00:00 - The following program is sponsored and part by "Customers Bank.

00:13 - " John Anzer, senior vice president of public

00:16 - affairs at the PA Chamber of Business and Industry,

00:20 - which everyday activities on personal computers or smartphones

00:25 - are made possible by data centers.

00:28 - Thanks for having me, Larry, and virtually everything that we do today

00:33 - that involves the internet or a smart device is supported by a data center.

00:39 - And really what a data center is, it's essential infrastructure.

00:43 - No different than a telephone pole, a sewage line, roads, bridges.

00:49 - The same way Americans built those forms of infrastructure hundreds of years ago.

00:58 - We are now being asked to build more data centers to

01:02 - store the data that is produced by our use of electronics.

01:06 - And really these are fundamental aspects of the American and the global economy

01:14 - to support not just the modern conveniences that we take for granted every day,

01:21 - but really the commerce that drives our state and our national economy.

01:25 - Online shopping, social media, it's a pretty long list.

01:30 - Streaming, if you watch Netflix, if you use email, GPS navigation,

01:37 - online banking, you know, companies today are

01:40 - using AI to bolster their cybersecurity defenses

01:48 - against hackers, hospitals use AI to create efficiencies

01:52 - and find cures for, you know, hard to cure diseases.

01:56 - AI is in everything we do today.

01:59 - It's not a, you know, technology that was portrayed,

02:03 - you know, in the Arnold Schwarzenegger movies,

02:07 - the Terminator movies, I think that's the

02:09 - fear some people have when they think of AI.

02:13 - But it's really, you know, in everyday technology

02:17 - that makes our lives better and more convenient

02:21 - and is really integral to how we exist as a society.

02:26 - Well, some of our viewers here in Pennsylvania are

02:29 - just plugging into this discussion of data centers for the first time.

02:32 - So let's consider just how much data center activity is up and running currently in PA.

02:40 - A significant amount now, it's important to

02:44 - distinguish though between the types of data centers

02:48 - that have been in our communities for decades.

02:51 - Data centers are not a new thing.

02:53 - Data centers have been around as long as the internet has been around, right?

02:57 - So going on 30 years now, we've been living with data centers.

03:02 - The difference today is the data centers that

03:06 - are being proposed are to support AI, right?

03:09 - So these are what are called hyperscale data centers.

03:12 - So they are much bigger, they use more energy,

03:16 - and these are the projects that are getting

03:20 - more news attention today for those reasons.

03:24 - None have been actually developed yet in Pennsylvania.

03:28 - Despite what you may read in the news, the

03:31 - governor just came out with an executive order

03:34 - several weeks ago, outlining certain parameters

03:37 - that data center development needs to follow

03:40 - and either in order to receive certain state

03:44 - incentives and permits, and in that executive order

03:48 - announcement, he laid out the fact that there

03:51 - are about 85 of these data centers that have been

03:54 - proposed, but none have actually received the

03:58 - permits and actually gone through the full development to be up and operational.

04:03 - So the key change nowadays is data centers going

04:07 - from relatively small to large, these so-called

04:11 - hyperscale data centers, and just give us a more perspective on how big they are.

04:16 - In other words, how much space do they take up?

04:19 - Hundreds of acres in some cases, there are proposals to build data center campuses.

04:27 - So multiple of these data center buildings in

04:31 - one place, so quite large, and that is, I think,

04:35 - why you're seeing some of the concern in various

04:39 - communities that several months ago had never

04:42 - heard of a data center. And all of a sudden,

04:46 - there are these massive several hundred to

04:49 - a thousand acre campuses being proposed in their

04:52 - community, and they have questions, and rightfully so,

04:55 - and I think what you're seeing is the industry,

04:59 - the data center developers have been too slow to

05:02 - get out and be transparent with the public about

05:06 - what are these buildings, how much energy do

05:09 - they use, what is the water consumption, what

05:12 - investments are these companies going to make

05:14 - into the communities where they're proposing to build them?

