The Environmental Protection Agency (EPA) said in a press statement on Monday that certain off-grid, or “islanded,” electricity generators are not subject to the federal Acid Rain Program under the Clean Air Act.
The statement outlines a clarification that the EPA earlier issued to regional administrators addressing generating units that produce electricity solely for on-site use and are not connected to the electric grid.
“The EPA believes that, considering the plain text of these definitions, the Acid Rain Program does not apply to power generation facilities that are not connected in any way to the larger electricity grid,” EPA Assistant Administrator Aaron Szabo wrote in the July 16 clarification.
According to the EPA, the Acid Rain Program applies only to fossil fuel-fired combustion devices that sell electricity. Because islanded facilities do not sell electricity to the grid, the agency said they do not meet the statutory definition of a utility unit covered by the program.
The ruling impacts data centers because they are increasingly using on-site power that is not connected to the grid. A 2026 report by Bloom Energy found that with grid constraints, on-site power is increasingly part of future data center power strategies. More than one-third of data centers are expected to use 100 percent on-site power by 2030, the report stated.
The EPA said the clarification is intended to provide regulatory certainty by explaining how the agency interprets the Clean Air Act’s requirements for these types of generating facilities. The document does not create a new regulation or amend existing requirements but explains the agency’s interpretation of current law.
The clarification does not specifically mention data centers or artificial intelligence (AI) facilities. However, a growing number of proposed AI data centers plan to build dedicated natural gas-fired power plants to supply their own electricity rather than connect to the regional power grid. Such facilities are commonly described as islanded because they operate independently of the electric transmission grid.
The EPA has separately taken steps aimed at supporting the expansion of AI-related infrastructure, including providing Clean Air Act permitting resources for data center developers. The agency has said those efforts are intended to help accelerate permitting while ensuring facilities comply with applicable environmental laws.
Environmental groups have criticized the Trump administration’s efforts to accelerate data center development by reducing environmental review and streamlining permitting for power infrastructure.
The Environmental Defense Fund, Natural Resources Defense Council, and other organizations argue the EPA is weakening Clean Air Act protections in ways that could allow data centers, power plants, and other large industrial projects to move forward before their air pollution impacts are fully evaluated.
They said in public statements that the administration is prioritizing rapid AI infrastructure growth over public health and environmental safeguards and have challenged several of the EPA’s recent actions in court.
The Acid Rain Program was established under the 1990 amendments to the Clean Air Act to reduce emissions of sulfur dioxide and nitrogen oxides from large fossil fuel-fired power plants. The EPA’s latest clarification addresses only whether certain off-grid generating units fall within the program’s statutory definition and does not alter other federal or state environmental permitting requirements that may apply to those facilities.
