Introduction

The data center market is experiencing rapid growth driven by the rise of artificial intelligence (AI) and cloud computing. This is apparent in Illinois, where data centers are being constructed at a rapid pace, thanks in part to Illinois’ data center incentive program. The Chicago area in particular is recognized as a data center hotspot, with numerous new developments planned around the city and suburbs.

Data centers require a substantial amount of reliable electricity to power and cool the servers and networking equipment that comprise the facilities. Data centers that rely on the local grid for electricity often require many fossil fuel-fired emergency generators to ensure that the facility’s power needs are met during grid outages. Combusting the fuel in these generators results in criteria pollutant [i.e., volatile organic material (VOM), nitrogen oxides (NO_X), carbon monoxide (CO), sulfur dioxide (SO₂), and particulate matter (PM)] emissions. As a consequence, most data centers are required to obtain an air permit from the Illinois Environmental Protection Agency (Illinois EPA) to install and operate the generators and other emission units at the facility (e.g., cooling towers).

Air quality due diligence and permitting are crucial steps in the design process of a data center which can impact all phases of a project, as discussed below.

Air Permitting Considerations for New Illinois Data Centers

With the exponential growth of the data center market across Illinois, air quality permits in this sector have grown increasingly complex. Emissions limitations and operational restrictions imposed in these air permits have the potential to significantly impact the operational flexibility of a data center. Therefore, it is imperative that data center developers and operators strategize effectively when embarking on the air permit application process. The following sections discuss opportunities and challenges to consider when devising a permitting strategy.

Air Permitting Exemptions

The Illinois EPA requires that a construction and operating permit be obtained unless all classes of equipment and activities meet a permit exemption in Title 35 of the Illinois Administrative Code (35 IAC) Part 201.146, provided that the potential emissions for the site including exempt activities do not trigger the requirements of Title V permitting or Prevention of Significant Deterioration (PSD)/Non-attainment New Source Review (NA NSR). Per 35 IAC 201.146(i), “any stationary internal combustion engine or stationary turbine with a rated power output of less than 1118 kW (1500 bhp)” is exempt from construction permit requirements. This is the primary exemption available for data centers that only have emergency generators on-site, but 35 IAC 201.146 contains exemptions for additional equipment that may be relevant to some facilities. Note that the potential emissions from engines or stationary turbines can easily approach the requirements of Title V which may make the above exemption unavailable.

Data center developers should determine if any exemptions apply to the planned equipment as a first step in the air permitting process.

Nonattainment Areas

The attainment status of an area refers to how the ambient pollutant concentrations in that area compare to the National Ambient Air Quality Standards (NAAQS) for that pollutant. Many locations across the United States are considered “nonattainment areas” (NAAs) for ozone, including the Chicago area and the Illinois portion of the St. Louis area. As of January 16, 2025, these two areas were
reclassified from “Moderate” to “Serious” NAAs for the 2015 ozone NAAQS, resulting in stricter regulations surrounding emissions of NO_X and VOM — both of which are considered precursors to ozone formation.

The threshold to trigger NA NSR for a new data center constructed in the referenced ozone NAAs is only 50 tons/year for NO_X or VOM, compared to 250 tons/year if constructed in an attainment area. As a result, sources seeking to avoid major permitting requirements typically find themselves limited to fewer maximum runtime hours than those in attainment areas. However, there are strategies that can be undertaken to ensure maximum operational flexibility for the data center while avoiding complicated NA NSR permitting.

For example, applicants can request operational restrictions in the form of fuel usage limitations instead of runtime hours. Doing so often results in higher overall allowable runtime since fuel usage during routine periods of operation (e.g., maintenance and testing) is lower relative to operational capacity. Additionally, facilities may elect to proactively install Tier 4 engines or add-on air pollution control [e.g., selective catalytic reduction (SCR)] to lower pollutant emission rates and accommodate increased runtime hours before triggering applicable major source thresholds.

