From cityjournal.com
Last year, Pennsylvania Governor Josh Shapiro celebrated a major economic-development victory. His administration had helped secure an initial $20 billion investment from Amazon to build several data centers, the largest private-sector investment in Pennsylvania’s history. Shapiro heralded the deal as a win for both the state and the nation, calling the race with China for AI dominance “yet another national security issue that Pennsylvania can lead on.”
Shapiro had good reason to celebrate. His administration had made permitting reform a signature priority, cutting backlogs and creating a fast-track permitting program for major infrastructure and economic-development projects. At the future site of one of Amazon’s campuses last August, Shapiro credited those reforms with helping land the investment. His administration, he said, was “proving that government can work at the speed of business.”
Last week, Shapiro sharply changed course. He signed an executive order stripping data-center projects from the state’s fast-track program, barring future ones from inclusion in it, and imposing what he called “the strictest standards in the nation for AI data centers.” It was a striking turn for a governor often cast as one of the most growth-minded, pro-“Abundance” Democrats.
The move is part of a broader shift happening in data-center politics. Voters are growing increasingly wary of the rapid buildout of AI infrastructure, even in red states. Earlier this month, Texas Governor Greg Abbott ordered a “comprehensive verification and audit” of data-center projects seeking to connect to the state’s grid. Abbott, too, had been one of the industry’s most enthusiastic supporters. Just nine months ago, while announcing a $40 billion Google investment, he called Texas “the epicenter of AI development.”
Abbott and Shapiro have joined New York Governor Kathy Hochul, who last month issued a one-year moratorium on new hyperscale data centers, in a growing group of politicians now eager to prove that they can be tough on the industry. The instinct is understandable. As residents grow increasingly worried about electricity prices, water use, infrastructure demands, and local impacts—and polls continue to show overwhelming opposition to locating data centers nearby—politicians have strong incentives to respond in some way.
But politics and policy are not the same thing. Abbott and Shapiro may have adopted similar rhetoric, but their orders differ considerably in substance and likely effect. Texas has mostly refined an existing process to better sort through a chaotic data-center development pipeline without abandoning growth; Pennsylvania is using permitting policy to single out data centers, impose new requirements, and give the state more discretionary regulatory control over the industry. To understand what this new phase of the backlash may mean, it helps to look at what the two policies actually do and don’t do.
Start with Texas, which has more planned data-center capacity than any other state by far. ERCOT, the regional grid operator serving nearly all of the state’s electricity load, says it is considering more than 474 gigawatts of grid-connection requests from large users—more than five times its all-time peak demand, and nearly all of it coming from proposed data centers.
This rush of applications has forced ERCOT to overhaul its review processes for large new connections. Rather than study each of the proposed projects individually, ERCOT recently created a streamlined process known as “Batch Zero” to group the first wave of projects together so regulators can assess them more efficiently.
Abbott’s audit applies to projects under consideration in the Batch Zero process—roughly 250 to 300 projects in total. Rather than imposing a general moratorium on construction, the directive pauses one stage of that interconnection process so that ERCOT can verify information from each of the projects before allowing them to advance. Specifically, developers must disclose their expected electricity and water use, plans for on-site generation, cooling systems, tax incentives, and measures to mitigate noise, traffic, and other local impacts.
The Abbott requirements amount to relatively modest changes to the Batch Zero process. ERCOT was already planning to do much of the same verification work; Abbott’s order simply moves those checks to the front of the process and adds a few more standards that projects must meet. The purpose, according to Public Utility Commission chairman Thomas Gleeson, is to provide “more certainty and confidence in the Batch Zero process.” Officials still expect to complete the Batch Zero study by its original April 2027 deadline.
Nor does Abbott’s action stop data-center construction in general. Since it applies only to projects seeking connection to the ERCOT grid, it does not affect developers pursuing on-site power generation. Moreover, many of the proposed projects are unlikely ever to be built. The audit is intended to help distinguish projects with real development potential from more speculative ones. The state is simply insisting on better information before deciding which projects should advance.
Pennsylvania has taken a different approach. Rather than refine its streamlined permitting process, Shapiro removed data centers from the state’s fast-track program altogether and declared that no future data centers will be eligible for it. Data-center developers are now categorically excluded from the permitting process available to other major economic-development projects such as manufacturing and industrial facilities. Instead, the executive order subjects large data centers to a new review process requiring legally binding commitments with detailed requirements governing energy and water use and a community benefits agreement, along with local approval before state permits are issued.
The need for this is not entirely clear. Shapiro had already created a framework for addressing many of the same concerns. Earlier this year, his administration established its Governor’s Responsible Infrastructure Development, or GRID, standards for data centers. Developers seeking the state’s “full support”—including faster permitting and tax incentives—were expected to meet conditions on energy, water, workforce, transparency, and community impacts. In effect, GRID offered a bargain: meet the standards and qualify for those benefits; decline the standards and forgo them.
Now, all data centers are ineligible for the fast-track program, even if they comply with GRID standards. Shapiro’s order incorporates the GRID standards into the state’s review process, requiring developers to sign consent agreements and withholding final permits until local approvals are secured. Developers that refuse those commitments face an even more cumbersome permitting process. The GRID standards themselves are fairly expansive, imposing requirements ranging from paying for new energy infrastructure and conserving water to local hiring, workforce training, and community-benefit agreements. They also require developers to obtain growing shares of their electricity from specified clean-energy sources.
Some of those requirements address legitimate concerns, but other parts of Pennsylvania’s new regime go far beyond making data centers pay their way. The policy singles out data centers for special treatment simply because they are data centers. Pennsylvania will continue fast-tracking factories and industrial facilities with smokestacks, emissions permits, and industrial wastewater discharges while denying the same permitting treatment to data centers.
Unlike Hochul’s one-year moratorium, Shapiro’s order technically leaves projects with a path forward. But Pennsylvania’s shift may prove to be more consequential and long-lasting. While a moratorium can be lifted—as Hochul has said hers will—Shapiro’s order establishes a new, more cumbersome baseline policy regime for data-center permitting in Pennsylvania. Texas, by contrast, has mostly changed the optics rather than the underlying policy. Abbott can claim a crackdown while regulators refine a process they were already redesigning to address many of the concerns driving the public backlash.
The concerns expressed about data centers are not unique. Factories, semiconductor plants, and other large industrial users also require large amounts of energy, consume water, or generate noise and other local effects. Good policy should address those underlying impacts directly rather than single out one industry for disfavored treatment. As the data-center debate intensifies, the test for policymakers is whether they are confronting the problems associated with data-center growth—or treating data centers themselves as the problem.