Newsom clamps down on California data centers as voters turn against the industry

Facing growing public backlash and a pivot from his own past vetoes, Gov. Gavin Newsom signed a sweeping package of seven bills on Monday that aim to force the data center industry to pay its own way in California.

Three of the new laws shift electric infrastructure costs away from residential customers and toward data center operators, three more mandate disclosures of water usage and other resources, and the last one makes data centers ineligible for environmental review exemptions.

Newsom, in a written statement, contrasted the new regulations with President Donald Trump’s hands-off approach to data centers and artificial intelligence.

“We know that we don’t have to sell out Californians or sacrifice our well-being to innovate and succeed,” the statement read. “California has proven that time and time again. With these laws, we are ensuring that Californians remain in the driver’s seat — and that those profiting from data centers aren’t doing so at our expense.”

Trump has aggressively pushed to accelerate data center development nationwide, arguing that they represent a significant economic opportunity for states that embrace them. He said last week at the All-In Summit, an invite-only conference for business leaders, that the industry is the “oil of the next 20, 25 years.”

Newsom’s signature on the new laws represents a significant departure from his actions on data centers last year, when he vetoed a water disclosure bill over concerns that regulation could stifle AI growth and signed into law only a single stripped-down environmental study bill.

Environmental advocates and the lawmakers behind this year’s bills previously told CalMatters that intensifying public backlash to data center construction propelled the legislation this year, despite a flood of lobbying funds from Big Tech and other business interests that aimed to soften the proposals.

“When you’re looking down the barrel of public outcry that says we don’t want [data centers] at all, and you’ve got localities that are saying they’re going to ban them, then you know the atmosphere has changed,” Assemblymember Diane Papan, a San Mateo Democrat who authored two of the bills which were signed into law on Monday, previously told CalMatters.

Other state legislatures as well as Congress are also advancing new measures to regulate the industry. In May, a Gallup poll found seven in 10 Americans oppose data center construction in their communities, while a July Public Policy Institute of California poll found similar opposition statewide. Hundreds of cities nationwide — including Monterey Park and Bay Area cities like Pittsburg — have either passed data center bans or walked back approvals following public outcry.

Arnab Pal, the executive director of Deploy Action, a nonprofit that promotes clean energy, told CalMatters the new laws are a good step toward preventing data centers from harming consumers through utility rate increases or environmental damage. Still, Pal said, more can be done to ensure such projects actually benefit everyday people through advancements to the electrical grid and the acceleration of clean energy infrastructure.

“I don't think these bills are the end of this fight; I think we're gonna have to do a lot of implementation on the back end and, as other states roll out their policies next year, I think California is going to look back and be like, ‘maybe we should have done more,’” Pal said. “I'm interested to see what we do next year on this.”

Business interests that oppose the measures, like the Data Center Coalition — which counts companies like Google, Microsoft and OpenAI among its members — warn that further regulation could push the data center industry out of California. According to the latest figures from the Data Center Coalition, the industry contributed 665,500 jobs, more than $159 billion in economic activity, and $14.1 billion in federal, state, and local taxes in California in 2024.

Khara Boender, the director of government affairs west for the Data Center Coalition, told CalMatters that “the data center industry shares the goal of ensuring growth of this critical infrastructure is responsible and well managed,” but more work needs to be done “to promote responsible data center growth while maintaining California as a key, competitive market in the global economy.”

Newsom signed the following bills:

• Senate Bill 1168, SB 886 and Assembly Bill 2383, which shift electric infrastructure costs away from residential customers and toward data center operators
• AB 2469, AB 1577 and AB 2619, which mandate disclosures or estimates of water usage and other resources
• SB 887, which makes data centers ineligible for blanket environmental review exemptions, and offers fast-tracked approval for facilities that meet state standards for water and energy conservation

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.