Wary of data center boom, Pittsburgh and Allegheny County proceed with caution

Residents worry about noise, energy demand, water use and pollution from fossil fuels.

By JAMES ENGEL
TribLive

Pittsburgh will likely never become Pennsylvania’s version of Data Center Alley, the cluster of massive buildings in northern Virginia helping to power the AI boom.

But that doesn’t mean the city isn’t playing a critical role in supporting the controversial technology.

Many of the large entities that rely on the enormous computer storage and processing capability provided by Western Pennsylvania’s data centers make their homes in Pittsburgh, according to Brian Kennedy, senior vice president for operations and government affairs for industry-advocacy group Pittsburgh Technology Council.

With the existing colossal data requirements of Pittsburgh’s healthcare, finance and education industries — not to mention the power- gobbling demands of the AI revolution in its booming tech sector — it’s hardly a surprise that the region depends on the large amounts of data stored and managed by the centers.

While a future transformation of Pittsburgh into a data center hub is improbable, Mayor Corey O’Connor isn’t sitting back.

He said his administration is monitoring the results of ordinances passed by nearby local governments restricting data center development.

It might be a prudent move. Just 18 miles up the Allegheny River, for instance, Springdale residents discovered the hard way that residents opposing a data center couldn’t block one in part because the borough didn’t have language on the books regulating such a use.

Data centers have also caught the eye of Allegheny County officials, who are exploring how to regulate the industry.

“At the present, there is a lack of strong regulations around data centers and their energy usage,” the county said in a statement, “so it’s incumbent upon the county to ensure data center developers are held accountable for their promises to communities, public health, labor unions, and local decision makers who supported projects like Springdale advancing. There is a team assigned to this purpose.”

Boroughs and townships in Allegheny County and its neighbors aren’t oblivious to the pitfalls of leaving regulation for later. The sudden influx of data centers in Southwestern Pennsylvania has sent local governments rushing to create ordinances to control development.

East Deer, Oakmont, Tarentum, Upper Burrell, Murrysville and Gilpin, among others, have made moves to shield themselves from the industry.

In plain sight

Plans for a data center in Springdale call for a 652,000-square-foot building standing 75 feet tall with scores of diesel generators and rooftop chillers.

Residents worry about noise, energy demand, water use and pollution from fossil fuels.

By contrast, most Pittsburghers probably wouldn’t know if they lived right next to a data center.

The facilities are basically gargantuan server rooms containing row after row of electronic equipment.

In the city, though, it’s more like data center lite. Forget acres and acres filled with humming buildings. Pittsburgh’s data centers tend to be nondescript buildings.

Ed DeHart has operated a small data center along Penn Avenue in Pittsburgh’s Bloomfield neighborhood for more than 25 years.

The facility, called aspStation, was originally built as a data center for nearby West Penn Hospital before DeHart and his partners purchased it in 2000.

“No one knows what it is,” he said. “It’s just a big brown building.”

DeHart’s company rents out server space to smaller companies that require 24/7 data services, a business model called co-location.

“People don’t know about data centers, but they know about the cloud,” DeHart said, referring to the internet’s vast storage and computing network. “The cloud is data centers. Our whole world relies on data centers.”

At Nova Place, the commercial complex at the former Allegheny Center Mall on the North Side, Expedient operates two data centers totaling around 51,000 square feet. They’re among several others in the building.

Based in Pittsburgh, Expedient operates data centers throughout the country, providing cloud storage and data management services for numerous clients, including healthcare and financial services companies, said Jonathan Rosenson, Expedient’s president.

Like many hyperscale data centers, Expedient’s centers in Pittsburgh use diesel backup generators and require significant power to keep servers online.

But the company’s two generators and 3 to 5 megawatts of needed power are minuscule compared to the Springdale proposal — itself a medium-sized hyperscaler — with its 124 generators and potential to draw 330 megawatts.

“It’s called hyperscale for a reason, and that’s just not what we do,” Rosenson said.

Squeezed for space

Pittsburgh’s geography — and politics — don’t lend themselves to data center development.

“I would not support a data center happening in the city of Pittsburgh,” O’Connor told TribLive this week.

Hyperscale data centers — the AI-focused behemoths that have drawn backlash throughout the country — normally require significant flat acreage with access to electrical infrastructure.

In this region, data center developers have mostly sought out brownfields and former industrial sites for their projects. But in Pittsburgh, that niche is already filled, according to the tech council’s Kennedy.

“Our brownfields in the city have been largely developed,” he said.

Former steel mills in the city’s South Side Flats and Hazelwood neighborhoods have been redeveloped into the SouthSide Works retail complex and Hazelwood Green technology campus.

“At one point in time, some of the sites would’ve been great,” Kennedy said.

Industry in the city has historically made its home along the rivers, where to some extent, it remains in neighborhoods like Chateau and Marshall-Shadeland along the Ohio River, and in Lawrenceville and the Strip District on the Allegheny.

Other pockets of industrial zoning also exist in city neighborhoods like Fairywood and Larimer, but those footprints are small compared to the land needed to accommodate some massive data center projects.

“Overall, the industrial districts are a fairly small percentage of the city,” said Carolyn Ristau, Pittsburgh’s zoning administrator.

Still, unlike many surrounding municipalities, the city does not have a zoning ordinance regulating the industry. That means Ristau or Pittsburgh’s Zoning Board of Adjustment would have to find the closest comparable use if an application were submitted.

‘More smoke than fire’

Pittsburgh residents don’t need to look far beyond the city limits to find developments orders of magnitude larger than aspStation and Nova Place.