05:19 - These are all very valid questions,

05:21 - and the reality is, these companies have, in a lot

05:24 - of cases, very good answers to those questions.

05:28 - I think because of the public outcry, we've

05:31 - reached a moment where the industry is now being

05:35 - more transparent. I think the governor's executive

05:39 - order, which really requires companies to be more transparent and to engage in local

05:44 - communities and to work with those communities on

05:48 - standards that are set by the residents that

05:52 - really prescribe the type of development they

05:56 - want in their community. All of this is now

05:58 - happening, and I think what you're going to see is

06:01 - really a cooling of the temperature within the

06:04 - public because we now have these guardrails.

06:07 - And as you know, citizen groups are just growing

06:10 - by the day, and they're opposition to data

06:12 - centers, and whenever there's a local meeting

06:15 - about data centers, that is sure to bring

06:17 - protesters and civic engagement. So have you been watching that lately?

06:21 - I have been, and you know, civic engagement is

06:24 - what our country was founded on, and here in

06:28 - Pennsylvania, we are a commonwealth. That means we

06:32 - have municipalities where many of these decisions

06:36 - around zoning and permitting, those reside at the

06:39 - local level, at the municipal and the township level.

06:43 - So, you know, when you see residents

06:45 - showing up at these meetings to have their opinion

06:49 - heard, that's really by design. I think what is

06:53 - a little concerning from where I sit is the fact

06:57 - that there's so much misinformation out in the public right now about data centers.

07:02 - And what would you say is the number one

07:04 - misconception about data centers among citizens who posed that?

07:09 - Sure. I think there are two very large misconceptions that I think the public has

07:16 - the right concern, but not the full picture of

07:20 - what these projects will do. And it has to do

07:23 - with energy consumption and water consumption.

07:26 - Look, I'm a resident of Pennsylvania.

07:28 - The last thing I would want is a massive development going

07:32 - into my community, raising my rate on energy and

07:36 - water because they're using more of it, creating

07:39 - less for the residents who have been there

07:42 - and have been paying taxes. The reality is,

07:44 - though, these data centers are -- I have a really

07:48 - good story to tell on energy and water.

07:50 - So, on energy, in order for a data center, a hyperscale

07:54 - data center to go in, they've pledged to do one

07:57 - of three things on energy to either build their

08:00 - own generation, so not take energy from the power

08:03 - grid to buy it from the grid, which would then

08:07 - lower cost for everyone because you'll have

08:10 - a large load consumer is what they're called,

08:13 - paying more for that energy, or bring it. And we're seeing a little bit of that with

08:19 - these small modular nuclear reactors.

08:22 - So, there are really three ways that companies are

08:26 - addressing the energy, build, buy, or bring.

08:29 - And what we're seeing in places where data centers

08:32 - have been -- have been built in our operational

08:36 - is because of the three Bs, residential rates have

08:39 - actually gone down, again, because these companies

08:43 - are investing into the transmission grid,

08:45 - they are investing into new generation, which

08:48 - is putting more energy out there, which is

08:51 - increasing the ability for energy to go from the

08:55 - ground to, you know, deliverable power for the

08:59 - rest of, you know, the residents of their state.

09:02 - So, on energy, you know, data centers really,

09:06 - they just got to do a better job telling

09:08 - their story, in the same -- the same on water.

09:12 - Data centers today are largely utilizing a

09:15 - technology called closed loop cooling. So, what that

09:20 - means is, rather than continually taking water in

09:24 - from an aquifer or a local public water source,

09:28 - they get a finite amount of water and then recycle it, for cooling of the servers.

09:34 - And, you know, data centers that are using a

09:37 - closed loop cooling system, you know, they use less

09:40 - water than a golf course, a residential lawn, a

09:44 - swimming pool in some case. I wonder how long they

09:47 - can recycle the same source of water. It's a good question. I'm not exactly sure,

09:52 - but what I do know is that, you know, there's a

09:55 - lot of concern that communities don't want these

09:58 - developments coming in and using all of the water

10:02 - and, you know, raising rates, that's just not

10:06 - the case with closed loop systems today.

