The Secretary of the Delaware Department of Natural Resources and Environmental Control (DNREC) has told Starwood Digital Ventures that their planned Delaware City data center project is prohibited from development under the Delaware Coastal Zone Act (CZA).
In a letter to Starwood dated February 3, 2026, DNREC Secretary Greg Patterson specifically identified a regulation that "any new tank farm greater than 5 acres in size, not associated with a manufacturing use, is prohibited as a new heavy industry use."
According to DNREC, Starwood's proposal includes over 500 double-walled diesel fuel belly tanks capable of storing over 5,000 gallons of fuel in an area far exceeding 5 acres. Each of the tanks is co-located with a diesel generator on top of the tank.
"Typical backup generation is exempted out of the coverage of the statute, even when it includes supporting tanks. But a system of backup generation that incorporates more than 5 acres of storage tanks is not at all typical," Patterson wrote. "Indeed, a proposal to operate more than 500 backup generators at a single location with more than 2.5 million gallons of stored diesel fuel appears to be entirely unprecedented, and would have been inconceivable just a few years ago. The large tank farm that is incorporated into this proposal will pose exactly the types of risks that justify the categorical exclusion of such a tank farm from the Coastal Zone as a prohibited use."
In a Facebook posting, New Castle County 6th District Councilman David Carter applauded DNREC's decision, calling it unambiguous.
"As we continue working to put reasonable zoning guardrails in place at New Castle County Council, I want to recognize the outstanding work of the staff at DNREC," wrote Carter. "They conducted a thorough, fact-based environmental review and showed the leadership needed to make the right decision. Protecting Delaware communities requires clear standards and thoughtful planning, whether a project is inside or outside the Coastal Zone."
State Senator Stephanie Hansen said the decision "buys us time to get this right."
"Make no mistake, this decision should not be viewed as a referendum on the future of data centers in Delaware," Hansen said. "Given the growing emphasis on technology and artificial intelligence, it's clear that data centers are here to stay and it's up to us to implement meaningful regulations that balance economic opportunity with energy affordability and reliability."
The data center complex was planned for an area off of Route 9 between Hamburg Road and Governor Lea Road.
Starwood has fourteen days to appeal the decision to the Coastal Zone Industrial Control Board.
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