Concerns about data center construction and energy use are being raised all over the Commonwealth. About 80 new data center projects have been proposed in the state.
The Pennsylvania Capital-Star’s Peter Hall has been covering the issue and spoke with The Allegheny Front’s Kara Holsopple about what has been happening in Harrisburg.
LISTEN to the interview
Kara Holsopple: Things have changed quite a bit now that the state’s budget has passed, but let’s talk about some of the bills that recently passed in the Pennsylvania House regarding data center development, beginning with an optional 180-day pause on data center applications so that communities can have more time to consider how to handle proposals. How would this work, and what are some of the issues it’s brought up?
Peter Hall: The pause bill, it’s House Bill 2496, would let municipalities, as you said, pass resolutions to declare a temporary moratorium on new data center applications. So importantly, the pause would be retroactive or reach back to the point when officials advertise that they were going to pursue a moratorium.
That’s important because I’m aware of at least one situation where a township made that legally required notice, and a data center developer raced in with kind of a half-baked application to beat the moratorium deadline, so to speak.
The purpose of the pause is to give local officials the time to amend their zoning laws with specific provisions for data centers. While that bill passed in the state House with near unanimous support, it never got a vote in the Senate. There was a [PA] Senate version of the bill that got a last-minute committee approval before the budget passed, but it also didn’t get a vote in the Senate, so both bills are on hold.
Now that the budget has passed and the General Assembly’s on summer vacation, the next chance for a vote will be at the end of September when they come back.
Governor Shapiro courted new data centers. Then public opinion shifted.
Kara Holsopple: There was also a House bill to codify Governor Shapiro’s data center development guidelines. What would data center developers be asked to do under those guidelines?
Peter Hall: This is a plan that Josh Shapiro outlined broadly in his budget address back in February. He released details this spring, calling them the Governor’s Responsible Infrastructure Development or GRID standards.
It would make the 6 percent sales tax exemption on computer equipment that data center operators already receive contingent on getting a certification from the state. The data center owners would have to provide information about the ownership structure of the project and meet benchmarks for energy procurement strategies, community engagement, workforce development, environmental protections, sustainability measures and their water usage plans. So there are some pretty specific requirements on that.
They have to show incremental increases in clean energy use from sources in Pennsylvania, that would rise to 32% of their overall power use by 2035.
One of them is that they have to show incremental increases in clean energy use from sources in Pennsylvania, that would rise to 32% of their overall power use by 2035. They also have to show they’re bringing in $250 million in new investment.
Kara Holsopple: There seems to be some disagreement among lawmakers over tax exemptions for companies building data centers. One House bill would repeal that previous tax exemption that you were talking about, while Shapiro’s proposal depends on the tax exemption. What’s going on there?
Peter Hall: The main criticism of the GRID standards is that they’re voluntary. The movement to repeal the tax exemption is kind of based on the belief that big tech doesn’t need a handout, especially when the political will in Pennsylvania has largely shifted toward putting the brakes on data centers.
The other aspect is that as data center construction ramps up, the tax break is expected to cost the state more than half a billion dollars a year in tax revenue and that’s a pretty tough argument to make that we should give that to companies like Amazon, Google and Meta when people in your district are seeing all their costs going up.
Kara Holsopple: Practically none of these measures were mentioned recently in the Pennsylvania budget that just passed. What happens now?
Peter Hall: There’s a part of the budget called the fiscal code where legislation that’s agreed to by all parties can be quickly incorporated as an amendment into that budget bill without going through the full process of passing a bill.
So among many others, there were three pieces of legislation dealing with energy affordability and data centers, which go hand in hand, that were included in the fiscal code bill. They call for greater oversight by state regulators of the electricity demand forecasts that are produced by PJM Interconnection, which is the company that operates Pennsylvania’s electric grid. Some of the concern there is that we’re seeing speculative and duplicative loads for data centers that may never happen, and those are driving up costs by creating a false demand signal in the electricity markets.
There’s another piece of legislation that requires data center owners to report annually on their energy and water use.
There’s an interesting piece of legislation that requires local electric utilities in Pennsylvania to prove to the Public Utilities Commission, the state regulatory agency, that they have explored whether they can use what are called “advanced transmission technologies” before they spend money that they’re ultimately going to pass along to rate payers to build new transmission lines.
Before they do that, they have to go out and see if they can use more efficient conductors, the lines that you see strung from pylon to pylon. They lose about 5% of all the electricity that passes through them due to heat. One of these technologies is a composite power line that doesn’t heat up the way traditional ones do, and doesn’t encounter the same electrical resistance and loss of energy.
Kara Holsopple: New York Governor Kathy Hochul is signing an executive order for a one-year pause on the construction of those massive data centers in her state. Is this something that there’s political will for in Pennsylvania?
Peter Hall: I think the will is definitely bending in that direction at the moment. We saw a number of relatively brief moratorium proposals come through the legislature, as we discussed, and the one passed the House was with strong bipartisan support.
There is a belief that we’re in a race with other places to attract these projects, and that if we throw up too many obstacles in Pennsylvania, they’ll go elsewhere.
There is a belief that we’re in a race with other places to attract these projects, and that if we throw up too many obstacles in Pennsylvania, they’ll go elsewhere and we will lose the benefits that data centers bring in terms of economic activity, new jobs and the tax revenue that they are going to pay to the townships and other places where they’re located.
Kara Holsopple: It seems like municipalities will continue to bear the brunt of dealing with the rules and regulations around data centers. Is it a David and Goliath fight without the state intervening in a more robust way?
Peter Hall: It is to a large degree, but people value local control of these projects. And under land use law, you can’t exclude any use, so every municipality in Pennsylvania has to, whether specifically or conditionally, allow a data center to be built if it meets all of the requirements that are in place.
The way the state can help is by providing that kind of support, in terms of how to develop a land use ordinance, a zoning ordinance that ensures that data centers that do get built are appropriate for the sites and the communities where they stand.
Peter Hall is a reporter with the Pennsylvania Capital-Star.
