Washington Is Removing the Wrong Barriers

Follow a single data center developer and you can watch the whole collision happen in four moves. First, Virginia. The PJM grid serving the state's data center corridor is so congested that transmission costs rose 43% to $6 billion in the first half of 2026 alone ^[1]. Goldman Sachs documented developers packing up and relocating to Texas and Georgia ^[2]. Second, Texas. The state discovered its water plan contains no projections at all for data center water use, and froze every new grid connection pending an audit that won't finish until December ^[3]. The escape route closed. Third, the workaround. Rather than wait on either grid, developers are building their own power — Oracle running behind-the-meter natural gas for Stargate, xAI dropping in temporary gas turbines for its Colossus site ^[4]. Fourth, the wall. The EPA is now scrutinizing those very temporary gas installations for emissions loopholes ^[4]. The developer who fled the grid to escape a wait has walked straight into the regulator Washington was trying to get out of the way. Hold that chain against the numbers. Of 3,969 announced AI data center projects, only 802 are under construction ^[5]. The shortfall isn't federal permitting. It's specialized labor, building materials, TSMC chips, and grid capacity — physical constraints, not legal ones ^[5]. Yet Washington's response has been to dismantle the legal layer. The EPA is exempting "islanded" power plants from Clean Air Act rules and proposing to end public notice for minor-source air permits. Administrator Zeldin framed the rollback in a single sentence.

This approach is intended to reduce administrative burden and responsibly speed up permitting, supporting American economic development and energy dominance. — United States Environmental Protection Agency

The Energy Department directed FERC to force 60-day grid interconnection reviews ^[6]. The Justice Department joined Elon Musk's xAI lawsuit to block Colorado's AI law ^[7]. Three fronts, all aimed at permission — none aimed at the transformer, the water table, or the chip fab. The people who actually govern the land see the mismatch. Maryland's Wes Moore made the state's position explicit.

You cannot just big foot a local jurisdiction. — Wes Moore

Texas's Greg Abbott, who once celebrated Google's $40 billion investment, has turned the other way.

And so, they had not been working in collaboration with the state, they'd not been in collaboration with local governments, and so they basically dug their own grave for the problem that's been caused for them and that's why they got the backlash they deserve. — Greg Abbott

And the physical walls are closing from directions the legal campaign can't reach. The DOE is carving out four federal sites — Idaho National Lab, Oak Ridge, Savannah River, Paducah — as enclaves outside municipal zoning, but on "as is, where is" terms that dump all interconnection risk back on developers ^[8]. PJM, meanwhile, has proposed making unsupported data centers the first to lose power in a shortage ^[9]. The trap is circular. The legal rollbacks don't remove the physical constraints — a faster permit doesn't conjure a transformer or a water allocation. And the workarounds developers adopt to survive those constraints, the on-site gas turbines, trigger exactly the emissions scrutiny the EPA tried to eliminate ^[4]. The two are now feeding each other: each legal wall knocked down sends more projects into the physical bottleneck, and each physical workaround walks them back into the regulator's line of sight.