A power company, Talen Energy, and a business partner want to build up to 29 huge computer buildings on about 900 acres in a small Pennsylvania township. Buildings like these run cloud services and artificial intelligence.
The largest version would have floor space equal to about 60 football fields. It would also have its own power plant. The developers have offered the township up to $50 million in community payments.
The local zoning board did not rule on the project. It gave the township’s elected leaders 60 days to act on rules for projects like this. A local deadline, not the power supply, now sets the schedule.
The Upper Mount Bethel Township Zoning Hearing Board in Northampton County, Pennsylvania, voted 4-1 on Monday, Oct. 19, to postpone a hearing on Slate Belt Holdings’ challenge to the township’s zoning ordinance. The hearing now resumes Dec. 17. In the meantime, the board gave township supervisors 60 days to take action on data center regulation, The Morning Call reported. Slate Belt Holdings is a partnership between Talen Energy and River Pointe Logistics.
The challenge covers 23 data center buildings and two substations on 754 industrially zoned acres west of River Road. A second challenge, filed Oct. 8 and due to be heard by November, covers six more buildings, battery storage and a power plant on roughly 152 acres east of the road. Land development plans filed Oct. 13 show two layouts across the roughly 900 acres. One has 29 buildings totaling 3.5 million square feet. The other has six buildings totaling nearly 1.5 million square feet.
Executive Summary
The postponement does not decide anything. It does move the project’s next date onto a township calendar. The zoning board chose not to rule on whether the township’s ordinance is valid as applied to data centers. Instead it handed the issue back to the elected supervisors. According to the board’s solicitor, they are expected either to advance the long-delayed data center ordinance or to act on the memorandum of understanding the developer has proposed. A memorandum of understanding is a negotiated, non-final agreement between the parties.
This matters beyond one township because of what the project bundles. The plan pairs hyperscale data center buildings with two substations, battery storage and an on-site power plant. Hyperscale means very large facilities built for cloud and large-scale computing customers. Developers increasingly treat that combination as the scarce asset in data center buildout. Here it is held up at an earlier gate: whether local land-use law permits the buildings at all, and on what terms. Two and a half years after the township’s zoning officer was first asked that question, the township has not passed a data center ordinance.
The Gate Is a Township Ordinance, Not a Power Plant
Power is often described as the binding constraint on large data center projects. That means grid connections, substations and on-site generation. Slate Belt’s plan addresses power directly. The western parcel includes two substations, which step high-voltage transmission power down for use on site. The eastern parcel adds battery storage and a power plant. Having a power producer as a partner signals that the developers see energy supply as part of the product, not something they hope to secure later.
None of that sets the timetable right now. The next operative date is Dec. 17, and a five-member zoning hearing board chose it. The legal question is narrow but decisive. Slate Belt’s attorney, Shawn Gallagher, argues that an April 2024 determination by the township’s zoning officer makes a data center a use permitted by right. That would mean approval without discretionary review. The township’s newly hired solicitor, Bill Jones, counters that the April 2024 plans did not include square footage. Under the township’s ordinances, total square footage determines whether a developer needs a special exception, which is a discretionary approval with its own hearing and conditions.
That is why the two layouts matter. The gap between the 29-building, 3.5-million-square-foot option and the six-building, roughly 1.5-million-square-foot option is about 2 million square feet. On the township’s reading, that kind of size difference changes the approval path. For anyone who builds, supplies or finances a campus like this, the scale of the investment depends on how a township defines a land use. That is the mechanism behind the headline. Securing power and securing permission are separate tracks, and the slower one sets the pace.
What $50 Million Has and Has Not Bought
Slate Belt’s August proposal offered up to $50 million in donations. In exchange, the township would end the legal fight, work with the developer on data center zoning changes and eventually approve its plans. An updated $50 million community benefits agreement came with the Oct. 13 filing. Community benefits agreements are common in large developments. They package payments or commitments to a host community, usually in return for cooperation on approvals.
The offer is substantial, but it is conditional by design. As described, the money depends on outcomes the township would have to deliver, including zoning changes and approvals. That explains why it has not settled the question. Supervisors have split on strategy. Some argue that negotiating directly with the developer is the best way to win environmental protections. Others want to pass the township’s own ordinance first. Several versions of the deal have gone back and forth without a resolution. The zoning board’s move now puts both paths on the same 60-day clock.
For developers watching from elsewhere, one lesson is clear from this case. A large benefits package can open a negotiation, but it does not replace a legal basis for approval. Where the underlying ordinance is unsettled, the money becomes one bargaining chip among several. It does not shortcut the process.
