Why Should Delaware Care?
The plans for several data centers in Delaware have garnered backlash from residents who are worried about their potential impact on energy costs and the environment. The outcome of this fight over environmental law will impact several of those proposals.
The developer behind a billion-dollar plan to build a data center near Delaware City is not giving up without a fight.
Last week, Starwood Digital Ventures appealed a state decision issued last month by Environmental Secretary Greg Patterson that the data center is not allowed under the Coastal Zone Act — a landmark Delaware law designed to limit heavy industry along the state’s shorelines.
The Delaware Department of Natural Resources and Environmental Control publicly released the appeal on Tuesday.
In it, Starwood’s attorney Jeffery Moyer argued that the data center plan, dubbed Project Washington, does not have the characteristics of heavy industry, such as smokestacks, chemical processing equipment or waste-treatment lagoons.
“Project Washington will be a non-manufacturing data-center campus that stores and manages data,” Moyer stated in the appeal.
In recent years, the data center industry has been among fastest growing in the country, with investors seeking the profits from an ongoing artificial intelligence boom. The exuberance appeared in Delaware in recent months with developers proposing several data center plans.
One of them, proposed near land that hosts the popular Halloween attraction Frightland north of Middletown, also sits within Delaware’s coastal zone boundaries and may have to comply with the provisions of the act.
The Delaware General Assembly passed the Coastal Zone Act in 1971 to protect the state’s environmentally sensitive shorelines by prohibiting new heavy industry from them.
In his decision on the Starwood proposal, Patterson pointed to the data center’s proposed use of 516 backup diesel generators, which would operate in the case of a power outage, as a reason for the heavy industry classification.
Together, they would rely on 2.5 million gallons of stored diesel, which Patterson called “entirely unprecedented” in his ruling.
Moyer — who represents Starwood as an attorney with Wilmington-based Richards, Layton & Finger — argued in the appeal that Patterson’s analysis “improperly” determined that the diesel engines’ exhaust and fuel storage amounted to tanks and smokestacks, under the law.
The Delaware Coastal Zone Industrial Control Board will decide whether to reverse Patterson’s decision. The date of the hearing has not yet been determined.
Other approvals continue
Despite Pattenson’s Coastal Zone Act decision, Starwood is continuing to progress through its other county and state regulatory processes.
In January, the company filed a request with New Castle County’s Board of Adjustments for a special use permit to allow it to build an electric switch station for the project. The board will consider the request during a hearing on March 5.
Starwood’s plan is also continuing to move through the state’s land-use review process – in which representatives from multiple state agencies offer comments about how the data center plan may be impacted by their respective regulations. Among the agencies that typically participate in the process is Patterson’s DNREC.
The process is conducted by the Delaware Preliminary Land Use Service board, which does not have the power to make final decisions. Still, its recommendations can influence the ultimate decisions that local governments make.
Get Involved
The Board of Adjustments will meet at 6 p.m. on March 5 at 67 Reads Way in New Castle. Members of the public can also attend the meeting over Zoom. The Preliminary Land Use Service will meet from 9 a.m. to 1 p.m. on March 4.
What else is in the appeal
Moyer, Starwood’s lawyer, also stated in the appeal that Patterson should not have relied on a worst-case scenario when calculating the potential emissions from the backup generators.
In its Coastal Zone application, Starwood reported that the maximum possible hours the generators could operate would be 500 hours, or a little over 20 days, per year.
“Under this worst-case assumption, this proposed campus has the potential to emit more tons of nitrogen oxides than any other industrial use in the coastal zone, with the exception of the Delaware City refinery,” Patterson said.
Starwood’s Coastal Zone Act application did say the generators could operate for that long in the worst-case conditions.
But Moyer said that Patterson “downplay[ed] the project’s actual expected operating scenario” of the generators running 20 hours per year “and failed to evaluate the potential to pollute under realistic operating conditions.”
Patterson did reference the 20-hour estimate in his decision. But he used the 500-hour scenario to calculate potential emissions.
‘This could take years’
Those familiar with the Coastal Zone Act decision process are unsure of whether Starwood has a case.
Kenneth Kristl, former director of the Environmental Rights Institute at Widener University’s Delaware Law School, said Patterson, as DNREC’s secretary, generally has considerable discretion about how the Coastal Zone Act is implemented.
Still, whether large-scale data centers count as heavy industry has not yet been litigated, he said.
“To me, it’s an intriguing legal question that needs to be resolved,” Kristl said.
New Castle County Councilman Dave Carter, who is trying to regulate data centers, said he has been on both sides of the Coastal Zone Act decision process, as a DNREC employee and as a litigant.
He thinks Patterson’s decision that Project Washington is heavy industry aligns with the “functional reality” of the plan, not how the developers are labeling it.
“You can do all the wordsmithing you want, but if you look at the actual impact … it’s clearly heavy industry,” Carter said.
Carter said regardless of what the Coastal Zone Industrial Control Board decides, he thinks the losing side will likely appeal the decision to the Delaware Superior Court, then the Delaware Supreme Court.
“This could take years,” he said.
Kristl agreed, saying he thinks the whole process will take between 18 months and three years.
