HARRISBURG — Gov. Josh Shapiro recently signed an executive order setting much stricter environmental and transparency standards for new data center developments in Pennsylvania.
The order is sweeping. And the many things it does — and doesn’t — do to existing and future data center projects may not all be clear at first glance.
Here are its most important components:
The executive order asks developers to sign an agreement that they will follow the governor’s GRID standards, which include clean energy and job creation requirements. In exchange for signing, they get permit review and approval on a rolling basis.
It requires that developers show proof of local approvals before they can receive any state permits or authorizations.
It puts conditions on Pennsylvania’s data center sales tax exemption — if developers don’t follow the GRID standards, the state Department of Revenue won’t acknowledge applications for the tax credit.
It bans agencies under the governor’s control from signing NDAs in connection with data center projects.
It kicks data centers out of Fast Track, a Shapiro administration initiative to speed up permitting of major projects. (Previously, Shapiro had said he was giving this extra permitting attention to data center projects that followed his GRID standards.)
Below, you’ll find everything you need to know about the order’s key points; a look at the administration’s underlying goals; and what all this means for tech companies, data center developers, and the communities in which they want to build these massive projects.
Is this a moratorium?
No. Several states have enacted moratoriums on data center development, and a growing number of Pennsylvania lawmakers support such a move. But that wasn’t Shapiro’s approach.
A staffer for Shapiro recently appeared before a state board, and in remarks reported by PA Environment Digest, offered some insight into the administration’s thinking on data centers.
“We really do want to respect the local decision-making that has a primary role in siting and zoning decisions,” Sam Robinson, a deputy chief of staff, said. “That is a local power that is retained, and we believe should be retained here. But we don't want to say there's nowhere that [data center construction] can happen.”
Sometimes, Robinson said, a project’s environmental risks are so significant that the state, in turn, regulates it so stringently that it becomes cost-prohibitive.
But, he added, “This is a big state. There are other parts of Pennsylvania where there is one house every square mile. And in those places, it may make sense for a facility to be sited. And nobody would care. None of the local community would be concerned.”
How will this change the permitting process for data centers?
Previously, any developer looking to build a data center could simply apply for permits from the state (like a Chapter 102 permit, which allows things like earthmoving) and break ground once approved. This could happen even if they hadn’t yet gotten local zoning approvals.
This kind of thing takes place in lots of projects, said David Sanko, executive director of the Pennsylvania State Association of Township Supervisors. When work has already begun on a site, local officials can feel pressured to approve projects.
“That's not even specific to data centers,” he added. “That probably happens with shopping malls, businesses, economic development.” Sanko said he’s hopeful the new rules on data centers will prompt the state to prioritize local control on other projects too.
While the Shapiro administration had pledged to fast-track permits for developers following its set of higher standards before the executive order, other projects could still get them on a rolling basis.
Going forward, the executive order sets up two tracks for any data center with peak demand of over 25 MW (which would mean all but the smallest data centers). One of these tracks would be easier, and one would be very difficult.
The easier track will be open to data center developers that execute a “consent order and agreement” that incorporates Shapiro’s GRID standards. Once they do that and show documentation of all their local approvals, developers will be able to get state permits “on a rolling basis.” In other words, developers can get permits whenever they have the necessary documents ready.
The harder, non-GRID-compliant track is for developers that don’t sign a consent agreement. The state will require these developers to submit all of their permitting and authorization applications before it issues a single permit; that means if one piece of documentation is missing, they have to start over.
The administration argues that the executive order will also help stop developers from exploring sites speculatively — that is, floating data center proposals without actual buy-in from one of the major tech companies driving data center development, like Amazon, Meta, or Microsoft — leading to consternation in communities where a project might not even be built.
Shapiro mentioned this in his announcement of the order. There have been reports, he said, of more than 100 data centers being planned across the state, but “most of those proposals are completely speculative, and many of them haven't even taken the formal steps to apply to the Commonwealth, and they'll never be built.”
Even so, these proposals are “scaring our communities,” Shapiro said.
The administration’s perspective is that while the executive order doesn’t explicitly stop anyone from floating speculative data center plans, it will disincentivize this behavior by raising overall permitting standards — particularly by making local zoning approvals a precondition of state permits.
What’s in the GRID standards?
The benchmarks that the administration plans to use in writing its consent orders come from a plan Shapiro announced earlier this year, which he called the Governor’s Responsible Infrastructure Development standards.
These standards require developers to:
Build, buy, or bring online the electric capacity they’ll need for a data center. An increasing percentage of this energy must be from “dispatchable, clean firm energy resources” within the state, which encompasses options including nuclear, hydroelectric, solar, and “clean hydrogen-fueled energy generation.” Ten percent of a data center’s energy would come from these sources to start, and the standard will top out at 32% by 2035.
Create a community outreach plan that involves notifying affected governments, holding public meetings, and providing information about things like campus size and electric demand
Commit to making at least $250 million in new investment; create at least 200 prevailing wage construction jobs; create at least 50 jobs paying 125% or more of the average statewide wage by the fourth anniversary of the project’s certification; and pay at least $1.5 million overall to employees after the fourth anniversary.
Make a sustainability plan that commits to limiting emissions and water and energy consumption.
What does this mean for Pa.’s data center sales tax exemption?
The commonwealth’s sales tax exemption for data centers has become one of the most prominent talking points on the issue in Harrisburg; several bills have circulated that would get rid of it completely.
The exemption allows data center developers that meet certain financial benchmarks to skip paying Pennsylvania’s 6% sales tax on purchases related to building and maintaining their campuses. It has been projected to cost the state over $2 billion in tax revenue by mid 2031.
Previously, Shapiro called for the legislature to add his package of environmental and transparency requirements as a condition of getting the credit. That legislation never passed.
The executive order doesn’t get rid of the tax exemption. It just unilaterally makes following GRID requirements a condition of getting the exemption — the change Shapiro previously asked the legislature to make — by instructing the state Department of Revenue to update the program guidelines.
Can a noncompliant developer still build a data center?
Technically, a data center could still be built without a consent agreement.
The administration is making the case that this is extremely unlikely because of how difficult it would be to permit a big project all at once. Projects that don’t get the state’s sales tax exemption for data centers would also be less competitive.
Does this affect data center projects that are already underway?
Mostly no.
If a project has already gotten permits and tax exemptions from the state, these won’t be clawed back. However, if any existing projects still need permits, they’ll have to comply with GRID in order to get them on a rolling basis, and can no longer expect preferential treatment.
No data centers are up and running in Pennsylvania yet, but Shapiro noted that five have the permits they would need.
This also applies to other parts of the order, like nondisclosure agreements. While the order bars state agencies from entering into nondisclosure agreements with data center developers going forward, any NDAs the state already entered into still stand.
Does the order do anything else?
There are also some directives in the order for various kinds of monitoring and advocacy, in places where the administration can’t act unilaterally.
For one, the administration says it will advocate that the Public Utility Commission get electric utilities to revise their protocols to make sure that in emergencies, data centers will have their power curtailed before other customers do.
It says it will also urge the PUC to adopt rules that are broadly designed to keep utility costs associated with data centers from being passed on to consumers.
Plus, it instructs the Department of Environmental Protection to recommend any new regulations that the agency believes might be necessary to prevent negative environmental impacts from data centers, like emissions from diesel backup generators.
Can Shapiro do all this unilaterally?
Shapiro certainly thinks so.
Asked at the signing of his executive order whether he was within his authority, Shapiro told reporters, “Without question.”
However, the order also includes a severability clause. If any part of it is found to be invalid in court, the rest can still stand.