10:08 - Oh, here's another concern that citizens have about

10:11 - hyperscale data centers and it has to do with

10:14 - noise generated by data centers and the reports on

10:18 - noise are mixed. What's your personal experience

10:21 - if you can tell us? So, I've been to multiple data centers.

10:25 - The Pennsylvania Chamber has been taking the giant hyperscale ones. Correct, yes.

10:30 - So, we've been taking residents and elected officials from

10:34 - Pennsylvania on buses to Loudoun County, Virginia,

10:38 - which is known as data center alley.

10:41 - That's where AOL was founded back in the early 2000s

10:46 - and because AOL was there and they had the

10:49 - infrastructure already in place, data centers

10:53 - started popping up around AOL and over the last

10:57 - two decades, they've really grown to really have

11:01 - the highest density of hyperscale data centers

11:05 - of anywhere in the world. And when you go

11:08 - there, you're really, I think, taking it back at,

11:11 - you know, you hear all of these, these, you know,

11:15 - negative descriptions of a data center as kind

11:19 - of being an eyesore, looking like a big concrete square.

11:23 - That was not our experience.

11:25 - These looked like modern office buildings with glass

11:31 - and landscaping and you really couldn't hear them.

11:35 - And that's because data centers are not running

11:39 - on that the noise from a data center is from

11:42 - their backup generators. And those only kick on

11:47 - five percent of the year whenever, you know,

11:50 - there's a peak demand for energy on the grid

11:54 - and they have to, you know, tap into that backup

11:57 - power generation. But that again, that's five

12:01 - percent of the year. The other 95 percent of the

12:04 - time, you know, you feel like you're in just a normal

12:07 - office building or more office building campus,

12:10 - you would never know that that you were surrounded

12:13 - by data centers. Now, it's important you had

12:15 - the perspective of being outside. Correct.

12:18 - Yeah. And, you know, these are very secure facilities.

12:22 - These are not facilities that anyone

12:25 - off the street can just walk into. In other words, the noise and interior room would be

12:29 - different than the outside. I want to make sure that's right.

12:32 - It's, if you are inside a data center,

12:34 - you're going to hear a hum, just like, you know, when you start.

12:37 - But let's say you're outside and you're living in the house across the street, you're

12:41 - saying you're really not going to hear anything.

12:43 - And just like any development project, there

12:47 - are engineering solutions to prevent the noise

12:51 - from escaping the building. Again, it's a, it's

12:53 - a minor hum when you're inside the building.

12:56 - And when you're outside, unless it's the five

12:58 - percent of the year when those backup generators

13:00 - are on, you don't hear really a thing.

13:03 - I've been reading about a local government near King

13:06 - of Prussia, Pennsylvania, and they just rejected

13:09 - plans for some data centers. Have you been watching

13:12 - that situation where reasons given, is this

13:16 - maybe a harbinger for the future of data centers?

13:20 - Well, there have been examples of that happening

13:23 - where local communities have passed, you know,

13:27 - ordinances, pausing data center development, or

13:31 - rejecting a company's proposal to rezone land

13:35 - for a data center. It's not unique to King of Prussia.

13:39 - It's happened several places really

13:41 - across the Commonwealth. And again, I think that's

13:45 - just the reality that we live in a system of

13:49 - government where there's a lot of local control.

13:52 - I mean, municipalities and the residents who live

13:55 - in those municipalities have the power to decide

13:58 - what types of development they want and what

14:01 - types they don't. And a data center is not for

14:04 - every community. Again, you know, I live in a neighborhood.

14:07 - I wouldn't want necessarily a hyperscale data center right in my backyard.

14:12 - But there are rural parts of Pennsylvania.

14:15 - There are brownfield sites. There are sites already

14:19 - zoned as industrial where these projects make a lot of sense.

14:25 - Let's move on, John, to the no technology pledge.

