Newsom vetoed a data center water bill last year. Will he sign it this time?

As fights about data centers erupt nationwide, California lawmakers have approved a pair of bills to make data center developers disclose how much water they really use. 

The bills are a new test of whether California will set limits on an industry that’s becoming a flashpoint over water, electricity and the environmental consequences of artificial intelligence. 

Lawmakers on Monday cleared Assembly Bill 2469 by Assemblymember Diane Papan, a Democrat from San Mateo. The bill bars local governments from approving new or expanded data centers unless the developer discloses its water plans and covers the full cost of any new water pipes, treatment or storage for the facility. 

This bill will now join Papan’s Assembly Bill 2619 on Gov. Gavin Newsom’s desk. 

California senators last week, in a decisive 30 to 9 vote, approved the measure requiring data center operators to report their estimated or actual water sources and use — under penalty of perjury — when seeking and renewing a business license or permit. 

It’s almost identical to a bill Papan authored last year, which Newsom vetoed amid pressure from the tech industry. 

Newsom said at the time he was “reluctant to impose rigid reporting requirements … without understanding the full impact on businesses and the consumers of their technology.” 

Papan said she’s often asked whether she thinks her do-over will survive Newsom’s desk, this time. 

“To which I say, the opportunity for leadership has not gone away. If anything, it has been amplified,” Papan told CalMatters. 

Since Newsom’s veto last year, public sentiment has shifted, with bipartisan backlash building against facilities that have become the ganglia of artificial intelligence.

A Public Policy Institute of California survey found that a majority of residents oppose construction of data centers in their areas, and are concerned about the environmental impacts.  

“We currently are seeing a phase of heightened concern because of the rapid evolution of the industry — and the lack of transparency,” said Iris Stewart-Frey, an environmental science professor at Santa Clara University who led a study this year highlighting how rarely data center developers disclose their water use. 

“I think that’s where these bills can really make some progress in getting the sides back to the table and conversation,” Stewart-Frey said, “and also recreate some of this public trust.” 

Lack of oversight, local bans

Opacity around data centers’ environmental impact is fueling fights around the state, from the desert and parched Imperial County to cities and farm towns. 

With little oversight and even less state direction, local governments are saying no to data centers, citing concerns about environmental issues, electricity rates, and often, water. 

Monterey Park, in the San Gabriel Valley, led the way when voters approved a permanent ban in June. The Coachella City Council approved its own ban last week to public applause. Others including the Tulare County Board of Supervisors are pausing as they weigh more permanent moratoriums. 

Nationally, New York State has enacted a yearlong moratorium, and 70% of Americans told a Gallup poll that they oppose the facilities. 

A fight over a data center in the city of Gilroy, in Santa Clara County, recently made national news, which Stewart-Frey attributed to growing public awareness and distrust of the secretive industry.  

“It’s also emblematic of the fact that the data center industry in California has not been releasing actual water use data, right?” said Stewart-Frey. “This lack of transparency is also biting them in the back here.” 

Papan said that’s the point of her bills. 

“I don’t think we should be eliminating anything without sufficient knowledge about what their needs are, and then how can we meet those needs,” Papan said. “Help us help you,” she said, to data center developers, “because if you go into an area that doesn’t have sufficient water supply for you, it’s not going to work.” 

The usual suspects, and new wildcards

The usual coalitions have lined up. Environmental and community groups back the bills, seeking more transparency over how much water these facilities really use. On the other side are the heavy-hitting and big-spending tech industry and business groups. 

Khara Boender, a Western government affairs director for the Data Center Coalition, said the trade association is concerned that these bills single out data centers from other non-agricultural water users. 

Reporting tied to receiving a business license or permit “should apply to other similar commercial and industrial users, as that would provide context and a holistic view of water demands,” Boender told CalMatters. 

A few wildcards have also entered the fight. As of mid-August, the League of California Cities, the California State Association of Counties, and the Rural County Representatives of California opposed Papan’s bill requiring developers to disclose water plans and pay for upgrades.

In a July letter the groups said the measure — which would bar local governments from approving data centers that fail to disclose required information about their water plans — “undermines local governments’ ability to protect and represent their communities through established permitting mechanisms and community engagement processes.” 

Water agencies have mostly stayed quiet, raising only technical issues, with one exception:  Santa Clara Valley Water District, a water wholesaler in a data center hotspot, supported both bills.  

“Despite local efforts to mitigate the impact of data center water demand, more information on water use could help local water agencies, such as Valley Water, plan for actual needs,” Joshua Golka, head of state government relations for Valley Water, said in a letter to Papan Friday. 

Necessary but not sufficient 

Michael Kiparsky, director of the Wheeler Water Institute at the UC Berkeley Center for Law, Energy, & the Environment, called Papan’s bills “necessary, but not sufficient.” 

He expects that even with more data, small communities with limited resources and staff will still struggle to assess the benefits and risks. The version of AB 2619 that senators approved last week cut an earlier provision requiring California agencies to develop guidance for local governments. 

Papan said that guidance would have been nice to have, but that there were state costs associated with developing it. An Assembly analysis estimated that developing water-use and emerging technology guidelines would cost $2 million the first year, and $1 million annually after that. 

“The main goal has been transparency. Let me give you the data, and let’s go from there,” Papan told CalMatters. “I just didn’t want anything to divert from that main goal.” 

Kiparsky called for the state to establish a strike team to help small communities analyze the data that would be produced under the legislation. He also thinks the state should post this information in one place so officials and academics can assess the impacts of data centers and the policies regulating them. 

“To be really clear, data centers are not bad or good … we use them every day for just about everything we do involving technology,” Kiparsky said. 

The real question, he said, is whether a given community — and its specific mix of land, water, and energy resources — is the right spot for one. 

“You can’t answer those questions just with what’s required from this bill — you need to have the understanding that comes from experts looking at it,” Kiparsky said. “The state, in my opinion, can and should provide that.”