Massachusetts Conditions Large Data Center Permits on Community Agreements

Key Takeaways

What Happened: Massachusetts imposed new requirements on data center projects with peak electricity demand exceeding 25 megawatts by Executive Order 658 on September 8, 2026. State permitting agencies cannot issue permits or authorizations for covered projects unless developers comply with the Healey-Driscoll administration’s June 2026 data center development and operations framework and submit a community benefits agreement (CBA) consistent with the Massachusetts Office of Environmental Justice and Equity (OEJE) March 2026 guidelines for community benefit plans (CBPs) and agreements. The Executive Order is broad: it applies to qualifying new data centers and expansions of existing facilities, not only projects dedicated to artificial intelligence.

Who’s Impacted: Developers, owners, and operators planning large new data centers or expansions in Massachusetts; utilities serving large new loads; municipalities evaluating data center proposals; and businesses that depend on local data center capacity.

What to do next: Developers should make early and meaningful community engagement, environmental justice review, energy procurement, and community benefits part of site selection and project planning. Proposed projects should also model the costs of clean energy, grid upgrades, water and other infrastructure, and community benefits when comparing Massachusetts sites with alternatives in other states.

By When Should They Act: Immediately for projects that require future state permitting. MassDEP must establish an alternative clean-energy compliance payment mechanism by December 31, 2026, and the Commonwealth must issue additional municipal data center guidance by year-end.

Community Support Becomes Part of Permitting

Governor Maura Healey describes the new policy as requiring “local approval” before any Commonwealth agency issues permits to data centers. The Executive Order puts that policy into practice by directing MassDEP, the Energy Facilities Siting Board (EFSB), the Massachusetts Environmental Policy Act Office (MEPA), and other permitting agencies not to issue permits or authorizations unless a covered applicant submits a CBA with key stakeholders and demonstrates conformance with the Administration’s data center framework.

Massachusetts already uses CBPs and CBAs to align energy projects with environmental justice principles and promote equitable distribution of project benefits and burdens. For data centers, applicants must consult with OEJE, submit the agreement for OEJE review, and include OEJE’s feedback with their permit materials. The Executive Order gives OEJE sole authority to determine whether an applicant satisfies the applicable community benefit standards and guidance. It also prohibits permitting agencies from using non-disclosure agreements with a data center project.

These requirements make community engagement an early project development issue, not simply a later permitting step. Developers will need to identify relevant stakeholders, determine what meaningful engagement requires, and evaluate what community benefits may be necessary to move a project forward.

Existing energy projects offer a starting point. Community benefits agreements for large solar projects have included host community payments tied to power production, as well as funding for parks, infrastructure, and other local projects. Data center agreements may look different, but potential benefits could include road, electric, water, or wastewater infrastructure improvements; direct payments; workforce commitments; environmental mitigation; or other location-specific investments.

The harder question is which projects must comply. As drafted, the Order applies to data centers, as defined in 400 CMR 9.00, that are “built or expanded” after September 8, 2026, and exceed specified peak electric demand thresholds. But the Order does not address projects already in the permitting process or facilities under construction, define when a facility is “built,” or provide a grandfathering or transition provision. Although the Executive Order does not appear to invalidate previously issued permits, projects that are not yet complete—and projects still seeking additional permits or approvals—may face uncertainty about whether, and to what extent, the new requirements apply.

Lowell Shows Why Environmental Justice and Community Engagement Matter

The ongoing dispute over Markley Group’s Lowell data center previews the permitting and community-relations risks Massachusetts data center developers may increasingly face. The approximately 352,000-square-foot facility sits in a dense residential area, where neighbors have raised concerns about noise, diesel-generator exhaust, water and energy use, and the facility’s proximity to homes. Lowell has also imposed a temporary moratorium on new or expanded data centers while it considers new zoning standards.

Residents challenged MassDEP’s approval of additional backup diesel generators, arguing, among other issues, that the agency failed to adequately address environmental justice concerns or conduct a cumulative impact analysis. On August 10, 2026, a Massachusetts Superior Court judge temporarily blocked installation of four additional generators while the challenge proceeds.