14:29 - This is a document that the chamber wrote recently.

14:33 - And tell me just what is it before we explore some

14:36 - of the details that I know our viewers are going

14:39 - to find interesting. Yeah. So the no technology

14:42 - pledge, it's really a tug and cheek way for us to

14:45 - make the point that we talked about earlier, Larry.

14:49 - And that is that data centers are essential

14:52 - infrastructure that supports everything from

14:55 - video streaming to cell phones and emails and GPS,

14:59 - online shopping, all of the things we do with

15:03 - our smart phones and our laptops and whatnot.

15:09 - So, you know, as we hear lawmakers and politicians

15:13 - across really the country today coming out and

15:17 - saying that they want to ban data center development,

15:21 - the no technology pledge says, okay, if you

15:25 - are going to propose that we don't build any

15:28 - more data centers, you're basically saying that

15:31 - you want to cap our ability as a society to

15:35 - use all of the technologies that depend on data

15:39 - center development. And the demand for technology

15:43 - is what is driving the demand for more data centers.

15:47 - It is not vice versa. So, you know, again, this is really, it's not a real pledge.

15:53 - Although, we have had people go to our website

15:56 - and sign it, which is ironic because in order

15:58 - to do so, they have to include their email address.

16:02 - So, we get a kick out of that every time we get

16:05 - we get a submission. So, somehow, they unwittingly

16:07 - used a doubt center there. Yeah, and that's part of the point we're trying to make.

16:12 - And again, it's essentially once we can get to the point

16:16 - where there is common understanding that a data

16:19 - center is infrastructure, then we can get to

16:22 - the point of saying, all right, how do we

16:24 - build this infrastructure in a responsible way?

16:27 - And I want our viewers to read this document because it has so much detail on it and

16:33 - outline so many activities that we engage in every

16:35 - single day that we might not even think about anymore.

16:38 - 100%. So, how do we, once we go to the

16:41 - chamber website, how do we navigate to that page

16:45 - that's going to show us that pledge?

16:47 - So, there's a block on our homepage where you'll be able to click on it.

16:51 - It'll take you right there.

16:54 - That same homepage will take you to the Energy and

16:58 - Innovation Institute homepage, which is an

17:01 - initiative that we at the chamber started about a

17:05 - year ago to educate the public about Pennsylvania's

17:08 - energy future and opportunity and how data

17:12 - centers fit into that. And I go back to the

17:14 - misinformation that I talked about earlier.

17:17 - Much of which is being driven by our adversaries and

17:21 - specifically China. We are in a race against China

17:26 - for AI domination. And, you know, the Chinese

17:30 - Communist Party is, there's been reports, credible

17:34 - reports in the New York Times and from Congress

17:37 - that there are agents in the Chinese Communist

17:40 - Party that are inflaming these tensions and

17:43 - controversy around data centers in an effort to

17:46 - drive up the negative public opinion of these

17:50 - buildings and ultimately slow down America's ability

17:54 - to lead the AI race against China.

17:57 - Data centers today are pulling around 20% favorability,

18:02 - 80% on favorability, but they're pulling the opposite, 80% favorability in China.

18:08 - Why is that? It's because, again, these are foreign adversaries who are largely

18:13 - fueling and stoking the flames of division here and here in America.

18:18 - A few minutes ago, you said that the no

18:20 - technology pledge is really a tongue in cheek,

18:23 - attempted informing the public that they

18:25 - actually rely on data centers in order to engage

18:28 - in all these activities. So, putting aside any

18:31 - kind of humorous intent, what kind of response

18:34 - have you gotten from anybody or maybe especially lawmakers?

18:37 - So, I think what we're starting to see

18:40 - is a little bit of a swing back to the middle on this issue.

18:45 - I mentioned the polling, the 2080, you know,

18:49 - favorability to unfavorability of data centers.

