Proposed California Legislation Aims to Reshape Land Use Approvals for Data Centers and Renewable Energy and Storage Projects
As interest in artificial intelligence (AI) continues to increase, the California legislature has set its sights on the data center and renewable energy projects powering AI development, introducing a series of bills targeting the rising number of data centers across the state. These bills address topics such as increased electricity rates, environmental impacts, and community involvement. Together, these proposed provisions signal a shift towards greater scrutiny of data center development, and could meaningfully affect project planning, entitlement timelines, and operational compliance. The core question remains whether Governor Gavin Newsom and the state’s legislature will continue to enact laws that disincentivize tech investment in California, and continue to push job creation and tax generation to other states that look more favorably towards progress.
The power and energy-supply landscape is undergoing rapid development, and local governments throughout the state are balancing planning efforts to guide renewable energy technologies. For example, Los Angeles County is studying revisions to its Renewable Energy Ordinance (REO), which could update current planning and zoning requirements for development of utility-scale renewable energy and energy storage projects. The detailed REO Update Technical Study analyzes everything from the county’s renewable energy policy and planning goals to market trends and funding considerations. The study recommends technology-specific siting considerations and regulatory permitting tools for each county department. Separately, the Los Angeles County Board of Supervisors is also set to consider a motion addressing the purported health and environmental impacts of data centers in a few weeks, with a possible county-wide moratorium of such developments on the table.
With California’s notorious “NIMBYs” shifting their focus to a new cause, land-use and environmental concerns are sure to add regulatory hurdles to the data center boom. The interplay between the new state bills makes data center site selection multi-dimensional, requiring careful review of environmental constraints, proximity to overburdened communities, and electrical grid capacity. Below is a summary of key provisions in each draft bill affecting data center and renewable energy and storage projects. As the legislature continues to meet, these bills will inevitably be amended.
Senate Bill 887 (Padilla)
Eliminating CEQA Exemptions for Data Center Projects
If enacted, SB 887 would prohibit the use of categorical exemptions under the California Environmental Quality Act (CEQA) for data center projects. Under current state law, lead agencies may apply categorical exemptions to classes of projects determined not to have a significant environmental effect. SB 887 eliminates this option for data centers, meaning every such project will require, at minimum, an initial study and either a full environmental impact report, negative declaration, or mitigated negative declaration. Importantly, by requiring CEQA review, this bill would introduce a discretionary element to land use review for all data center projects, even if local zoning allows such use by right. SB 887 simultaneously authorizes the Governor to certify qualifying data center projects as “environmental leadership development projects” that are eligible for expedited judicial review in the event of CEQA litigation. However, in order to qualify, a data center project must meet stringent conditions, such as zero-carbon energy storage, using recycled water and water-efficient cooling systems, and entering into community benefits agreements.
Assembly Bill 2170 (Boerner)
Heightened CEQA Review for Industrially-Zoned Projects near Overburdened Communities
AB 2170 has the broadest potential impact on industrial operations beyond data centers. This bill would apply to all industrial facilities—not just data centers—that are located on land zoned for industrial use and within one-half mile of an “overburdened community.” Overburdened communities include disadvantaged communities and those within a census tract among the highest 15% of CalEnviroScreen pollution burden scores, which include many areas withinthe Los Angeles Basin, Inland Empire, Bay Area, and Central Valley. Critically, these projects would be ineligible for any statutory exemption under CEQA or ministerial review. This bill would also impose significant new translation, public noticing and public participation requirements. AB 2170 imposes a new 60-day public notice requirement for properties and schools within one-half mile of the project site. Additionally, specified CEQA documents (including initial studies, cumulative impact analyses, and mitigation monitoring requirements) must be translated into all “threshold languages” in the city or county where the project is located, which is defined as languages spoken by 5% or more of the jurisdiction’s population.
Assembly Bill 1577 (Bauer-Kahan)
New Data Center Reporting Requirements
AB 1577 requires the California Energy Commission (CEC) to establish a monthly reporting process covering a broad range of operational metrics for data centers. Reported data includes the data center’s location, total floor area, electrical capacity, water and energy consumption, power and water usage effectiveness, heat data, onsite generation details, fuel consumed by onsite generators, renewable and carbon-free energy procurement, and noise levels. This data must also be submitted to local agencies at the permitting stage, and may be used for land-use planning, infrastructure planning, energy and water supply assessment, and environmental review.
Assembly Bill 2619 (Papan)
Comprehensive Data Center Water Reporting Requirements
AB 2619 creates an entirely new framework for data center water use reporting and statewide water resource planning. The bill requires data center operators to provide their water supplier with an estimate of expected water use, anticipated water source, and projected water use volumes prior to applying for a business license in any California city or county. Upon license renewal, data center operators must report actual annual water consumption, including total, direct, and indirect water use (with “indirect water use” defined as water consumed to generate the electricity used by the data center—a novel and expansive metric). The bill also treats data centers as a distinct category within the state’s water resource planning framework for the first time by requiring the Department of Water Resources and the CEC to develop guidelines and best practices for efficient water use in data centers, including the use of closed-loop cooling systems, nonpotable water, rainwater capture infrastructure, and scalable water-efficient practices for higher-demand facilities.
Senate Bill 886 (Padilla)
Dedicated Data Center Tariff
SB 886, the California Technology Innovation and Ratepayer Protection Act, requires the California Public Utilities Commission to establish a new rate structure with a dedicated electrical corporation tariff for “participating customers,” defined for interconnection purposes as data centers taking transmission-level electrical service with an estimated peak demand of at least 25 megawatts. This bill would create a comprehensive, purpose-built regulatory framework to ensure that the costs of serving high-demand facilities are not shifted to ordinary ratepayers. The bill also seeks to prevent stranded costs by assessing an early termination fee against any participating customer that departs the electrical system within 15 years of initial interconnection or fails to achieve full load ramp-up.
These bills are currently in the legislative process and amendments are possible as they advance through committee review and floor votes. Mayer Brown will continue to closely track developments as the current legislative session progresses.