Those issues are particularly significant because Massachusetts already requires cumulative impact review for certain air permits in and near environmental justice communities. MassDEP’s Cumulative Impact Analysis (CIA) regulations, 310 CMR 7.02(14), apply to certain Comprehensive Plan Approval applications filed on or after July 1, 2024, and require applicants to assess existing environmental, health, and socioeconomic burdens, conduct enhanced public outreach and participation opportunities, and perform additional air-quality analysis. B&D previously analyzed MassDEP’s final CIA regulations and their implications for air permitting.

The takeaway for data center developers is clear: environmental justice, cumulative impacts, backup generation, and public participation can become project-critical issues well before construction begins. Early site and permitting diligence should account for nearby environmental justice populations and cumulative burdens—including air emissions, diesel generation, noise, water demand, wastewater, and traffic—and incorporate those considerations into permitting and project planning from the outset.

Massachusetts Still Needs Data Centers, but Economics are Challenging

Massachusetts’ own framework recognizes that data centers can strengthen the Commonwealth’s biotechnology, finance, defense, and advanced computing, as well as its broader innovation economy. Data centers can also generate significant economic benefits, including increasing local property tax revenue, investment in supporting infrastructure, and construction jobs.

The challenge is capturing those benefits while managing community expectations and environmental impacts. Several states, including Maine, have considered or are considering temporary data center moratoriums for similar concerns.

Massachusetts also started from a challenging energy cost position. In June 2026, the U.S. Energy Information Administration reported an average industrial electricity price of 18.97 cents per kilowatt-hour in Massachusetts—more than double the national industrial average of 9.17 cents. Massachusetts commercial customers paid an average of 24.52 cents per kilowatt-hour, compared with 14.19 cents nationally.

Those economics can be particularly challenging in Greater Boston, where high power and real estate costs intersect with dense development, competing land uses, grid constraints, and heightened sensitivity to local environmental and quality-of-life impacts.

The Executive Order adds a further cost consideration: covered projects must procure sufficient incremental clean electricity generation to match the facility’s annual electricity consumption, or make alternative compliance payments under a mechanism MassDEP must establish by December 31. The Department of Public Utilities must also develop large-load rate structures designed to prevent existing customers from bearing the cost of distribution upgrades needed for data centers.

What Developers Should Do Now

Companies considering Massachusetts data centers should:

• Evaluate community acceptance early. Identify municipal leadership, nearby residents, environmental justice communities, community organizations, and other stakeholders before committing significant capital. Engagement should begin early and be earnest and substantive, giving communities a meaningful opportunity to identify concerns and shape potential benefits before key project decisions are solidified.
• Assess cumulative impacts during site diligence. Determine whether MassDEP’s CIA regulations or other environmental justice requirements may apply and evaluate community conditions before designing the permitting strategy.
• Build community benefits into project planning. Consider infrastructure improvements, direct payments, workforce commitments, environmental mitigation, and other location-specific benefits alongside project design and economics.
• Model the full energy costs. Account for clean-energy generation and procurement (or the alternative compliance payments), grid and interconnection costs, and potential large-load tariffs when comparing Massachusetts with competing jurisdictions.
• Plan for backup generation and other local impacts. Air emissions, diesel generators, noise, water use, and operational or construction items (such as increased traffic) can become significant permitting, community, and legal concerns.
• Track implementation. MassDEP’s alternative-compliance mechanism and additional guidance should provide further detail on project costs and community benefit expectations.

Massachusetts is not closing the door on data centers. The Healey-Driscoll administration is signaling that energy costs, infrastructure, environmental justice, cumulative impacts, and community benefits be core development considerations—not issues left for the end of permitting. For developers, early and meaningful community engagement, paired with environmental diligence, may now be as important to site viability as land, power, and fiber.

Beveridge & Diamond's infrastructure, project development, environmental, and energy lawyers help clients develop, permit, finance, and operate complex infrastructure projects while managing evolving regulatory requirements. Our Boston office regularly advises clients on environmental permitting, energy regulation, land use, and emerging legal issues that affect data center development and AI infrastructure. For more information on these developments, please contact the authors.