring a municipality to allow every lawful use somewhere.”
As developers aim to build large data centers across Alabama, community members have been asking government officials lots of questions. Those residents are often skeptical of the responses. Many queries are legal ones that boil down to issues surrounding zoning and land-use laws.
The Birmingham City Council proceeded on June 9 to adopt regulations that restrict data centers but do not ban them. Yet the question of whether cities in Alabama can ban data centers has persisted.
Are bans legal?
Hudson explained that states hold land-use authority, and most states delegate much of that responsibility to local governments. He said Alabama has granted broad land-use authority to incorporated cities and towns.
“So, local governments can generally completely ban use,” he said.
That’s so long as the ban on a type of land use is justified under an incorporated city or town’s power to protect such things as public health, safety and welfare, he said.
So what was Garrison talking about at the Birmingham City Council meeting? He might have been referring to a Michigan law rather than a U.S. one.
“Two months ago, in Michigan, a rural community attempted to outright ban,” he said. “They were sued by Open AI. They lost, and now that data center is going to be built.”
A Michigan state law prevents local governments from banning any particular land use, including data-center development.
Hudson said Alabama has no such law.
But in unincorporated parts of Alabama, the ability of local governments to ban data centers is different than it is in cities and towns. That’s because the state hasn’t granted any zoning authority to most counties – meaning they can’t regulate data-center development at all.
Alabama’s Association of County Commissioners released a resolution last month saying the group doesn’t want authority to regulate data centers specifically, but “encourages a more comprehensive approach to enhance the county commission’s role in strategic and productive growth in Alabama’s unincorporated areas.”
Kellen Zale, a professor who teaches land-use law at the University of Houston, has a more nuanced view on the question of whether local governments that do have zoning authority can outright ban data centers.
She said they can try, but they risk being sued. Not because of a federal zoning law that doesn’t exist, but because of the Fifth Amendment to the U.S. Constitution.
“It's a concept known as a regulatory taking,” she said.
A court could rule that by banning a particular use, the government took something of value from the landowner. As a result, that government could be responsible for the owner’s investment costs and lost income.
“It's not that every government necessarily would be liable if they enacted a ban, but it's more that liability concern about the property owner, the developer, suing them for a takings claim if they passed a ban,” Zale said.
Indirect bans
Still, if a city or town really wants to ban data centers, Zale said, there’s an indirect way that’s far less likely to result in a lawsuit. She said municipalities can essentially restrict large data centers to the point that, in practice, developers can’t build them.
“By amending its zoning ordinance to do things like have a minimum required distance from certain other types of land uses, there may actually be no place in the local community that then would be suitable for a large data center,” Zale said.
She said two towns in Texas recently established rules that illustrate both approaches.
In Kerrville, Texas, new rules effectively block data centers without an outright ban.
On the other hand, San Marcos, Texas, made data centers illegal in every part of the city, citing concerns they would take water and energy resources from the local community.
There’s no lawsuit yet, but “they have maybe exposed themselves a little more,” Zale said.
Can a moratorium be retroactive?
Another question that has come up in data-center debates is whether a project that has already received permits can be subject to a temporary pause, new regulations or a ban. This is a key issue around the hyperscale data center under construction in Birmingham’s Oxmoor Valley neighborhood.
Both Zale and Hudson said the answer to this question is, it depends.
Hudson said bringing an already-permitted project under a new moratorium or new zoning regulations is legally difficult because of – again – that issue of taking value from the landowner. And because of something called “vested interest.”
“We try to provide certainty when it comes to property law and what landowners can do, and so there's this notion of an investment-backed expectation,” he said “You bought property at a certain price, expecting you could do this certain thing, and the law generally looks down upon a circumstance where you pull the rug out from under people.”
He said a temporary pause followed by adjustments, rather than trying to completely block a data center, would be more viable legally.
“A court would look more favorably upon that,” Hudson said.
He said the city of Birmingham is being extra careful by not applying its new regulations retroactively to the data center in Oxmoor Valley.
“That's probably their safest position as far as protecting themselves from a lawsuit by the property owner,” Hudson said.
The city is, however, facing multiple lawsuits from nearby residents and the Greater Birmingham Humane Society.
Hudson said from a risk-management perspective, city officials might think they're more likely to win those lawsuits than they would be to win a lawsuit by the property owner.
Zale said a major factor in determining whether a project can be held to a moratorium or new regulations is whether a property owner actually has vested rights. State law determines that.
In Alabama, when rights are vested isn’t always clear. Lawsuits surrounding the Oxmoor Valley data center claim the developers didn’t have those rights – a claim the developers deny.
Why aren’t public officials listening?
Finally, people have asked whether data-center developers are targeting Alabama because of lack of regulation. And, if so, why, in their view, the state and some city governments don’t seem to be listening to residents’ concerns about their well-being or that of animals and the environment.
On the first count – whether developers are targeting Alabama – Hudson said: “I think there is a high probability that that's true. It's an acutely anti-regulatory state.”
As for why elected officials might not be doing what some constituents want, he said those officials might be thinking about potential tax-revenue – and fear losing out to another city that’s more welcoming to data centers.
This doesn’t mean officials aren’t acting in what they perceive to be the public’s interest.
Hudson said they could be thinking: “We need this data center. We know all the benefits it can provide. The public doesn’t know that, so we're going to do what we think is best for them.”
The solution, Hudson said, is for states to step in.
“Your local city councils – their incentives aren't necessarily aligned to deny these data centers, but the state can respond to the public outcry,” he said. “So you don't just play whack-a-mole in every local jurisdiction and around the state.”
An Alabama law that goes into effect next month requires large data centers to pay for their own infrastructure and calls on the Public Service Commission to verify the facilities don’t end up raising bills for other customers.
But whether a state like Alabama, which Hudson said is looking for ways to increase its economic productivity, would restrict development is an open question.
