Authors
On August 18, 2026, Pennsylvania Governor Josh Shapiro signed Executive Order 2026-05 (Executive Order), titled Protecting Pennsylvania Consumers from Data Center Impacts, purporting to establish what the Administration described as new “guardrails” for data center development across the Commonwealth. The Executive Order directs multiple state agencies – most prominently the Department of Environmental Protection (DEP) – to establish review procedures and increase transparency for data center developments. Pennsylvania has experienced significant interest in data center development, with reports of over 100 data center facilities proposed in the Commonwealth.
Key provisions
DEP permitting requiring all local approvals. The Executive Order directs DEP to create a two-track permitting framework for data center projects with peak demand exceeding 25 MW:
- Track one – DEP consent order: Developers that execute a legally binding consent order and agreement (COA) committing to the Governor’s Responsible Infrastructure Development (GRID) requirements would have their permit applications reviewed by DEP on a rolling basis. This includes commitments to a community benefits agreement and bringing power generation. However, DEP would not issue permits until the applicant demonstrates that the project is consistent with the local comprehensive plan and has received all required local or municipal approvals. The Payback and Permit Decision Guarantee programs would only attach once the local approvals are demonstrated. Among other things, Track one’s reliance on a COA and requirement of the community benefits agreement will need to be reconciled with the federal doctrine of unconstitutional conditions. See Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013); Dolan v. City of Tigard, 512 U.S. 374, 391 (1994); Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987) (monetary exactions must meet these “essential nexus” and “rough proportionality” requirements).
- Track two – without COA: Developers that do not execute a COA face an extended process. DEP would not begin reviewing applications until the developer has obtained all local approvals and any required water withdrawal or wastewater discharge authorizations. All necessary permit or authorization applications must be received and reviewed by DEP before any permits or authorizations are issued. Permits would not be issued on a rolling basis, and such projects are excluded from the Payback and Permit Decision Guarantee programs.
Removal from fast-track permitting. As of the date of the Executive Order, all existing data center projects are to be removed from the PA Permit Fast Track Program, and data center projects will no longer be eligible for fast-track treatment.
Transparency requirements. The Executive Order prohibits the use of nondisclosure agreements in connection with data center projects by agencies under the Governor’s jurisdiction. DEP is also directed to create a publicly accessible map of proposed data center projects. The Executive Order also directs DEP to notify currently operating data centers that by July 1, 2027, and by July 1 of every year thereafter, they must comply with energy and water consumption reporting obligations under the Fiscal Code. The required reporting covers total energy and water consumption, peak load estimates, efficiency measures, clean energy generation, and waste heat recovery efforts, among other items.
Consumer and ratepayer protections. The Governor’s Special Counsel for Energy Affordability is directed to engage with the Pennsylvania Public Utility Commission to advocate for rules ensuring that data centers are curtailed before other customers during pre-emergency or emergency events, that data center customers bear PJM reliability backstop auction costs, and that non-data center customers are protected from bearing interconnection and infrastructure costs attributable to data center development.
Tax exemption compliance. The Department of Revenue is directed to update the Computer Data Center Equipment Exemption Program guidelines to ensure that applicants for sales and use tax exemptions also comply with the GRID requirements.
Land use and DEP considerations
The Executive Order has notable implications for land use and environmental permitting:
- Local approval as a prerequisite. Under both tracks of the permitting framework, DEP is to require evidence of local comprehensive plan consistency and local zoning and subdivision approval before issuing permits. How this is reconciled with the Pennsylvania Municipalities Planning Code’s treatment of comprehensive plans is not clear. How this would be applied in localities that do not have zoning is equally unclear. Given the variability in applicable zoning and land use requirements among municipalities, demonstrating to DEP that a project has all municipal and local approvals would be another administrative hurdle that is not presently applied.
- Environmental regulatory review. DEP is directed to recommend new regulations to the Secretary of Policy and Planning to address environmental impacts that are purportedly unique to data center development, including regulation of backup generator emissions and the use of backup generators as grid resources.
- Clean energy and brownfield development. DEP is also directed to identify mechanisms to expedite permitting and remove barriers for new clean energy generation and storage facilities on brownfield and previously developed sites, as well as to support the deployment of advanced transmission technologies on existing rights-of-way.
- Local government best practices. The Department of Community and Economic Development is directed to prepare best practices on zoning standards and community benefit agreements that municipalities could use when engaging with data centers.
Looking ahead
On its face, the Executive Order takes effect immediately and remains in effect until amended or rescinded by the Governor. It expressly provides that it does not create any enforceable rights or benefits and must be implemented consistent with applicable law. Meanwhile, several data center-related bills remain pending in the Pennsylvania General Assembly, including proposals for development moratoriums.
Developers, utilities, municipalities, and other stakeholders involved in data center development in Pennsylvania are likely to be impacted by the Executive Order. Reed Smith is evaluating how these measures may affect current and proposed projects. Please reach out to a member of the Reed Smith team for further guidance on impacts of the Executive Order on specific projects.
Client Alert 2026-169