A Deadline With an Undefined Ask
The 60-day instruction is firm on timing and vague on substance. Ron Angle, the alternate member who made the motion, said he expected supervisors to “do the job that the citizens of this township elected them to do.” Supervisors Chair John Bermingham told The Morning Call he did not know what he was supposed to do in 60 days. Solicitor Chad DiFelice’s reading, either advance the ordinance or act on the memorandum, is the clearest guide available. It still leaves supervisors to choose between two strategies they have been divided on.
The process is also gaining participants. The Delaware Riverkeeper Network was granted standing on behalf of 27 members who live within half a mile of the proposed campus. One non-member resident in that radius was also admitted. Standing gives these parties formal rights to present evidence and argument. A second validity challenge covering the eastern parcel, which holds the power plant, is scheduled separately for November. The developer’s spokesperson said that challenge seeks to clarify how zoning applies to the full buildout.
The supervisors’ draft ordinance went to the Lehigh Valley Planning Commission for review on Sept. 21. An earlier March 2025 draft, written after Amazon showed interest in a data center deal, was never finalized. Each delay so far has carried a cost for everyone involved. The developer has faced litigation and uncertainty. Residents have had to organize legal representation. Supervisors have had to defend an ordinance whose application to this use is still disputed.
Background
Upper Mount Bethel is a township in the Slate Belt region of Northampton County, in Pennsylvania’s Lehigh Valley along the Delaware River. The question of how its zoning ordinances apply to data centers dates back two and a half years, to an April 2024 request for an interpretation from the township’s zoning officer. Amazon’s interest in a data center deal, beginning in 2024, prompted a March 2025 draft ordinance that was never adopted.
Hyperscale data centers are very large facilities built to serve cloud and large-scale computing customers. They need large tracts of land, substantial electricity and approval from local governments, which often lack rules written for this kind of use. Slate Belt Holdings, the Talen Energy and River Pointe Logistics partnership, has pursued both a legal track through zoning challenges and a negotiated track through a proposed $50 million community benefits agreement.
Talen Energy, a company that owns power plants including a large nuclear station in Pennsylvania, has lined up about $1.2 billion in payments from the grid operator serving much of the eastern United States.
The money is not for electricity sold. It pays Talen to keep its plants ready for the grid’s busiest days. Those payments are set in advance, and they have climbed because the grid expects many new artificial intelligence data centers. So power plants get paid before many of those data centers exist.
Electricity customers ultimately cover the bill. The same week, Talen named a new chief executive and a $1.5 billion plan to buy back its own shares.
ScanX reported that Talen Energy (NASDAQ: TLN), the Houston-based independent power producer, has secured $1,208 million in capacity revenues from PJM Interconnection, the operator of the largest power grid in the United States. Capacity revenues are payments a generator receives for committing its plants to be available during a future delivery year, separate from what it earns selling electricity.
The figure lands the same week as an 8-K filed September 29 in which Talen named President Terry Nutt as chief executive effective January 1, 2027, succeeding Mac McFarland, and announced $1.5 billion of accelerated share repurchases inside an upsized $3.0 billion buyback authorization running through the end of 2028.
Executive Summary
Talen’s $1,208 million in PJM capacity revenue is money earned for availability, not output: PJM pays generators a fixed price for each megawatt they commit to have ready during a delivery year, and the size of that payment is set by an auction that buys enough supply to cover forecast peak demand. That forecast has been pushed sharply higher by expected data-center growth, much of it tied to artificial intelligence.
The practical consequence is that AI demand is already turning into cash for existing merchant power plants, ahead of the data centers it anticipates. For Talen, which sells into wholesale markets rather than earning regulated rates, a large, pre-set revenue line behaves much like a contract. In the same week, the company’s board committed $1.5 billion to an accelerated share repurchase that Talen said would retire more than 10% of its shares at the current stock price, and handed the chief executive role to its former chief financial officer.
Talen has not explicitly linked the capacity revenue to the buyback, and important details, including delivery period, cleared megawatts and plant mix, remain open. But taken together, the two announcements illustrate how the AI power story is flowing through grid market design and into generator balance sheets.
Paid on the Forecast, Not the Plug-In
PJM’s capacity market works through an auction, known as the Base Residual Auction, held ahead of each delivery year. PJM estimates how much generation it needs to cover forecast peak demand plus a safety margin, then buys that commitment from power plants. Every plant that clears receives the auction price for each megawatt, for every day of the delivery year, as long as it is available when called. Total revenue is simple arithmetic: cleared megawatts times the price times the days in the year. Talen’s $1,208 million is the product of that arithmetic applied to its fleet.
