What’s Next for Data Centers in Pa.? State Lawmakers Are Split on How to Regulate Them

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HARRISBURG — The Pennsylvania House has passed bills in recent months aimed at regulating the massive data center projects popping up across the state.

The proposals range from a mandate to disclose energy and water usage to a requirement that data centers pay into energy assistance programs. All four passed with at least some bipartisan support. But they face a major hurdle: A top lawmaker in the Republican-controlled state Senate says he doesn’t “think we should be looking at individual bills right now” on data centers.

Senate Majority Leader Joe Pittman (R., Indiana) told Spotlight PA that while he is “appreciative” of the legislation sent over by the state House, he wants to consider the issue more “holistically.” This would mean encouraging data centers to be transparent with host municipalities and to bring new energy to the electric grid — though he added he’s “not entirely sure” that this can be accomplished through legislation.

“We want to make sure that we're competing against our neighboring states, to make us attractive to responsible development overall,” Pittman said.

State senators have introduced their own bills, from a Democrat’s pitch to amend an existing tax exemption to require data centers to follow green requirements to get it, to a Republican’s proposal to let municipalities pass moratoriums on data center development. None has gotten a vote in the chamber.

The computing needs of artificial intelligence and demand for cloud storage are driving data centers’ massive expansion across the country. As projects have proliferated in Pennsylvania, many residents have voiced concerns about how they will impact energy prices, water supplies, and local economies.

So far, the commonwealth’s response has been more carrot than stick, said Robert Routh, an environmental lawyer and advocate for the Natural Resources Defense Council.

Gov. Josh Shapiro proposed speeding up permitting for data centers that meet environmental and transparency standards during his budget address. The state Public Utility Commission approved a model framework for agreements between utilities and large energy users, namely data centers, that would require the latter to pay for any infrastructure upgrades that are required as a result of their energy use.

These moves serve as strong suggestions and incentives for data center developers, Routh said, and are easier to accomplish because they don’t need legislative approval. But these are voluntary actions undertaken by data centers and not enforceable by the state.

“[They] are steps in the right direction. They’re incentives, they’re recommendations,” Routh told Spotlight PA. “New legislation would be the most significant enactment of guardrails with the most impact.”

What would the state House bills do?

Guardrails on data centers

The most comprehensive legislation that passed the lower chamber would direct the PUC — which regulates everything from natural gas to water to telecommunications — to enact binding rules for data centers that use over 25 MW of energy. That would cover most of the newly proposed facilities in Pennsylvania, most of which are projected to use between 100 MW and 1,000 MW.

The bill leaves many of the details to the PUC. But broadly, the guardrails it lays out would include establishing new standards for data centers’ contracts with utilities to prevent the latter from losing money if a developer backs out of a planned project; mandating the centers pay utilities for the construction of their infrastructure; and tracking the costs of the facilities’ energy usage.

The bill, sponsored by state Rep. Rob Matzie (D., Beaver), would also prohibit utilities from passing on costs associated with data centers to ratepayers. And it would require the PUC to review all rates to ensure customers are protected from paying higher costs due to the centers’ high energy demand.

Under the legislation, data centers would have to use some clean energy, such as from solar, wind, or nuclear sources, to power their campuses. At first, centers would only need to have 10% of their total energy come from such sources, but that requirement would increase to 32% by 2035.

The bill would also direct data centers to pay into state programs that help low-income Pennsylvanians pay for their heating or cooling bills and provide money to finance new clean energy projects.

Monitoring energy and water usage

Two of the bills focus on disclosing how much water and energy data centers use.

One, introduced by state Rep. Joe Webster (D., Montgomery), would mandate that data centers that plan to use more than 100,000 gallons of water per day over 30 days notify the Department of Environmental Protection before they begin construction. That report would include a description of the data center, how it plans to use the water, where the water will be taken from, and proof that the withdrawal won’t negatively affect the source or the people who live nearby.

Estimates about how much water data centers use range from 300,000 gallons per day for mid-sized facilities to 5 million gallons per day for large ones.

The bill would also allow DEP to require additional permitting or conduct an aquifer test, and the agency would be able to deny permitting requests if it finds a data center would overly tax the water supply. It would additionally have DEP monitor water sources for adverse impacts after construction is complete, but it doesn’t specify how frequently.

The other bill, introduced by state Rep. Kyle Mullins (D., Lackawanna), would make data centers submit an annual report to the DEP that includes how much water and energy they use in total and during peak hours, and an estimate of their annual energy and water usage for the upcoming year.

A data center that fails to comply with the reporting requirements would be penalized $10,000 per day until the report is submitted to the department.

Township regulations

The final bill, sponsored by state Rep. Kyle Donahue (D., Lackawanna), would direct the Local Government Commission — a bipartisan and bicameral legislative agency composed of 10 lawmakers — to create a model regulation ordinance for townships.

Townships would not be required to enact the ordinance. Some have already begun this regulation process on their own as data center developers have arrived on their doorsteps.

The bill would require the commission’s template to address height and size and noise standards, the setback distance from residential areas, and emergency planning. It would also mandate that data centers write a community benefits agreement — a contract between the developers and the town — to bring things like local jobs or affordable housing.

The Local Government Commission would be required to reach out to stakeholders, such as the Department of Conservation and Natural Resources, environmental advocates, and local governments, when drafting the model ordinance.

‘The right tools’

Environmental advocates are among the loudest critics of data centers and are concerned about the impact these major construction projects will have on land and water quality, as well as overall water availability.

They have largely supported the state House proposals.

Katie Blume, the legislative director at Conservation Voters of Pennsylvania, wants to ensure that “if a data center is coming, that communities are armed to protect themselves with the right tools.”

“No matter what happens, we want to make sure that there are things in place to protect our communities and protect our environment,” Blume said.

(There are some environmental advocacy groups, like the nonprofit Food and Water Watch, that are neutral on or opposed to these bills, as they would prefer a total moratorium on data center development.)

The Data Center Coalition, the industry’s trade group, has meanwhile opposed all the legislation coming out of the state House, saying that it holds the industry to unfair standards.

(Pennsylvania is not the only state that has lately seen a rush of legislation to regulate data centers.)

“Ultimately, what it does is say every single problem that we have is because of data centers and data centers only,” said Dan Diorio, the vice president of state policy for the coalition.

Diorio said the bills would place restrictions on data centers that don’t exist for other projects and create a system where “there’s one set of rules for one type of economic development, while there are no rules for other types.”

“Pennsylvania is just now seeing data center development,” Diorio told Spotlight PA. “I worry that these policies are ultimately going to provide so much uncertainty that it won't see any future data center development.”