On September 21, 2026, California Governor Gavin Newsom signed a package of seven data center-focused bills into law that introduce new energy and water use reporting requirements, modify environmental review requirements, and direct regulators to address electricity infrastructure, interconnection, and cost allocation for certain data centers. The California legislation comes at a time of increasing state attention to the environmental effects associated with data center growth, reflected in other recent legislative and executive actions in Texas, New York, and Virginia. Together, these recent actions highlight the importance of planning ahead for disclosure obligations, infrastructure cost responsibilities, and related sustainability considerations.
California Adopts New Reporting, Cost Allocation, and Environmental Review Requirements
California’s seven-bill package reflects a broad state effort to better understand and address the potential energy, water, and other environmental effects associated with increasing data center demand. While each measure addresses a different aspect of data center development and operation, the legislation generally falls into three categories: (1) increased disclosure and reporting of energy and water use; (2) measures intended to require data centers bear an appropriate share of the costs associated with electricity infrastructure needed to support their operations; and (3) changes to environmental review and project development requirements.
Three of the bills (AB 2469, AB 1577, AB 2619) focus primarily on disclosure and transparency. Collectively, these measures require certain data center owners, operators, and developers to provide state and local regulators with additional information regarding energy consumption, water use, cooling systems, onsite generation, projected water demand, workforce impacts, and other operational characteristics. AB 2469 prohibits local governments from approving certain permits or entitlements for the construction or expansion of a data center unless the applicant first submits a water supply assessment, information on water use and efficiency measures, and estimated workforce needs associated with the project. AB 1577 and AB 2619 require data centers owners or operators to report on expected annual energy consumption, onsite electricity generation, and projected and actual water use and water source to regulators, local agencies, and water suppliers in connection with permitting, licensing, and ongoing reporting requirements.
Three additional bills (SB 886, AB 2383, SB 1168) address electric infrastructure, interconnection, and cost allocation, aiming to limit potential cost shifts to other electricity customers. These measures direct California regulators and electricity providers to develop or evaluate tariffs, rate structures, and interconnection requirements to ensure that data centers bear an appropriate share of the costs of serving large new loads, including transmission, distribution, generation, and reliability-related investments. Specifically, SB 886 requires the California Public Utilities Commission to establish new interconnection tariffs that assign responsibility for transmission upgrade costs and include protections against stranded costs. AB 2383 requires utilities, community choice aggregators and other electricity providers to develop tariffs under which data centers bear incremental generation costs attributable to their loads, with the ability for data centers to reduce generation funding requirements by installing zero-emissions resources behind the meter. SB 1168 separately directs the Commission to evaluate rate structures that would ensure data centers pay their reasonable share of transmission, distribution, and other infrastructure costs.
The seventh bill (SB 887) focuses on environmental review and project development. It generally limits certain California Environmental Quality Act (CEQA) exemptions for data center projects while creating a pathway for qualifying projects that meet specified zero-carbon energy, water, and community benefit requirements to seek certification as “environmental leadership development projects” that are eligible for streamlined review.
Texas Pauses Data Center Permitting
On the same day, Texas Governor Greg Abbott directed the Texas Commission on Environmental Quality (TCEQ) to “pause the issuance of all permits related to data center projects” until data centers’ effects on the Texas electric grid and water resources are evaluated. The letter explains that the Public Utility Commission of Texas and the Electric Reliability Council of Texas (“ERCOT”) are reviewing data centers undergoing ERCOT’s interconnection process, while the Texas Water Development Board is examining water use and compliance with existing water reporting requirements.
The Governor stated that the goal is to “put Texans first” and emphasized that data center projects should bear their own electrical infrastructure costs, report electricity and water use, and avoid using water needed by local communities. TCEQ must provide an update regarding compliance with the directive by October 19, 2026.
New York Places Certain Large Data Center Projects on Hold
Two months earlier, New York placed certain large data center projects on hold pending a statewide review of their potential effects. In a July 2026 executive order, Governor Kathy Hochul directed the Department of Environmental Conservation to place certain incomplete state permitting applications for covered data centers in abeyance, citing the rapid growth in proposed facilities, including nearly 12 gigawatts of data center load requests pending in the interconnection queue.
The order directs the preparation of a Generic Environmental Impact Statement (GEIS) examining potential impacts including energy demand, water use and quality, air quality, noise, and effects on disadvantaged communities. The abeyance applies to certain state permitting applications involving facilities that can consume 50 megawatts of electricity or more and remains in effect until the Department of Public Service submits the final GEIS and associated findings statement.
Beyond the GEIS process, the order also directs the development of a Community Investment Framework to help local governments negotiate benefits from data center projects and consideration of new mechanisms, including a potential “New York Grid Acceleration Fund,” through which data centers could contribute to grid infrastructure and other costs associated with serving large new loads.
Virginia Developments and Accountability Framework
While Texas and New York have temporarily paused certain permitting activity, Virginia has focused on developing a broader framework intended to guide future development. On September 18, Governor Abigail D. Spanberger issued Executive Order 22 implementing a new “Data Center Accountability Framework” that directs state agencies to develop initiatives addressing issues such as community engagement, water use, noise, energy infrastructure costs, and workforce impacts. More broadly, the accompanying framework contemplates additional legislative action in 2027 to further advance goals related to transparency, environmental protection, affordability, and grid reliability.
Those efforts build on an active year of legislative and regulatory action in Virginia, including a statewide tax on data center electricity consumption, an order requiring data centers to pay for transmission infrastructure built exclusively for their facilities, stricter environmental requirements for backup generators, and legislation requiring site assessments of certain large data center projects before local approval. The Governor also directed the Virginia Department of Environmental Quality to set and enforce a statewide noise standard for data centers and establish “Cooling Water Scarcity Areas” to address the potential risk of water shortages from evaporative cooling in data centers and other industrial uses.
Planning Amidst Evolving State Frameworks
While their approaches differ, California, Texas, New York, and Virginia are all responding to the rapid growth of data centers by seeking to measure—and in some cases directly regulate—the demands they may place on energy systems, water resources, public infrastructure, and local communities. For data center developers and operators, these actions highlight the growing importance of planning for disclosure obligations, cost responsibilities, environmental review requirements, and project siting and sustainability considerations—some of which may be a prerequisite to permitting approval. As states consider new measures and implement emerging requirements, stakeholders face a more varied and evolving state regulatory landscape governing data center development and operation. Timely regulatory tracking and thoughtful planning around energy use, water, sustainability, and community engagement are becoming important elements of a holistic strategy in this growing sector.
Gabriela Nalvio Melillo, Associate, contributed to this blog post.
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