The demand side of that auction is a forecast, and PJM’s recent load forecasts have been revised upward largely on expected data-center growth. PJM’s independent market monitor has attributed a large share of recent capacity price increases to forecast data-center demand, and prices for the 2026/27 and 2027/28 delivery years reached a temporary ceiling approved by federal regulators. In other words, a meaningful part of what generators are being paid reflects servers that are planned, not yet running.
That is the operational point. Once an auction clears, the commitment and the price are locked for that delivery year. If some forecast data-center campuses slip or are never built, the payments still flow. The forecast risk sits largely with the utilities and customers who fund capacity through their bills, while generators such as Talen hold a cleared price. This is how a fleet anchored by the Susquehanna nuclear plant can bank revenue tied to the AI buildout without signing a data-center contract for every megawatt it owns.
Contract-Like Cash for a Merchant Fleet
Talen is a merchant generator: it sells power at market prices rather than under regulated utility rates, so its energy revenue rises and falls with natural gas prices, weather and demand. Capacity revenue is different because it is known before the delivery year begins. For lenders and shareholders, that predictability makes it behave more like a contract than a commodity bet.
Talen’s September 29 disclosures show how it is deploying its cash. The company entered $1.5 billion of accelerated share repurchases, in which a bank delivers shares up front and the final count is settled later based on the average stock price. Talen said the ASRs are uncollared, meaning there is no price band limiting how many shares the fixed dollar amount ultimately buys, and that at the current stock price they would retire more than 10% of shares outstanding by the end of the first quarter of 2027. The board also raised remaining buyback capacity to $3.0 billion through December 31, 2028, leaving $1.5 billion beyond the ASRs.
Nutt described the ASRs as buying stock at “an attractive free cash flow yield” while “preserving liquidity and strategic flexibility.” Talen did not tie that decision to the capacity figure in its release. Still, a large revenue line fixed in advance is exactly the kind of visibility that lets a board commit a fixed dollar amount to an uncollared buyback with confidence.
The Price-Signal Debate, Asked of Both Sides
Generators and PJM have argued that high capacity prices are a legitimate scarcity signal: they keep existing plants from retiring and encourage new supply as demand grows. Consumer advocates and state officials, including Pennsylvania’s governor, whose challenge preceded the temporary price cap and floor, have argued that customers are paying elevated prices on forecasts that may prove too high, and that payments to existing plants do not add new supply quickly.
Both positions deserve pointed questions. For generators: how much of the elevated capacity revenue is going into new or uprated megawatts, rather than returned to shareholders? Talen’s most recent capital-allocation announcement is a buyback, not a construction program. For critics: if prices were held well below scarcity levels, what would keep existing plants running as load grows, and how confident can anyone be that a lower forecast would be more accurate? The reliability of large-load forecasts has itself become contested, because a single data-center project can appear in more than one utility’s plans.
A Finance-Led Succession for a Capital-Allocation Story
The incoming chief executive’s résumé fits the business the capacity figure describes. Nutt, 50, has been Talen’s President since December 2025 and was chief financial officer from July 2023 through December 2025. Before Talen he was chief financial officer of EDF Trading North America and held risk-management and controller roles at Vistra. Capacity auctions, hedging and capital returns are core skills in that background.
The board framed the transition as continuity in strategy, operations and capital allocation. McFarland stays chief executive through December 31, 2026, then serves as senior advisor until his retirement on March 1, 2027. Rubric Capital Management, which described itself as Talen’s largest actively managed shareholder, and Energy Capital Partners both publicly backed the choice, signaling that the shareholder-return emphasis is likely to persist.
Background
Talen Energy is a Houston-based independent power producer whose fleet is anchored by the Susquehanna nuclear plant in Pennsylvania, one of the largest nuclear stations in the United States. The company emerged from a Chapter 11 restructuring in 2023 and has since become one of the most closely watched power stocks of the AI era, after selling a data-center campus adjacent to Susquehanna to Amazon and later expanding its power-supply relationship with the company.
PJM Interconnection runs the grid and wholesale market for 13 states and Washington, D.C. Its capacity market, which pays plants to be available rather than only for power they produce, has become a focal point in the debate over who should bear the cost of AI-driven load growth, after recent auctions cleared at a temporary ceiling approved by federal regulators.
