Bringing Data Centers To Brownfields

What to Know (AI Generated)

• Brownfield sites offer built-in power, infrastructure and zoning advantages for data center siting.
• Redevelopment hinges on managing legacy contamination and CERCLA liability through due diligence.
• Contracts, cleanup programs and risk allocation are critical to advancing brownfield data center projects.

A framework is in place for understanding and allocating environmental risk.

The redevelopment of brownfield sites into sites for data centers offers unique advantages as well as environmental challenges. Potential site benefits include grid adjacency, established rights of way, zoning, and access to water and other infrastructure. At the same time, site-specific environmental challenges may impact the scope and timeline for development and permitting for new infrastructure.

While data center developers are focused on the development timeline, access to power and stakeholder support, sellers of a brownfield site are most focused on finding a next owner capable of addressing legacy environmental risks in a manner that reduces the possibility of a “boomerang” liability.

Legacy environmental issues at brownfield sites range from minor to significant. An old warehouse could have tiles and insulation containing asbestos, or a transformer might contain polychlorinated biphenyls. Through historical spills and releases, the soil or groundwater at a brownfield site may contain hazardous substances.

Because the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) makes current and former “owners” and “operators” jointly and severally liable for environmental contamination at a site, these historical impacts can present a significant impediment to redeveloping a brownfield for productive use.

Developers can evaluate and manage these risks through due diligence, contractual mechanisms and the various brownfield programs aimed at bringing industrial sites back into productive use.

Environmental Due Diligence

At each stage of a diligence effort, developers should ask whether and how the findings affect the viability, cost and timeline of a potential project. Typical diligence tools include database searches, historical aerial photographs, site visits, interviews and a review of existing environmental permits. Helpful questions to ask include:

• How has the historical use of the brownfield site impacted soil and groundwater conditions? Is off-site migration a concern? Do existing conditions pose a risk to neighboring properties that might trigger a more active intervention?
• What concerns do state and local authorities have about legacy liabilities at the site? Are there “buffer” properties that could also be purchased to facilitate redevelopment? Has the site been formally enrolled in any remediation programs?
• Is there legacy infrastructure at the site that may need to be removed, and if so, will it present environmental challenges (e.g., removing asbestos-containing materials from buildings, removing underground piping)? Will the infrastructure be a potential project benefit (e.g., electric transmission lines, tie-ins to neighboring facility processes)?
• Are there legacy permits at the site that present challenges or opportunities? Does an existing permit include closure obligations that require a new owner to conduct investigation and remediation activities?
• Does the seller have existing insurance policies that might mitigate the consequences of discovering unknown contamination during redevelopment?

Contractual Liability and Risk Allocation

Brownfield redevelopment is predominantly structured as an asset sale, not as a lease or a sale of stock or membership interests. Leases are generally disfavored because a continuing role as the owner of the site does not allow the lessor to distance themselves from the legacy liabilities. Stock transactions are often less favorable because the purchaser does not want to acquire other liabilities — such as product, exposure and off-site disposal liabilities — associated with the former business conducted at the site. 

Preexisting environmental liabilities: Typically, a purchaser will want the seller to retain responsibility for all preclosing environmental liabilities associated with a site because the purchaser was not in position to control a preclosing presence or release of hazardous substances.

At a brownfield, however, the value of the transaction to the seller is often the opportunity to delay environmental requirements triggered by closing the site and to potentially have someone else remediate preexisting soil and groundwater conditions as part of the redevelopment effort. In such cases, the seller will be focused not only on price but also on the purchaser’s likelihood of success and how to ensure the site’s legacy liabilities will not boomerang back to the seller should the purchaser fail in its redevelopment efforts.

Representations and warranties: In brownfield transactions, the buyer should expect to purchase the site “as is” and without substantial contractual recourse if environmental surprises arise after closing. The seller’s environmental representations and warranties typically focus on the seller’s knowledge about environmental conditions and confirmation that they have provided all relevant environmental information in their possession or control. Additional representations may focus on compliance with applicable environmental law and the presence of environmental permits, but these are less of a focus when the buyer plans to redevelop the site. Any indemnity from the seller will likely be limited to a breach of environmental representations. This places a premium on assessing environmental risks prior to closing using due diligence.

