Data Center Regulation (Or Not) in Pennsylvania: Part 3

In Part 1 of this post, I recounted the lack of meaningful regulation of data centers in Pennsylvania, noting that the Governor was promising imminent executive action.

On August 18, the Governor signed an Executive Order (EO) that essentially does three things:

1. Directs the Department of Environmental Protection (DEP) to review data center permit applications only if they have received local approvals, and expedites only those whose developers have signed a legally binding consent order and agreement (COA) (based on this 33-page template) that incorporate the GRID standards.
2. Removes data center proposals from the state’s Fast Track permitting process.
3. Prohibits the use of nondisclosure agreements for data center projects (though state officials have previously signed some).

The EO amounted to an about-face of the state’s approach to data center development. And while the Governor singled out speculative developers for criticism, the projects proposed by tech giants are no less impactful to communities.

Here are eight important questions and answers about the Governor’s action.

1. Does the EO block “speculative, irresponsible” data center projects?

No. Permit applications for non-compliant projects will still be reviewed by DEP. There is no exclusion for “speculative” projects.

2. Can a data center receive state approvals without following GRID standards?

Yes, if they get local approvals—though it will take longer and they may not get a state tax break (see #8 below).

3. Are the GRID standards really “strict”?

Read Part 2 of this series.

4. Will the EO guarantee that at least some new clean energy is developed to power data centers?

No. There are provisions in the COA for an Alternative Compliance Payment in the form of a per-megawatt-hour payment made to the Pennsylvania Energy Development Authority if a data center “elects to satisfy its Clean Firm Energy procurement requirement through payment in lieu of procurement.”

5. Will the EO lower electricity costs?

Not directly, and certainly not immediately. The EO directs the Special Counsel for Energy Affordability to “engage” with the Pennsylvania Public Utility Commission and to “advocate” for policies and rules to ensure data center development doesn’t shift energy costs onto households and businesses, or compromise electricity reliability.

6. What does the EO mean for air pollution and climate?

The COA provides that a data center’s generation facilities can be located on-site, co-located on nearby property, or come from a connection to the existing electrical grid under contract with a provider. So, the extent of local air emissions will vary widely, on a case-by-case basis. However, given GRID’s unambitious clean energy requirements and the off-ramp of alternative compliance, overall emissions—and climate impacts—will increase for every data center built under this EO. The only question is by how much, and where the impacts will be greatest?

7. Will the EO spur any policy advances?

The COA requires the installation of local air quality monitoring stations at approved projects, and, significantly, the EO tasks DEP with “examin(ing) whether regulations should consider the cumulative impacts” from “multiple” (read “hundreds of”) backup generators. Rigorous cumulative impact analysis should be (but has not been) routinely applied to state permitting decisions for all sorts of emissions sources (like gas compressor stations). The seriousness of any examination of cumulative impacts, and its broader implications, should be watched closely.

The EO also requires DEP to identify ways to expedite permitting for clean energy generation and storage facilities on brownfield and previously developed sites, as well to remove barriers to deploying advanced reconductoring and transmission technologies. Those actions are long overdue.

8. Could the EO be challenged in court? (Is some of this for show?)

The extensive requirements of the COA could potentially be challenged as beyond DEP’s authority to impose without regulation. However, there is a much more obvious vulnerability.

The EO directs the Department of Revenue to change the Computer Data Center Equipment Exemption Program guidelines to ensure new applicants’ compliance with the GRID requirements. This has been done. Does the Governor have the authority to change a statutorily enacted program in this manner? Perhaps another legal challenge to a Governor’s unilateral authority is in the offing.

Indeed, the EO contains a severability clause.

The impact of the EO will depend upon how individual COAs are written, interpreted, implemented, and enforced, and on whether key provisions survive any potential challenge.