California Passes Slate of Data Center Laws

Earlier this week, I wrote about fourteen new AI-related laws in California. These laws introduced new restrictions on AI use and development across multiple areas. However, those aren’t the only AI industry regulations to come out of this legislative session. The California Governor also signed seven new data center laws. These fall into three categories: permitting requirements, mandatory reporting, and public utility use. A recent Holland & Knight memo discusses these in depth and offers the following highlights:

• “A new environmental review requirement ends fast, ‘ministerial’ or exempt approvals for data centers and applies the California Environmental Quality Act (CEQA) to any size data center while offering an optional litigation-streamlining track for projects that meet demanding ‘leadership’ conditions.
• New water conditions and disclosures tie local permits and business licenses to water supply assessments, drought scarcity plans and applicant-funded water infrastructure, while a new energy reporting law feeds the permitting and CEQA record.
• New utility rate rules, together with a rate design study, require data centers to bear their own grid costs through special tariffs, upfront payments and penalties, with direct consequences for project economics, interconnection timing and financing.”

Multiple states are grappling with data center regulation. It’s proving to be a bipartisan issue with strong backing across the political spectrum. Texas and New York have seen state-level action from their governors pausing data center permitting. California’s new laws, on the other hand, are more permanent and attempt to build a long-term framework for data center development. California is often a leader in environmental regulation. With these new laws in place, other states may replicate California’s approach.