A massive $10 billion Indiana County project in Homer City that will include hyperscale data centers — which will be fueled by enough natural gas to power more than half of Pennsylvania’s homes — began construction this year.

Proposals in Springdale in Allegheny County, Shippingport in Beaver County and Upper Burrell in Westmoreland County have cleared some hurdles but need further approvals.

Aligned Data Centers, the Shippingport developer, declined to comment. Developers in Homer City did not provide a comment for this story.

Developers or landowners have expressed interest in building data centers in Aliquippa, Midland and Big Beaver in Beaver County, Monongahela Township in Greene County and South Strabane in Washington County, among others.

Stowe approved a zoning change that would allow for a data center, but site owner SunCap Property Group and a township commissioner said there are no plans to build one. Instead, they said the company plans to erect distribution warehouses.

For now, some proposals are merely dollar signs in the minds of real estate speculators, according to Brian Regli, a consultant for Dynamo DC, formerly known as Allegheny DC Property Co., which is developing the data center in Springdale at the site of a former coal-fired power plant.

“You do have more speculation than reality — there is much more smoke than fire,” said Regli.

That’s because data centers are hardly a get-rich-quick scheme, he said.

Many of the projects announced in the region come with multibillion-dollar price tags and yearslong timelines before any servers even come online.

Still, amid the rampant AI-driven economic hype, landowners and real estate firms throughout Western Pennsylvania are champing at the bit to attract developers.

“I’m exaggerating for effect, but right now it seems like everybody with a thousand acres and a gleam in his eye wants to announce a data center,” said Sean O’Leary, a senior researcher at the Ohio River Valley Institute, a think tank focused on economic development in Northern Appalachia.

To Kennedy, that’s a problem. He criticized what he calls “phantom data centers.”

Those are projects where landowners, hoping to score interest from developers, are touting their sites as the future home of a data center without the ability to offer any details to concerned residents.

That leaves a vacuum where misinformation about the industry thrives, Kennedy said.

And it makes the job of developers even more difficult, according to Regli.

“There are people who are going to succeed. I don’t want to diminish that — I hope, certainly, that we’re one of them — but fundamentally, one of the things that the public has had to face, I believe unnecessarily, are all of these speculative deals that are floating around in the real estate community for folks that are hoping to get the quick buck.”

Even in this early, uncertain period, however, Western Pennsylvania has the capability to become a strong regional hub for the data center industry, Regli said.

A ‘story of renewal’

For Kennedy, the data center boom is a chance to breathe new life into the region’s many blighted properties and build up Western Pennsylvania’s economy.

Kennedy said it’s not so much the centers but the components that go in them that excite him.

“I do think we have a story about data centers in Western Pennsylvania — it’s mostly a story of renewal.”

He cited recent local expansions by electrical component firms Hitachi and Mitsubishi, both of which produce components vital to data center development and electrical grid upgrades.

Hitachi is spending $70 million to transform its facility near Mt. Pleasant in Westmoreland County into a high-voltage product manufacturing facility. Mitsubishi is investing $86 million, including almost $7 million in state money, to upgrade plants in Beaver and Allegheny counties for the manufacture of circuit breakers and other electronic components.

In Pittsburgh, Expedient’s Rosenson credits the smaller data centers at Nova Place — mostly empty when he arrived in 2008 — with helping to revive the former mall into a booming hub of tech firms on the city’s North Side.

“Nova Place has really become the center of the internet in Pittsburgh,” he said.

But the Ohio River Valley Institute’s O’Leary is more skeptical of the industry’s broader impact.

“When we talk about these huge numbers being invested, the question isn’t ‘How much is being invested?’ The question should be, ‘How much of that investment is actually going to end up in local economies and end up as disposable income in those communities?’ — and the answer is very, very little,” O’Leary said.

Tax impact

Though data centers require significant labor during construction, the size of full-time staff at big data centers is comparatively small after completion because the servers are mostly self-sufficient.

Taxes derived from the industry, however, could have some impact on Western Pennsylvania, O’Leary said.

In Loudoun County, Va. — the epicenter of the nation’s data center industry — taxes from the industry account for more than one-third of general fund revenues, according to the county.

And, in recent years, Loudoun consistently has slashed property taxes, which now rank among the lowest in the area.

If the growth of the industry has a similar effect around Pittsburgh, that could lead to more disposable income for residents, but O’Leary said it would likely be highly isolated to local municipalities.

Though real estate taxes on land and income taxes on employee salaries would provide some bump to local governments, the biggest tax boost would come from sales and use taxes, which mostly benefit the state.

Even that wouldn’t be seen for some time.

Pennsylvania legislators passed a bill in 2021 exempting data center developers from those taxes temporarily in an effort to attract the industry.

It worked so well, the state recently changed course to strengthen oversight of data centers after intense public backlash.

One new bill, backed by Democratic Gov. Josh Shapiro, who has generally favored data center development, passed the state House with strong bipartisan support in June. It would establish stricter transparency and environmental requirements for data center developers seeking state sales tax exemptions.

Another would eliminate those sales tax exemptions for equipment purchased for data center development altogether. It passed the House with near unanimous support a day later.

Both, however, are caught up in the Republican-controlled state Senate.

The vast backlash against AI data centers — and the government scramble to regulate them — isn’t isolated to Pennsylvania.

New York Gov. Kathy Hochul issued an executive order in July placing a one-year moratorium on hyperscale data center development in her state.

Pennsylvania Treasurer Stacy Garrity, Shapiro’s Republican opponent in the governor’s race, says she also supports an indefinite pause on development — though her larger regulatory proposal for the industry remains hazy.