A positive step, with room to improve

Last month, the Indianapolis Department of Metropolitan Development (IndyDMD) presented draft zoning policies for local data centers to a committee of the Indianapolis City-County Council. Residents of Indianapolis-Marion County have been invited to provide feedback on the proposed regulations to IndyDMD – which is accepting public comment on the draft ordinance through 8:00 a.m. on Monday, May 18, 2026.

IndyDMD oversees local land use and zoning; its data center regulations could be implemented as soon as July, pending approval from the Council. HEC has outlined multiple suggestions for strengthening the draft regulations, below. In addition, given the enormous impact the proposed regulations could have on the entire Indianapolis community, HEC is also calling on IndyDMD to:

  • Extend its current three-week comment period to three months/90 days,
  • To host at least one public forum on the issue in each township of Marion County, and
  • To assure city residents there will be no new approvals of data center developments while the proposed regulations are under consideration. 

HEC encourages all city residents to join our call for expanded opportunities for our neighbors to review and respond to the city’s proposed data center regulations by including the points above in public comments to IndyDMD. Comments can be submitted via IndyDMD’s online comment form; commenters are free to use the information in this blog post in their submission.

Environmental Recommendations

As written, the draft ordinance is more focused on the community nuisance (noise, sound, visibility) of data centers than on their true environmental impact. To address this, we encourage the city to add policy provisions specific to:

  • The type of water system a data center uses. HEC recommends all data centers built in Indianapolis use closed-loop systems. These systems provide a sustainable cooling architecture in which water remains sealed within the system’s pipes, circulating between servers and cooling units to manage heat without evaporation. Closed-loop systems improve a data center’s energy efficiency and can reduce its consumption of fresh water by as much as 70%. In addition, HEC recommends required disclosure about use of PFAS, or “forever chemicals,” in cooling systems. Although toxic, discharge levels of these chemicals are not currently regulated under Indiana statute.
  • The center’s plan for back-up power. The vast majority of data centers use standard diesel generators as their primary backup power source; these generators are expensive, noisy, highly polluting and exempt from Clean Air Act regulations in times of energy “emergencies ” like grid outages, which is when a data center would use them. Standard generators are a significant source of air pollutants, including nitrogen oxides, sulfur oxides, carbon monoxide, carbon dioxide, and particulate matter. These emissions present serious health risks to humans, including respiratory and cardiovascular problems.
  • Instead, HEC recommends data centers use large-scale battery energy storage systems (BESS), which provide silent, emission-free, and near-instantaneous backup power. 
  • Alternatively, HEC recommends, at minimum, that data centers use Tier 4 diesel generators. These generators meet the EPA’s strictest emission standards, reducing particulate matter and nitrogen oxides by over 90%.
  • The draft regulations do not require pollution impact studies for data center development. HEC encourages the city to include these studies, which are helpful tools for understanding where data center pollution is likely to end up in the local environment and for identifying related health risks to the surrounding neighborhoods.

While the draft ordinance requires data center developers to have written plans for water and energy quantity, there are no requirements or recommendations related to quality.

  • HEC recommends the ordinance include requirements for how a data center sources water (to prevent over-reliance on or depletion of groundwater), in addition to a requirement that a data center pretreat water used for cooling before returning it to the local utility’s wastewater treatment system. Returning water without pretreating it can increase a local water utility’s costs, which could ultimately drive up costs for residential customers.
  • Across the country, most electric utilities are relying on net new natural gas plants to meet data centers’ soaring demands for energy. AES Indiana has already announced plans to build new natural gas-fired power plants and associated infrastructure to power large-scale data centers moving into its service area. Gas-fired plants emit nitrogen oxides and volatile organic compounds which react to form ground-level ozone and fine particulate matter hazardous to human health.
  • HEC would like to see Indianapolis require or recommend that data centers work with AES Indiana to prioritize (and pay for) clean energy or distributed energy resources.

Community Recommendations

The current Indiana statute on community benefits related to data centers is very weak as it relates to community benefits agreements. HB1210, passed in the 2026 session, added a requirement that communities receive 1% of the exempted sales tax on energy only, which equates to 1% of 7% of the total amount a data center spends on electricity. Many data center operators have made public pledges not to seek incentives from communities and to focus instead on community benefit agreements. These agreements are a vehicle for data center operators to invest in local communities outside the tax structure.HEC recommends the draft ordinance be strengthened by specifying any additional community benefits the city chooses to require, along with a requirement that data center operators engage with the community during project development. 

Process Recommendations

  • The draft ordinance does not address use of non-disclosure agreements (NDAs). While NDAs are standard practice in business to protect trade secrets, their use in data center development deals have caused significant concerns. NDAs that shield development plans from the public or prohibit elected officials from sharing development information with constituents are particularly problematic. HEC recommends stronger language around NDAs be included in the final ordinance.

Categories: Climate Change