Amazon is building a string of data centers across Pennsylvania — large buildings packed with computers that run websites, cloud services and artificial intelligence.
Pennsylvania does not charge its 6 percent sales tax on the computer equipment inside them. State budget writers expect that break to cost close to $2 billion in uncollected taxes by 2031.
Lawmakers in both parties voted this summer to end it. Neither version reached the governor’s desk. The argument is really about who helps pay for the buildings behind your chatbot.
Capital & Main reported on September 16 that Amazon has so far claimed Pennsylvania’s data center sales-and-use tax exemption at two locations, according to the state Department of Revenue, while expanding a portfolio that now includes a permit application for 36 data centers at the 4.5-gigawatt Homer City campus in southwestern Pennsylvania, a 1,300-acre site in Hazle Township, a pending site in Kline Township, and a prospective end-user role at a rezoning-denied site in Montour County. Amazon pledged $20 billion of data center investment in the state in 2025, beginning with projects in Salem Township and Falls Township.
The exemption relieves buyers of the state’s 6% sales and use tax on equipment bought, stored or used at qualifying data centers. Pennsylvania projects it will forgo $188.4 million in fiscal 2026-27 and close to $2 billion by 2031. In late June, the Democratic-controlled House and Republican-controlled Senate each passed a repeal; neither reached Governor Josh Shapiro before he signed the budget on July 12. Shapiro’s August 18 executive order left the exemption intact but conditioned it on a consent order binding operators to new siting, disclosure and energy standards.
Executive Summary
The substance here is not that a state subsidizes data centers — most do. It is the shape of this particular subsidy. Pennsylvania’s exemption attaches to equipment, and equipment is the part of a modern AI facility whose cost is rising fastest. The nonprofit research group Epoch AI estimates servers account for almost 60% of the cost of owning a one-gigawatt data center, with the remainder split across the building, network gear, energy, land, labor and water. A tax break written against that base grows with every generation of accelerators, whether or not the campus gets bigger or hires anyone else.
That is why a program appropriated at $5 million in 2016 is now projected to reach $517.2 million in fiscal 2030-31 under Shapiro’s own 2026 budget proposal — more than a hundredfold increase. It also explains why the repeal fight crossed party lines in June and why it is unresolved: the exemption has become the single largest state-level lever on data center economics in Pennsylvania, and the governor chose to attach conditions to it rather than remove it.
For anyone underwriting capacity in the PJM footprint, the operational takeaway is that Pennsylvania’s cost question has migrated. The debate that dominated 2024 and 2025 was about electricity price and interconnection. The debate now decided in Harrisburg is about the state revenue base — and it introduces a policy variable into equipment capex that most site-selection models still treat as fixed.
A Subsidy Indexed to Silicon, Not to Square Footage
Most location incentives are written against things that change slowly: assessed property value, payroll, acreage. Pennsylvania’s data center break is written against the 6% sales and use tax on equipment — servers, storage, and the gear that supports them. That distinction is the whole story. Epoch AI’s estimate that servers make up almost 60% of the cost of owning a one-gigawatt facility means the exempt share of a project’s spend is the share dominated by AI accelerators, whose unit prices have climbed faster than any other line in the stack.
The arithmetic follows mechanically. Two campuses of identical size, power draw and headcount will generate very different amounts of forgone state revenue if one is filled with general-purpose cloud servers and the other with AI training racks. The state’s own projections trace that curve: $188.4 million forgone in fiscal 2026-27, growing to a projected $517.2 million in fiscal 2030-31, against a $5 million appropriation when the program passed in 2016 — before generative AI or hyperscale campuses were part of the conversation. Nothing in the statute had to change for the cost to multiply. The compute did.
Who is affected: the state treasury, which is absorbing the growth while legislators field demands to fund public transit and close a structural deficit; developers whose pro formas capitalize a 6% equipment discount that two chambers have already voted to remove; and county tax bases that receive the land and the substation but not the largest slice of the spend. It also means the conventional local-benefit argument — that a campus pays for itself through construction and property tax — is being made about the smallest part of the capital stack.
A Program the State Cannot Meter
There is a real weakness on both sides of this argument, and it is the same weakness. When the incentive was converted from a refund to an exemption in 2021, Pennsylvania lost the ability to track exactly how much revenue it gives up when an operator claims it. The Department of Revenue confirmed Amazon has received the incentive at two locations; it did not put a dollar figure on them.