18:53 - That was several weeks ago. I do think since

18:56 - Governor Shapiro and other governors around the

18:59 - country have come out with guardrails for how

19:03 - these projects must be developed. If they're going

19:06 - to be developed in their states, I do think you've seen a cooling of the temperature,

19:12 - which is allowed, you know, facts to enter the conversation.

19:16 - And in an understanding that,

19:18 - again, this is essential infrastructure that

19:21 - supports the technology and the commerce and the activity that we all engage in.

19:28 - I mean, most homes today have dozens of connected devices.

19:34 - You know, I would encourage viewers to just

19:36 - take a couple minutes and think to yourself,

19:39 - count the amount of devices in your home or in

19:41 - your workplace that are connected to the internet.

19:45 - It's, I mean, you go from everything from an alarm clock to your thermostat to,

19:53 - you know, a meat thermometer. Anything that uses Bluetooth or connects like that,

19:59 - it relies on a data center. And, you know, when you sit back and think about it,

20:03 - you'll be shocked. You'll be upwards of almost two dozen devices, I'm sure.

20:09 - Oh, let's talk about Pennsylvania's competitiveness

20:12 - amongst other nations. And what makes

20:15 - Pennsylvania desirable for locating data centers anyway? Try to be brief.

20:19 - Sure. So Pennsylvania has a number of unique

20:22 - advantages that make data center development attractive.

20:26 - I mentioned some of them already.

20:29 - Number one, energy. We are the largest net exporter of electricity in the country.

20:34 - Data centers need power. We have it rather than exporting

20:39 - it to other states within the PJM grade, particularly Virginia.

20:43 - We have been powering Virginia's economic growth for decades. The data center

20:47 - development that's occurred there in the tax

20:50 - revenue that is accrued to the residents of Virginia, Loudon County, Data Center Alley,

20:56 - is one of the 10 most wealthy counties in America.

21:00 - That is because of Pennsylvania energy.

21:03 - So we have the energy. We could leverage that

21:06 - energy responsibly to drive investment here in PA.

21:10 - The other is water. You know, many states where

21:13 - energy is abundant like Texas, New Mexico,

21:17 - they lack a surplus of water. Pennsylvania has that.

21:21 - There are a number of other advantages we have

21:25 - our higher education institutions, our proximity

21:29 - to large markets like New York, Boston, Washington, D.

21:34 - C., Chicago, our better business climate in terms of public policy, which we can get

21:41 - into in terms of our tax code and our permitting system.

21:45 - All of this has happened from a policy standpoint.

21:48 - These improvements really over the last five years. And as a result, you're seeing

21:53 - investments start to flow back in the Pennsylvania.

21:56 - I do want to talk about the CNI tax.

21:58 - And that stands for corporate net income tax.

22:01 - And who pays it? And what's the trend as far as reducing that is concerned?

22:06 - Sure. So the corporate net income

22:09 - tax is a tax that about 80 percent of businesses in America pay.

22:14 - So in Pennsylvania for years, we had the second highest corporate net income tax

22:22 - rate in the country, second only to New Jersey at 9.

22:27 - 99 percent. Back in 2022, the Republican

22:30 - legislature and Governor Tom Wolf got together

22:34 - in on a bipartisan basis past legislation

22:39 - to reduce our CNIT from 9.99 to 4.

22:43 - 99 over the course of several years. So reaching 4.

22:48 - 99 by 2031. Today, because of that incremental phase

22:52 - down, our corporate net income tax rate is 7.49.

22:56 - So still on the higher end in terms of states, but

22:59 - on a glide path to being one of the more competitive

23:03 - corporate net income tax rates in America.

23:05 - And have you seen positive results from reducing

23:08 - the CNIT tax, even though it hasn't reached the goal?

23:11 - Yeah, the 4 percent, it's at 7 percent now.

23:13 - We have, and for years I mentioned when we had

23:16 - the second highest corporate net income tax rate,

23:20 - Pennsylvania was losing major economic development projects.

23:24 - A great example is the Intel chip

23:26 - manufacturing facility that ultimately ended up in Ohio.

