Data Center Impact Fee Legislation Planned

A Pennsylvania lawmaker plans to introduce legislation to establish a first-of-its-kind statewide impact fee on data centers.

State Sen. Gene Yaw, R-Williamsport, recently began circulating a co-sponsorship memo to all Senate members, asking for their support of the proposed legislation. He said the legislation will be modeled after the state’s Marcellus Shale impact fee program that was established under Act 13 of 2012 during the early stages of the boom in unconventional gas well development.

Yaw, who serves as the chairman of the Senate Environmental Resources and Energy Committee, has been a leading voice in developing energy legislation.

In the memo, Yaw noted that the state has been experiencing rapidly increasing interest in data center development, which can bring opportunities for investment and economic growth but also place substantial demands on local infrastructure, water resources, and the environment. “Pennsylvania has already demonstrated through its Marcellus Shale impact fee that a statewide fee and distribution model can direct meaningful resources toward communities affected by major industrial development,” he wrote. “A similar framework for data centers would provide a consistent transparent approach to addressing the infrastructure and environmental demands associated with this growing industry.”

Pennsylvania is the only state that has an impact fee on natural gas development, while other states rely on a severance tax. No other state has imposed an impact fee on data centers, but some have rescinded tax breaks and demanded that data center developers pay the full cost of supplying the needed amount of power.

While the memo did not address specifics of the amount of the fee or how it would be distributed, it noted that it would provide predictable annual revenue throughout a facility’s operating life, rather than a one-time negotiated payment by a developer. It would be based on a facility’s size and electricity demand.

Act 13 established a formula that takes into consideration the number, type (horizontal or vertical), and age of unconventional wells that a gas producer has spud (or begun drilling) and the average price of natural gas. The fees for each well are paid for the first fifteen years of a horizontal well’s life and the first ten years of a vertical well’s life, in a declining amount each year. The fees are paid to the Pennsylvania Public Utility Commission by April 1 of the year following the year for which the fees were calculated.

The fees are distributed annually, a set amount going toward funding of several state agencies. After that deduction, 60% is distributed to counties and municipalities hosting or located near wells based on a formula that includes the number of new wells, population and road miles in the municipality. The remaining 40% is deposited in the Marcellus Legacy Fund for use by all Pennsylvania counties to fund infrastructure, environmental, and development initiatives with potential local value.

Since its inception, more than $3.1 billion has been collected and distributed, with the highest payout occurring in 2025, when $243.8 million was collected. Washington and Greene counties, which sit in the Marcellus basin and host many wells, are consistently in the top 5 counties in the amount received.

The proposed legislation comes as legislative leaders are working to regulate the burgeoning data center industry in order to provide communities with protections and a voice in their development, and to ensure that developers pay their fair share of the resulting costs, including the cost of upgrading electrical infrastructure as power demand from these facilities is rapidly rising and leading to higher utility bills for other ratepayers.