Data center developers should review the attainment status for potential site locations during the due diligence phase of the project to avoid unanticipated permitting hurdles during the application phase. If a source cannot avoid triggering NA NSR permitting requirements, this would require significant additional steps to obtain a permit, including (but not limited to) purchasing emissions offsets, identifying and achieving the lowest achievable emission rates (LAERs), and conducting an alternatives analysis.

Note the Illinois EPA recently amended 35 IAC Part 217, also known as the NO_X Reasonably Available Control Technology (NO_X RACT) rules, to implement stricter requirements on NO_X-emitting units at major stationary sources in ozone nonattainment areas. As mentioned in a previous article, the new requirements include more stringent emissions limitations and increased recordkeeping and reporting requirements. While emergency engines remain largely exempt from these requirements (limited recordkeeping requirements still apply), developers should be aware of potential requirements for any engines classified as non-emergency (e.g., if required to allow for participation in a demand response program).

Air Dispersion Modeling

There are two main scenarios under which the Illinois EPA requires air dispersion modeling for a proposed data center project. The first would be if the potential to emit (PTE) from the new data center exceeded PSD permitting thresholds. For a site proposed in an attainment area, the PSD threshold is 250 tons/year for any single criteria pollutant. Similarly, a site proposed in the referenced ozone NAAs would be subject to the PSD threshold (i.e., 250 tons/year) for CO, NO₂, PM/PM_2.5/PM₁₀, and SO₂.

The second scenario where modeling is required is if the site is located in an Environmental Justice (EJ) area. EJ areas are communities that are recognized by the Illinois EPA to be disproportionately affected by environmental pollution. The Illinois EPA’s current policy is to require air dispersion modeling to demonstrate that the proposed project (in conjunction with background concentrations and surrounding sources) does not negatively impact the NAAQS, which typically requires an evaluation demonstrating the area remains <90% of each applicable pollutant. This can be challenging to pass and require several iterations of the model, potentially with stack height adjustments or run time restrictions.

Air dispersion modeling requirements for data center projects have the potential to significantly delay application preparation and agency review timelines, which in turn affects the overall project schedule. It is therefore critical that data center applicants have a complete understanding of the air dispersion modeling requirements of the proposed site during the site selection process and engage in the required modeling as early as possible during development of the air permit application.

Climate and Equitable Jobs Act (CEJA) Considerations

The Climate and Equitable Jobs Act (CEJA), Public Act 102-0662, was passed by the General Assembly and signed into law by Governor Pritzker on September 15, 2021. CEJA includes provisions to phase out carbon emissions from the energy and transportation sectors. Under CEJA, gas-fired Electric Generating Units (EGUs) that use gas as a fuel and are not publicly owned are required to permanently reduce all carbon dioxide equivalent (CO2e) and co-pollutant emissions to zero by no later than January 1, 2045. An EGU is defined as a fossil fuel-fired stationary boiler, combustion turbine, or combined cycle system that serves a generator with a nameplate capacity greater than 25 MWe and produces electricity for sale. It should also be noted that the compliance deadlines under CEJA are based on proximity to an EJ area and a unit’s NO_X and SO₂ emissions ratings. This rule should be considered by developers when deciding on a site location and the source of primary and/or auxiliary electricity generation.

Recommendations

Given the considerations and challenges discussed in this article, the following best practices are recommended to minimize risk in the development and permitting of new data centers:

1. Consider local air permitting requirements, modeling requirements, and challenges in the due diligence process. This process should be conducted on a site-by-site basis, but the following site locations typically indicate a more challenging or time-consuming
   air permitting process for data centers with onsite power generation:
   • Ozone non-attainment areas.
   • Environmental justice areas.
2. Begin the due diligence process early to allow for evaluation of different scenarios in emission calculations and air dispersion modeling, if required (e.g., SCR, multiple site configurations, or alternative stack parameters).
3. Evaluate permit applicability and type of permit required (e.g., permit by rule, minor construction permitting, NA NSR, or PSD).
4. Engage local experts to identify requirements and challenges specific to the Illinois EPA or site location (e.g., attainment status, proposed regulations, inclusion of emergency hours in potential to emit, and/or permit issuance timeline).

For more information, please email Connor Rutledge or call 630.495.1470.