That should temper the numbers everyone is citing. The $188.4 million and the roughly $2 billion cumulative figure are budget projections, not measured losses — useful, but not audited outcomes. By the same token, claims that the exemption is a modest and self-financing inducement cannot be verified either, because the state has no per-claim ledger to check them against. Amazon’s $20 billion commitment is not a tax base: only the portion spent on qualifying equipment is exempt, and the company has not broken that out. Good policy on either side would start with disclosure, and the current design forecloses it.
Conditioning the Subsidy Instead of Ending It
Shapiro’s August 18 executive order did something more interesting than the repeal bills would have. It kept the exemption but turned it into an enforcement hook: operators claiming it must sign a consent order committing to the standards in the order, which bars state officials from signing nondisclosure agreements with operators, requires demonstrated local community support, and pushes developers toward supplying their own energy so the grid is not strained. “I want to be clear: These are not voluntary standards — these are legally binding requirements in order to operate here in the Commonwealth,” Shapiro said at the signing.
Critics argue the conditions are beside the point. “Shapiro is Pennsylvania’s governor, not Amazon’s, not Meta’s, not Microsoft’s,” said Megan McDonough of Food & Water Watch when the underlying principles were introduced in May, arguing the state should withhold support rather than regulate access to it. The counterargument is that a consent order reaches conduct a repeal never would — siting, disclosure and self-supplied power are not things the tax code addresses. The tension is genuine: repeal is cleaner and cheaper; conditioning is narrower but touches the grid and permitting questions that actually determine whether these projects get built.
The process history is the part that will keep drawing scrutiny. Heatmap reported in April, based on correspondence obtained by a Pennsylvania resident, that Amazon was shown a “feedback draft” of the plan on March 18, months before public release; that the administration had offered “exclusive early access” to fast-tracked permitting subject to a nondisclosure agreement; and that the Department of Community and Economic Development secretary had described the plan to an Amazon representative as “intended to be voluntary.” The executive order now prohibits the NDA practice. Whether pre-consultation with a major investor is ordinary policy development or preferential access is a fair question, and it is fair in both directions — states routinely test regulatory drafts with the regulated, and doing so under an NDA is what changed.
Permitting Risk May Bite Before Tax Risk Does
Look at the pipeline and a different constraint appears. State officials have identified more than 100 projects at varying degrees of certainty. Yet the Hazle Township site was denied locally last year and is under appeal; the Montour County rezoning was denied in February; Kline Township is still pending. A developer told the governor’s chief transformation and opportunity officer by email that Amazon had been “appealed in EVERY project at EVERY turn,” per Heatmap’s reporting. For a hyperscaler, a 6% equipment discount is worth real money, but it does not compound the way a two-year zoning delay does on a site whose power interconnection and construction slots are already booked.
Capital availability is clearly not the binding constraint. In an 8-K filed September 14, Amazon disclosed it had closed a sterling bond sale of £4.242 billion in aggregate public offering price across four tranches maturing 2029 through 2045, netting roughly £4.235 billion. The filing does not state a use of proceeds, and nothing in it ties the raise to Pennsylvania. What it does show is a company funding a global buildout in size at fixed coupons ranging from 5.200% to 6.650% — a cost of capital against which state-level equipment tax treatment is a meaningful but second-order input.
The practical consequence for anyone building, powering or financing this infrastructure: Pennsylvania’s attractiveness is now a function of two variables moving in opposite directions. The exemption is under bipartisan legislative pressure, with both chambers back in session and 11 scheduled session days left this year. Meanwhile the executive order raises the local-consent and self-supplied-power bar, which favors sites with generation already next door — the pattern visible at Salem Township, where Amazon Web Services construction sits adjacent to Talen Energy’s Susquehanna nuclear station. Projects that solved power first are the ones least exposed to whichever way Harrisburg moves.
Background
Pennsylvania created its data center sales and use tax incentive in 2016 with a $5 million appropriation, aiming to attract facilities housing servers and storage equipment. It was restructured from a refund into an exemption in 2021. Over the following two years the state became a focal point of the AI buildout, with officials identifying more than 100 projects at varying degrees of certainty — drawn by PJM interconnection, legacy generation sites including retired coal plants and operating nuclear units, and abundant natural gas.
Amazon announced its $20 billion Pennsylvania commitment in 2025, anchored by AI-serving campuses in Salem Township and Falls Township. Opposition has grown in parallel and across party lines, driven by electricity demand, land use and local control; hundreds of residents rallied at the state Capitol on June 23. The result is a policy fight in which repeal bills, an executive order, campaign finance scrutiny and local zoning appeals are all running at once, in an election year in which Governor Shapiro is seeking reelection.
