Agency’s interpretation of the Clean Air Act’s applicability to utilities without a connection to power grid is expected to open doors for developers
The U.S. Environmental Protection Agency on July 27 announced it had issued permitting guidance earlier this month exempting “islanded” power generators, or facilities with no connection to a utility grid, from the Clean Air Act’s Acid Rain program.
In a memo addressed to administrators earlier this month, EPA said the guidance is in response to inquiries about the applicability of the acid rain regulations—including one involving a third-party-owned, islanded data center.
As long as they do not sell electricity or report as generating units to the U.S. Department of Energy, developers and operators of islanded power generators serving data centers are not subject to the acid rain program’s regulations, according to the guidance. If, however, a company develops a power generation facility that initially is off-grid but eventually becomes connected to the grid, the facility may be subject to the acid rain regulations under the guidance.
Regulations under the acid rain program, the nation’s first cap-and-trade program established under the amendments to the Clean Air Act signed into law in 1990, require major emission reductions of sulfur dioxide and nitrogen oxides from the power sector. These emissions are the primary precursors of acid rain, according to EPA’s website. EPA said that its reading of the Clean Air Act and DOE definitions of “utilities” shows that ARP does not apply to off-grid power facilities.
“The guidance expands opportunities for companies to develop and operate islanded power generation facilities for data centers,” EPA said in a statement. The move will also give them greater flexibility in where to locate new facilities and speed up the process, the agency added.
The exemption helps to ensure that the U.S. will maintain its “AI dominance essential to national security and economic prosperity,” Aaron Szabo, EPA assistant administrator for Air and Radiation, said in a statement. It also safeguards communities from utility price hikes, he said.
The action has sparked criticism from such groups as the Sierra Club, which referred to it as the Trump administration’s selling out to data center owners at the expense of the health and wellbeing of Americans.
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“Sulfur dioxide and nitrogen oxides not only cause acid rain but also threaten the health of Americans when emitted into our air,” Sierra Club senior attorney Zachary Fabish, said. “Massive fossil power plants shouldn’t get a free pass just because they are attached to data centers, and we will continue to push back against these reckless pollution passes being handed out to data centers and defend our public health and environment.”
EPA’s guidance aligns with President Donald Trump’s recently expanded Ratepayer Protection Pledge to support communities that «welcome” data centers. The pledge encourages companies to build, bring or buy all of the energy needed to power their facilities and pay all supporting costs, including infrastructure, a move that will cover 80% of all power delivered to U.S. homes and businesses, EPA said.
The pledge applies to all parties whose decisions determine the monthly rates consumers pay, EPA said. This includes electric utilities, developers and the states that regulate both. It also commits these parties to paying negotiated rates regardless of whether they use the electricity; invest in local hiring and workforce development; and coordinate with grid operators to strengthen grid resilience.
First announced last February in the president’s State of the Union address, the pledge’s signatories include Amazon, Google, Meta, Microsoft, OpenAI, Oracle and xAI.