Post-closing covenants: After closing, the seller often seeks to ensure the purchaser will fulfill existing site investigation and remediation obligations. This may include obligations for the purchaser to conduct specific work and possibly enter the site into a state-directed remediation program. The seller may also have identified areas of the site that are not suitable for redevelopment or that would potentially trigger environmental risks if disturbed. In that case, the seller may seek negative post-closing covenants restricting the purchaser’s ability to utilize such areas.

Separately, the parties can negotiate the parameters of insurance policies that the purchaser must obtain to protect both sides from unexpected environmental issues. In an asset sale, the purchaser may want to acquire the seller’s rights under preexisting insurance policies for preexisting environmental issues that are not discovered until the redevelopment work commences post-closing.

Parent guarantees: Purchasers prefer a single-purpose type of entity to own a site with significant environmental liabilities. The purchaser does not want to put its larger balance sheet and resources at risk if redevelopment costs and liabilities prove to be materially higher than anticipated (a practice known as “ringfencing”).

On the other hand, the seller may be seeking to minimize the likelihood that conditions at the brownfield site will boomerang back to the seller if the purchaser is unsuccessful. One way for the seller to better insulate against that risk is to require a guarantee from the purchaser’s parent entity. The parties must then address whether the guarantee is one of payment, performance or both, as well as the duration of the guarantee.

Voluntary Cleanup Programs

With the Brownfields Amendments to CERCLA, enacted in 2002, Congress sought to alleviate some of the risks brownfield redevelopers faced when returning sites to productive use. Through several memorandums of agreement with the Environmental Protection Agency (EPA), numerous states have established voluntary cleanup programs to help owners and developers perform cost-effective and successful cleanups through coordination with state and federal agencies.

When enrolling a brownfield into a voluntary cleanup program, the owner or developer commits to characterizing and remediating environmental contamination at the site. This work is overseen and supported by technical staff at agencies, who can leverage significant experience in support of cleanup efforts. After the design and implementation of a remedy, many states will issue the owner or developer a certificate of completion, signifying the agency’s view that the brownfield has been remediated to appropriate levels. Importantly, this certificate often constitutes a defense to state claims of liability for any future cleanups that may be necessary at the site.

In addition, voluntary cleanup programs offer several other benefits to the entities that pursue remediation to completion. For example, the owner or developer increases the property value of the site and adjacent sites, benefiting nearby landowners and communities. For subsequent real estate transactions, the certificate of completion can provide confidence to prospective purchasers that many of the site’s environmental liabilities have been addressed.

Conversely, voluntary cleanup programs pull state agencies into the site redevelopment process, which can require a broader scope of investigation and remediation and extend the timeline to completion. The state’s role may not prove to be compatible with the rush to get data centers online.

Brownfields 2.0?

The approach outlined above is immediately actionable for data center developers and others seeking to revitalize brownfield sites. Developers should also pay attention to actions taken by the Trump administration to further incentivize data center development at brownfields.

Within days of taking office, President Donald Trump issued an executive order to remove barriers to American leadership in artificial intelligence. It instructed agency officials to prepare an “Artificial Intelligence Action Plan,” which was published in July 2025. The AI Action Plan includes a recommendation to streamline numerous environmental permits and requirements that apply to data center developments, including permitting requirements and regulations promulgated under the Clean Water Act, the Clean Air Act and CERCLA. Also in July 2025, the president issued an executive order to accelerate federal permitting of data center infrastructure. It directed EPA to develop guidance for identifying Superfund and brownfield sites and to assist states in returning brownfields to productive use.

In January, EPA published “Guidance on the Redevelopment of Superfund and Brownfield Sites as AI Data Centers.” The guidance provides additional information and criteria that may be useful in evaluating brownfield sites for potential redevelopment as data centers.

It remains to be seen whether Congress, EPA or individual states will take steps to further incentivize data center development at brownfields, but the Trump administration’s statements make it clear that the race to power AI will be facilitated by favorable policies.

Real estate owners, investors and data center developers should stay up to date on new policies that make brownfields redevelopment even more attractive, while also recognizing that many strategies, contracting tools and programs are already available to bring data centers to brownfields.