Data center development is accelerating across California, bringing increased attention to the water supplies and infrastructure needed to serve these projects. That attention has prompted both developers and public agencies to address issues such as long-term reliability, infrastructure costs, drought planning, and the disclosure of project information. Pending legislation would add new requirements in several of these areas, but both public agencies and developers should already be working through these issues early in the development process.
Planning for Water Supply and Reliability
For a data center with significant water demand, one of the first questions is whether the proposed supply is sufficient over the life of the project and during periods of water shortage.
California already requires this type of analysis for many large development projects. Under the Water Supply Assessment (“WSA”) process, certain projects subject to the California Environmental Quality Act must evaluate whether projected water supplies will be sufficient to meet the project’s demand, together with existing and planned uses, over a 20-year period that includes normal, single-dry, and multiple-dry years. The assessment can also require examination of the water rights, contracts, infrastructure, and regulatory approvals underlying the proposed supply, as well as additional analysis when groundwater is part of that supply. Water Code §§ 10910–10912.
Many large data centers may already trigger the WSA requirements because of their acreage, floor area, or anticipated demand. AB 2469 would apply the requirement to all data centers by prohibiting a city or county from approving a new data center—or an expansion that increases maximum peak water use—unless the applicant prepares a WSA, projects its water use, proposes efficiency measures, and, beginning in 2028, submits a “water scarcity plan” identifying measures to address drought conditions.
These requirements reflect practical questions that both developers and water agencies need to answer regardless of whether AB 2469 becomes law. Developers need to know what supply will support the facility, how dependable that supply will be in dry years, and whether future expansions can be served—and at what cost. Water suppliers and permitting agencies, in turn, need reliable estimates of average and peak demand and a clear picture of how a substantial new load fits within existing commitments and long-term planning.
Allocating Infrastructure Costs and Service Risk
Identifying a sufficient water supply is only part of the equation. A large data center may also require new or expanded conveyance, pumping, treatment, storage, or distribution facilities, and the cost of those improvements can be substantial.
AB 2469 addresses this issue directly by requiring new data centers to assume the full cost of any water conveyance, treatment or storage, or distribution infrastructure improvements necessary to serve the project. Importantly, the bill provides that the applicable water supplier determines which improvements are necessary.
But AB 2469’s mandatory allocation of costs to developers would not eliminate the need for negotiation and careful planning. New infrastructure may benefit both the project and existing or future customers. Development may occur in phases. Forecasted demand may change as facility design or cooling technology evolves. And a water supplier may reasonably want financial assurances before making major capital commitments for a project that could be delayed, modified, or never be built at all.
Service reliability planning can be similarly complex. Water agencies need flexibility to manage their systems during drought and other shortages, while data center operators may prioritize reliable and predictable service. Working through those competing needs can require close attention to capacity commitments, shortage and curtailment provisions, alternative supplies, and the circumstances under which service may be reduced.
Neither side can eliminate every risk, but they can identify and allocate those risks before major investments are made. To do so effectively, agencies and developers need to consider the infrastructure and service relationship as early in the development process as possible.
Getting the Information Right—and Addressing Disclosure
Good water supply and infrastructure decisions depend on good information. But for a developing data center project, that information may change as the developer refines its engineering, cooling systems, project phasing, and operating assumptions. At the same time, the amount of information available about data center water use—and the use of nondisclosure agreements to protect project information—has attracted increasing public attention.
AB 2619 would impose new water-related disclosure requirements on data center operators. Before applying for an initial business license or equivalent permit, an operator would be required to provide its water supplier, under penalty of perjury, with a good-faith estimate of expected water use, the anticipated source of water, and projected demand for the maximum day, maximum month, and average year. The operator would report the same information to the city or county when applying for the license or permit. Renewal applications would then require reporting of actual annual water use from the preceding calendar year. The bill would also amend existing water-shortage planning requirements by specifying that an urban water supplier’s annual assessment of “unconstrained demand” must include the unconstrained demand of data centers, irrigation, and other large water users.
These proposed requirements emphasize that both developers and agencies need a workable process for developing water-demand information as a project moves forward. Their needs will not always be identical. A water agency planning new infrastructure may need firm commitments at a point when the developer still needs flexibility to refine the project.
Information sharing can also raise confidentiality concerns. Developers may regard information about facility design, operating assumptions, or infrastructure needs as sensitive from both commercial and security perspectives. Cities, counties, and many water suppliers, however, are public agencies subject to both transparency laws such as the California Public Records Act and the Brown Act as well as increasingly challenging transparency expectations from their constituents. Identifying potentially sensitive information early—and understanding the legal rules that govern information submitted to public agencies—can help avoid both legal and political disputes later in the process.
Addressing Water Issues Early
Many data center projects will present significant water supply issues, and those issues will vary by location, project design, and the capabilities of the local water system. Developers, water suppliers, and permitting agencies will all benefit from a common understanding of water demand, supply reliability, infrastructure, and information before making significant investments in permitting and infrastructure.
The pending legislation reflects the increasing attention being paid to these issues. It also reinforces a point that is already true under existing law: for water-intensive projects, careful planning at the front end can provide substantially more certainty for both the project proponent and the public agencies responsible for serving and approving the development.
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