California Enacts Data Center Laws Tightening Oversight of Water, Electricity and Land Use

California Governor Gavin Newsom on Sep. 21 signed a package of seven bills that strengthen oversight of data center development by requiring greater transparency on electricity, water, and land-use impacts while preventing developers from shifting infrastructure costs onto ratepayers. The legislation gives local governments more information to evaluate proposed projects as California seeks to accommodate rising demand for digital infrastructure without undermining its clean energy and consumer protection goals.

The package includes legislation requiring data center developers to cover the cost of electric grid upgrades needed to serve their projects instead of passing those expenses to ratepayers, particularly low-income customers. The legislation also requires qualifying facilities to meet California’s clean energy procurement requirements and support the addition of new electricity supplies needed to accommodate growing demand.

New water planning requirements direct developers to provide local governments and water suppliers with detailed information about expected water use, available supplies, efficiency measures, and drought planning before projects move forward. Any infrastructure improvements needed to provide water service must be financed by the developer rather than local communities.

The legislation also tightens environmental review for future developments. Data centers will no longer qualify for broad environmental exemptions and must demonstrate compliance with state standards governing energy use, water consumption, and fuel use before becoming eligible for streamlined judicial review. The changes are intended to strengthen local oversight while requiring developers to address community impacts earlier in the permitting process.

California’s action comes as states are adopting different approaches to managing the rapid expansion of data centers and their growing demands on electricity and water infrastructure. Texas on Sep. 21 directed the Texas Commission on Environmental Quality to pause permitting decisions for new data center projects until reviews of grid and water impacts are completed, while New York earlier this year imposed a one-year moratorium on new hyperscale data centers and advanced measures to require developers to cover infrastructure costs and strengthen community oversight.