23:31 - And when we at the chamber talked to Intel after they announced that they were going

23:36 - to build this facility in Ohio, we asked them,

23:39 - why not Pennsylvania? And they kind of chuckled

23:42 - and said, you guys weren't even on the list,

23:45 - and it was because your corporate net income tax rate of 9.

23:49 - 99 is a giant red stop sign to

23:52 - industry looking to expend capital and invest.

23:56 - So since we've reduced that rate over the last

24:00 - several years, we've seen hundreds of billions

24:03 - of dollars in new private investment announced,

24:06 - not just from data centers, but from life

24:09 - sciences, like Eli Lilly in the Lehigh Valley,

24:12 - Johnson in Johnson, another pharmaceutical

24:15 - manufacturer in southeast Pennsylvania. Two weeks ago,

24:20 - Chobani, the largest yogurt manufacturer in the

24:24 - world, invested $1.2 billion in the Lehigh Valley.

24:28 - These are investments that would not have

24:30 - occurred several years ago, but because we've made

24:34 - these reforms to our corporate tax rate, we are starting to compete again.

24:38 - So the CNI tax is on its way down. So let's talk about another

24:43 - priority of governorship heroes, which was making

24:45 - changes to the permitting process here in Pennsylvania,

24:49 - tells briefly, what was the problem and what

24:52 - could a permit, what form would it take?

24:55 - Sure. So permitting is just as important as the

24:58 - corporate tax structure in terms of attracting investment.

25:02 - And it all comes down to how quickly

25:05 - can we get shovels in the ground and can we turn

25:09 - these investments into good paying jobs and productivity?

25:12 - And what delay is getting shovels in the ground?

25:14 - Typically it's the permitting process.

25:16 - So what do they need a permit for? Just give you an

25:18 - example if you can. So there are air quality

25:20 - permits, other environmental permits that the

25:22 - state department of environmental protection

25:26 - has to issue to a project. There were also local

25:29 - permits that some municipalities require in order to build.

25:33 - But in Pennsylvania, it was taking three, four, in some cases five or six years,

25:39 - to get a response on a permit application.

25:43 - That some companies just give up. How did they respond to this delay?

25:46 - Probably the most famous example was US Steel.

25:49 - So US Steel, a Pennsylvania company, one of the

25:53 - most historic companies in our nation's history,

25:56 - built really the infrastructure I talked

25:59 - about earlier, was looking to expand and build

26:03 - a $3 billion facility somewhere in America,

26:07 - and really it came down to Pennsylvania in Arkansas.

26:10 - And the Arkansas governor at the time joked

26:13 - that US Steel will be cutting the ribbon on the

26:17 - facility in Arkansas by the time Pennsylvania

26:21 - issued the first permit. So where did US Steel end up? They ended up in Arkansas.

26:27 - And it's a great example of what we were losing

26:31 - and how permitting was really the root cause of that.

26:35 - And how much has that process been shortened up in general?

26:39 - How long was it at its worst?

26:40 - And then how good did it get? So it went from several years to several months today.

26:46 - And that's because again, and this has been a bipartisan

26:49 - effort with really Republicans in the state Senate,

26:53 - working with Democrats in the state house, and now Governor Shapiro, who has made this

26:58 - a big priority of his administration in speeding

27:01 - up these timelines. So they've instituted

27:04 - reform, such as what's known as deemed approved.

27:08 - That means if you submit a permit application

27:12 - and don't receive a response from the agency within

27:16 - a certain amount of time, that permit becomes

27:19 - deemed approved. There's also been refunds instituted

27:24 - where if you don't hear from certain agencies

27:27 - after a certain time, the company gets their money back.

27:31 - But more than that, it's really increasing the communication within government

27:35 - so that they could be more efficient, operate at the speed of business, and really

27:40 - allow Pennsylvania to compete for these big investments.

27:43 - John Anzer, senior vice president

27:46 - of public affairs at the PA Chamber of Business and industry.

28:06 - Thank you very much. Thank you, Larry.