Pennsylvania Executive Order Signals New Requirements for Large-Scale Data Center Development

For developers, landowners, investors, and municipalities, the Executive Order signals a clear policy shift: local zoning and land development approvals must generally be secured before state environmental permitting will proceed, and large data center projects will face enhanced scrutiny regarding energy consumption, infrastructure impacts, water use, environmental controls, and community engagement.

Of particular importance is the Order’s directive that the Pennsylvania Department of Environmental Protection (“DEP”) more closely coordinate its permitting process with local land use approvals. The Executive Order requires developers seeking certain procedural benefits to demonstrate that a project is consistent with the applicable municipal comprehensive plan and has received all required local zoning, subdivision, and land development approvals before DEP will issue qualifying permits on a rolling basis. Even for projects that do not voluntarily participate in the Governor’s Responsible Infrastructure Development (“GRID”) Standards program, DEP is directed not to begin reviewing permit applications until the applicant demonstrates consistency with the local comprehensive plan and obtains all required municipal approvals pursuant to applicable zoning and subdivision and land development ordinances. As a practical matter, the Executive Order elevates the importance of municipal entitlement strategies and reinforces the role of local governments as a critical gatekeeper in the development process.

The Executive Order further directs DEP to develop a template Consent Order and Agreement for data center projects exceeding 25 MW. Developers that elect to participate in the program must provide advance notice to DEP, engage in pre-application meetings, and execute a project-specific Consent Order and Agreement incorporating the Administration’s GRID Requirements, which focus on energy affordability, transparency and community engagement, workforce and economic development, and environmental protection. In exchange, participating projects may receive certain procedural advantages, including rolling review and issuance of permits once applicable local approvals have been secured.

The Administration also intends to increase transparency surrounding data center development. The Executive Order prohibits state agencies from utilizing non-disclosure agreements in connection with data center projects and directs DEP to create a publicly accessible map identifying proposed data center developments and their permitting status. Existing data centers will also be subject to expanded annual reporting obligations relating to energy consumption, water usage, peak demand, environmental mitigation measures, electricity generation, waste heat recovery efforts, and future resource demand projections. These requirements are designed to provide both regulators and the public with greater visibility into the operational impacts of data center facilities throughout the Commonwealth.

The Executive Order also reflects growing concern regarding the impact of rapidly increasing data center development on Pennsylvania’s electric grid and utility customers. The Governor cites projections indicating substantial electrical load growth associated with data center development and directs the Governor’s Special Counsel for Energy Affordability to advocate before the Pennsylvania Public Utility Commission (“PUC”) for rules and tariffs designed to ensure data centers bear the costs associated with grid reliability measures, interconnection infrastructure, and other system upgrades. The Administration’s stated goal is to prevent costs associated with large data center projects from being shifted to residential and commercial ratepayers.

From an economic development perspective, the Executive Order also removes data center projects from eligibility for the Commonwealth’s PA Permit Fast Track Program and directs the Department of Revenue to update procedures governing Pennsylvania’s Computer Data Center Equipment Exemption Program to incorporate compliance with the GRID Requirements. These changes signal the Shapiro Administration’s intent to balance continued data center investment with heightened oversight and accountability.

The Executive Order additionally lays the groundwork for future regulatory and land use initiatives. DEP is directed to evaluate whether new environmental regulations are needed to address emissions, backup generator operations, air quality impacts, water consumption, and other issues uniquely associated with large data center campuses. At the same time, the Department of Community and Economic Development (DCED) is tasked with developing best-practice guidance relating to zoning standards and community benefit agreements that municipalities may utilize when evaluating data center proposals. Municipalities that have not yet addressed data centers within their zoning ordinances may wish to evaluate whether new standards or performance criteria are appropriate given the likelihood of future guidance from DCED and increasing state focus on local land use regulation of these facilities.

Although many of the Executive Order’s provisions will require further implementation by DEP, DCED, DOR, the PUC, and other state agencies before their full practical effect becomes clear, the policy direction is unmistakable. The Commonwealth is signaling that large-scale data center development will be expected to demonstrate consistency with local planning objectives, secure municipal land use approvals early in the development process, address potential energy and environmental impacts, and provide greater transparency regarding project operations. Developers, investors, landowners, utilities, and municipalities evaluating potential data center projects in Pennsylvania should carefully consider these new requirements and their implications for project timelines, permitting strategies, municipal approvals, and community engagement efforts.

The zoning and land use attorneys at Klehr Harrison are actively pursuing entitlements for data center projects throughout Pennsylvania. Our firm will continue to closely monitor ongoing policy and legislative developments, and consider how they may affect pending projects, zoning ordinances, comprehensive plans and long-term development strategies. We will continue to provide updates as more detailed proposals emerge.

If you have any questions, please contact the authors. Co-authors Matthew McHugh, partner, and Leonard Altieri, associate, are members of the Real Estate Department at Klehr Harrison.