H.727- Data Center Bill veto analysis

by Alison Despathy

This past legislative session, Vermonters for a Clean Environment (VCE) participated in the attempt to develop a responsible data center bill. Despite these efforts and as much as it saddens me, Governor Scott’s veto of the data center bill was justified due to the Senate’s massive fumble.

VCE worked to ensure data center regulations would protect the environment, ratepayers, water, and the electrical grid. We met with legislators and regulators, researching existing policy and gaps. It is simply good sense to get ahead of an impending issue and like many, we held concerns about other states’ gruesome experiences with large load data centers.

Most are well aware that data centers are wreaking havoc throughout the country: guzzling power, contaminating water and land, destroying aquifers, causing droughts, increasing electric rates, and disrupting neighbors and communities with infrasound and radiofrequency radiation pollution.

Some argue that Vermont will not attract data centers because of higher electric rates and heavy regulation and permitting. However, with steep increases in the use of Artificial Intelligence and data generating tech in every sector and home expanding the digital grid, the demand –whether we like it or not– is consumer driven and may well invite data centers to VT. Best be ready.

At the start of this legislative session, Representative Sibilia introduced H.727 to regulate large load data centers over 20MW. This bill proposed,

“to regulate the deployment of data centers in Vermont for the purpose of ensuring electric service reliability and affordability for all Vermonters and preventing any adverse effects on the State’s environment, natural resources, local communities, economy, and public health and welfare. “

VCE’s initial goal was ensuring that large load data centers were regulated under joint jurisdiction by the Public Utility Commission (PUC) and Act 250. Fortunately this came together. The PUC should oversee “all things grid” and Act 250 would ensure responsible siting and regulations to protect communities and the environment.

Data center regulation is a perfect example of the significance of Act 250 for guiding development of large, impactful, commercial projects. Act 250 is well equipped to regulate these beasts that humanity and society are ever more dependent on due to digital expansion and increasing data processing needs.

H.727 was under solid development in House Energy and Digital Infrastructure Committee (HEDI).

Water was handled exceptionally well. Due to existing criteria in Act 250, protection for ground water, surface water, cooling water, and water discharge were all in play. The concepts of closed loop and bring your own water were employed to provide added protections.

Much of the materials for water transport used in data centers are coated with PFAS based films for friction free flow. PFAS contamination was under discussion in HEDI and House Environment and although debates surfaced on PFAS testing details, there was consensus this was a priority issue.

Grid hook up for large loads and protections and prioritization were in place for both power use and electric rates for Vermonters. Upgrades and infrastructure necessary for data centers would be funded by the data centers not the ratepayers.

H.727 cruised out of the House with high level support and landed in the Senate, where unfortunately it took a hard left turn into the land of extremism, chaos and bad policy. This is where it remained, despite attempts to salvage it. Quite devastating really, after all the hard work in HEDI.

The first major deathblow came in the form of an ‘Energy Transformation Payment’, basically an extortion fee or saying it gentler ‘Pay to Play” as called out by TJ Poor, Director of Planning at the Department of Public Service. Director Poor understands Vermont’s electric grid and power contract world better than most in the state. This is his job. Over the years, he has repeatedly tried to educate the House and Senate Energy committees about the concerns, risks, and cost impacts of many dangerous bills such as the Clean Heat Standard and the Renewable Energy Standard.

Ignoring Director Poor’s expert guidance has cost the state and ratepayers millions and resulted in ideological based, destructive legislation that many hope will be rectified. On May 8, Director Poor testified in the Senate and explained that the Department could not support H.727 with the newly added Energy Transformation Payment. His written testimony stated,

“The Energy Transformation Payment is a provision that will cause the Department to oppose the bill. The Energy Transformation Payment –approximately $6 million per year – was added to published legislation yesterday. I understand the extraction of cash from prospective Vermont businesses through the Energy Transformation Payment is intended to achieve emissions reductions above and beyond the requirements of the renewable energy standard but would fail to sufficiently and quickly achieve its intent of encouraging greenhouse gas reductions. It sends the wrong message to prospective businesses thinking about locating in Vermont (beyond just data centers), signaling that a new industry should look elsewhere.”

“I understood at the end of this morning’s hearing that it would be too late to modify the legislation, even though the particular provision was just added yesterday.”

This is the result of a committee chair listening to special interest groups–who endorse her and call her their champion– instead of seriously considering the advice of actual experts who work for Vermonters. Senate Natural Resources and Energy Chair Watson could have fixed this mistake, could have salvaged the bill, should have sought a solution or compromise but chose not to.

So let’s be honest here, who killed the data center bill? Chair Watson killed the bill by refusing to seek balanced, responsible legislation. She was well aware of the Department’s opposition to this last minute added Energy Transformation Payment.

Extortion is not good policy.

Zealotry and ideology have no place in the State House

Some may attempt to justify this extortion payment when it comes to Big Data–even though as digital grid users, participating humans are generating the demand– but the Senate also added language that further compromised the bill and created a path to enable water pollution.

Essentially this allowed data centers an unfair advantage to pollute if they received a permit to withdraw surface water. The disconnect is analogous to regulating the faucet and then completely ignoring the drain and the pollution and contaminants picked up and discharged out of a system. If you built a house and had a well drilled but then ignored the waste water and sewer, no doubt a complete disaster would be the outcome.

On May 19, the Land Use Review Board issued a memo and testified in HEDI to alert the committee members to this faux pas in the Senate version of the bill. Instead of dealing with this gaping hole, it was ignored. Chair Watson also neglected to address the radiofrequency radiation and infrasound issues from data centers causing negative health effects on neighbors and communities living in close proximity to data centers, despite efforts by VCE to provide these protections

This is a glimpse into the reality of the data center bill saga. Hopefully Vermonters can see through the propaganda because the Governor’s veto of the data center bill has been manipulated for political gain. The Democratic Party, Aly Richards (a candidate for Governor), Vermont Public Interest Research Group (VPIRG), Sierra Club, Conservation Law Foundation, Vermont Natural Resource Council and Vermont Conservation Voters all ignored key issues with this bill and are taking advantage of many Vermonters’ lack of information and warranted fears of data centers impacts.

What started as a thoughtful, effective bill shape-shifted into irresponsible policy that demanded a veto. Governor Scott summed it up quite right in his veto letter.

“While I share some concerns Vermonters have about data centers, and I’m mindful of the challenges they have created in other states, existing Vermont law already provides substantial regulatory authority to prevent harmful impacts. Vermont’s Act 250 process, Public Utility Commission oversight, environmental permitting requirements, energy siting, rules, and municipal zoning already provide extensive review and enforcement tools.”

“If the legislature wished to pass a data center bill, it should start with ta bill that more closely resembles the House passed version of H.727, with additional and substantial changes made to prevent unintended economic consequences in other important sectors of Vermont’s economy”

With high hopes for the successful passage of a bill to specifically regulate large load data centers, despite frustration I support the veto. It was the only responsible move, unless you actually believe extortion, water pollution and environmental contamination are good policy. Hopefully next session Act 250 protections and existing regulations can be brought together to create a specific policy for data centers in Vermont because at the rate the digital grid is growing due to human use and demand, this isn’t going away, as much as I wish it would.

Alison Despathy is Community and Environmental Health Director for Vermonters for a Clean Environment (VCE).