Gov. Josh Shapiro on Wednesday called on lawmakers to require that data center developers meet new standards in order to qualify for a state tax credit used to offset the cost of equipment purchased for data centers.

The data center tax credit is projected to cost the state almost $189 million in lost revenue in the coming fiscal year and more than $500 million by 2030-31.

Shapiro laid out the framework for data center standards ahead of his February budget address.

Wednesday’s announcement offered a clearer picture of the governor’s expectations for data center operators.

Under the governor’s strategy, data center operators that satisfy the state’s checklist will be able to work with Shapiro’s Office of Transformation and Opportunity to more quickly navigate the permitting and regulatory approval process.

“As Pennsylvania continues to compete for major economic development projects and lead on innovation, we have a responsibility to set strict accountability standards and ensure these projects create real opportunity for our communities,” Gov. Josh Shapiro said in a statement. “I’ve heard directly from Pennsylvanians who are concerned about the impact data center development could have on their communities, the environment, and their utility bills. That’s why I am putting clear guardrails in place to hold developers accountable to protect consumers, strengthen communities and put Pennsylvanians first.”

The governor said his administration is also rolling out a new local government toolkit through the Governor’s Center for Local Government Services to help municipalities navigate data center proposals and make informed decisions that work best for their communities.

The Office of Transformation and Opportunity will post detailed information about each project that satisfies the state’s data center requirements. Once they are operating, data centers would be required to meet reporting requirements in order to keep state approval to operate and continue getting the tax credit.

Environmental groups welcomed the governor’s proposal while saying it should not be the end of the state’s efforts to regulate the data center industry.

“The standards elevate common-sense requirements that communities have been demanding: transparency about who is behind a project, early and meaningful public engagement, and enforceable commitments around workforce and local economic benefits. If local communities decide — after a full and open process — to host major data center development, they deserve to know what’s being built, how it will affect local resources, and how developers will mitigate impacts like noise, water use and air pollution,” said Katie Blume, chair of Clean Power PA, a coalition of clean energy, environmental and community groups.

Blume said Shapiro’s data center standards should be a “foundation — not the finish line” because they only cover data centers seeking state incentives. Lawmakers should also pass legislation to establish protections covering all data center operators, she said.

Molly Parzen, executive director of Conservation Voters of Pennsylvania, said that with the House passage of HB 1834, all eyes should be on the Senate.

“The legislation that House Democrats passed would require data centers pay their fair share for grid upgrades and couple their expansion with new clean energy to limit the impact on energy prices and by providing municipalities with tools to respond to data center proposals in their communities,” she said. “The ball is now squarely in the court of the Senate, particularly Republican leadership. They must decide whether they will stand with multibillion-dollar tech corporations or Pennsylvania families struggling under skyrocketing electricity costs.”

Shapiro data center guide rails

Developers must bring their own power generation online or fully fund new generation to meet project demands, without increasing energy costs for homeowners or businesses. Shapiro said Wednesday that data center operators should get at least 10% of their power from clean energy sources beginning in 2027. By 2030, the clean energy mandate would hit 32%. Those clean energy standards are included in House Bill 1834, which passed the state House in March. The bill is now in the Senate Consumer Protection and Professional Licensure Committee.

Developers are expected to engage openly and transparently with community members and elected officials. Developers must also provide information on the end user for the data center and a footprint report detailing the project’s planned building size, campus acreage, estimated peak electric demand, estimated annual water consumption and water source, percentage of electricity sourced from non-emitting resources. The operators would also be expected to disclose power and water use efficiency data.

Projects must prioritize hiring and training local workers and commit community benefit agreements to provide funding for schools and other infrastructure. To qualify for state approval, developers must commit to: make at least $250 million in new investment; create at least 200 prevailing wage construction jobs; and at least 50 permanent jobs. Data center operators would be required to have at least $1.5 million in payroll costs for those permanent workers by the data center’s fourth year of operation.