The rapid expansion of data centers across the United States has created significant electricity demands, prompting state and local officials to push for data center operators to develop their own power sources rather than drawing from public utility grids. Pennsylvania Governor Josh Shapiro implemented a moratorium on artificial intelligence data centers that do not provide their own power generation, while Texas Governor Greg Abbott blocked new data centers from connecting to the state’s power grid. These efforts aim to protect residential and small business utility customers from bearing the costs of data center expansion.
However, recent guidance from the Environmental Protection Agency regarding “islanded” power plants — facilities built to serve individual data centers rather than the broader electricity grid — has reduced certain environmental oversight mechanisms. The EPA clarified that the Clean Air Act’s Acid Rain Program, established in 1990 to address sulfur dioxide and nitrogen oxide emissions from large power plants, does not apply to power generation facilities disconnected from the larger grid. This exemption eliminates one of several permit requirements that independent power plant operators must obtain, though experts debate whether such facilities were ever covered by the program. The Acid Rain Program historically required continuous emissions monitoring and reporting, providing state and local regulators with reliable data on air pollution impacts.
The shift toward fossil fuel-based data center power plants represents a significant reversal for the electricity sector. After years of declining natural gas plant construction as wind and solar became more cost-competitive, data centers’ massive and continuous power requirements have prompted renewed investment in gas infrastructure. OpenAI has announced plans for a 9.2-gigawatt natural gas plant in Ohio, while Amazon and other companies are proposing multi-gigawatt facilities in Texas. Smaller operations are also emerging, with projects ranging from 90 megawatts to 500 megawatts.
State environmental agencies retain authority to implement regulations beyond federal minimums, and the EPA’s guidance is technically non-binding. However, the loss of standardized emissions monitoring requirements under the Acid Rain Program restricts state and local regulators’ ability to assess the environmental impact of these power plants. The EPA has indicated it plans to propose additional formal rule changes to further streamline permitting for both data centers and their associated power generation facilities.
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