The EPA and the Grid Operator Both Landed on the Same Fix: Build Your Own Gas Plant

In January, the Environmental Protection Agency told data center developers something unambiguous: the gas turbines powering their facilities had to comply with the Clean Air Act. The Southern Environmental Law Center read the ruling as confirmation that corporations could not simply stand up unpermitted power plants.

EPA’s gas turbine decision makes it clear that companies are not — and have never been — allowed to build and operate methane gas turbines without a permit and that there is no loophole that would allow corporations to set up unpermitted power plants. — Southern Environmental Law Center

Six months later the agency had carved out the exact loophole it said did not exist. In July the EPA exempted "islanded" power plants — those serving a single data center and not connected to the public grid — from the Clean Air Act's Acid Rain Program, the federal rule that has governed sulfur and nitrogen pollution from power plants for three decades. ^[1]

The EPA believes that, considering the plain text of these definitions, the Acid Rain Program does not apply to power generation facilities that are not connected in any way to the larger electricity grid. — Aaron Szabo

While the EPA was dismantling the federal air-pollution floor from one direction, PJM — the grid operator for 13 states and the District of Columbia — was arriving at the same destination from the opposite one. PJM's concern is not deregulation but reliability. Its filing with federal regulators says the "unprecedented addition of large loads, most notably data centers" has created resource-adequacy shortfalls, and its remedy is to make data centers without their own generation first in line for power cuts during shortages unless they bring dedicated capacity by March 2027. ^[2]

The unprecedented addition of large loads, most notably data centers, has given rise to resource adequacy shortfalls — and associated real-time operational issues that Interim Resource Adequacy Service is intended to address — PJM Interconnection

Neither institution coordinates with the other. But the two rulings interlock. A data center that builds its own gas plant behind the meter is simultaneously exempt from federal air-pollution law under the EPA's islanded rule and shielded from the curtailment queue under PJM's proposal. The environmental regulator and the grid operator, speaking different vocabularies, have prescribed the same thing. The EPA's moves came in three parallel tracks, not a sequence. The islanded exemption was one. A second is the proposal to end the mandatory 30-day public notice and comment period for "minor source" air permits — a category that covers most data center power plants — which administrator Lee Zeldin framed as making the United States "the artificial intelligence capital of the world." ^[3]

This will give developers greater flexibility in where and how quickly they can build new facilities while helping to protect the environment and reducing burdens on communities’ electric grid. — United States Environmental Protection Agency

The third track began even earlier, in February: a presidential exemption process that lets developers bypass the Clean Air Act by claiming national security. More than 500 applications have been filed and roughly a third approved. Novva's CEO put the standard plainly. ^[4]

To fast track it, they created that exemption, — Wes Swenson

What the interlock produces in practice is visible in Mississippi, where the NAACP sued xAI for operating 27 unpermitted gas turbines at its Colossus facility — the exact practice the EPA had said in January was illegal and began exempting by July. ^[5] And the model it rewards is visible in Louisiana, where Meta's Hyperion project pairs its data center with ten company-funded gas plants generating 7.5 gigawatts. ^[6] The states are responding in a ragged, contradictory way. Counties are banning data centers outright — Monterey Park, Walton County, Pensacola, Pinson, Baltimore County. ^[7] Ohio's state EPA rejected blanket wastewater permits after 7,000 public comments. ^[8] But other states are channeling the industry toward the same behind-the-meter model the federal rules reward. Pennsylvania's moratorium applies only to data centers without their own power. ^[9] Texas blocked new data centers from connecting to the grid. ^[10] States resisting and states reinforcing the same outcome at once. That leaves water as the one constraint no federal rollback can remove. Texas blocked grid connections pending a water audit, and Southern Nevada banned evaporative cooling outright. ^[11] You can exempt a gas turbine from the Clean Air Act. You cannot exempt a county's aquifer from a cooling tower.