California Links Data Center Permitting and Licensing to New Water Use Disclosure and Drought Planning Obligations

Governor Newsom signed Assembly Bills (AB) 2469 and 2619 into law on September 21, 2026, as part of a seven-bill package his office described as “the most comprehensive data center laws in the nation.” Both bills are successors to legislation the Governor vetoed last year (AB 93) and impose new water use disclosure and planning obligations on data center developers and operators. AB 2469 and 2619 are intended to close gaps in California’s regulations and policies to specifically address data center water supply impacts by creating concrete compliance steps that did not previously exist. AB 2469 and 2619 will take effect on January 1, 2027. This alert summarizes what each bill requires and identifies the practical implications for data center development in this state.

AB 2469: Water Use Disclosures Before Project Entitlement Approval

AB 2469 adds a new section to the Government Code (Section 65964.7) that prohibits a city, county, or city and county from approving any discretionary or ministerial permit for the construction of a new data center, or an expansion that increases maximum peak water use, unless the applicant satisfies a series of disclosure and planning requirements. The inclusion of data center expansions could capture retrofits or cooling equipment upgrades that increase peak water demand even if the building’s footprint stays the same. AB 2469 explicitly states that compliance with all these requirements does not, by itself, entitle an applicant to permit approval. A project could meet every new requirement in Government Code section 65964.7 and still be denied a permit on other grounds.

First among the new requirements, applicants will be required to provide a water supply assessment (WSA) completed in accordance with existing provisions in Water Code section 10910 et seq. A WSA is typically not required unless the project is subject to the California Environmental Quality Act (CEQA) and exceeds certain threshold criteria, such as projects that contemplate more than 500 dwelling units. Government Code section 65964.7 now imposes the requirement to prepare a WSA on all new data centers and qualifying expansions, regardless of whether the project is otherwise subject to CEQA review. Through these reports, applicants will be required to demonstrate that there is sufficient water available to meet the data center’s projected water demand in addition to all existing and planned future water uses in the community. The WSA will also need to identify the water rights or entitlements that will be relied upon to meet all water demands. If existing water supplies prove to be insufficient to support the project, the applicant may be required to identify and secure alternative water supplies sufficient to meet the project’s demand.

Second, applicants will be required to disclose the projected water use volumes and water efficiency measures that the data center project will employ. They will also be required to assume the full cost of any water conveyance, treatment, storage, or distribution infrastructure improvements necessary to serve the project, as determined by the applicable water supplier.

Lastly, starting January 1, 2028, applicants seeking to construct or expand a data center will be required to additionally submit a “water scarcity plan.” These reports must detail the measures that applicants will implement during “an abnormally dry year, a moderate year, a severe drought year, an extreme drought year, and an exceptional drought year,” as defined by the United States Drought Monitor. These measures may include withdrawal reductions, curtailment of nonessential uses, water recycling and reuse, and thermal load reductions.

AB 2619: Ongoing Water Use Reporting Through Business Licensing

AB 2619 adds sections 16000.4 and 16100.4 to the Business and Professions Code, creating a statewide water reporting obligation that operates through the existing business license application and renewal process. These rules will go into effect on January 1, 2027.

Before applying to a city or county for an initial business license, equivalent instrument, or permit, a data center owner or operator must provide its local water supplier with a good-faith estimate of the expected water use, anticipated source of water, and projected water use volumes for the maximum day, maximum month, and average year. The same information must also appear on the license application itself. Additionally, when renewing a business license, equivalent instrument, or permit, the owner or operator must report actual total water use for the preceding calendar year, including the cooling system type and whether the water is potable, non-potable, or recycled. All of this information is provided under penalty of perjury. Companies would be well advised to establish internal tracking and verification systems before January 1, 2027.

The bill classifies data centers into three tiers: Type I (“hyperscale,” more than 10,000 servers or more than 25 megawatts), Type II (2 to 25 megawatts), and Type III (less than 2 megawatts). The current reporting obligations apply uniformly across all three tiers. Neither the bill nor its legislative reports explain why the tiers were created. For now, the tiers may help regulators understand how data center water demand varies with size and power use, and they could support tiered reporting requirements in the future.

Finally, the bill integrates data center water demand into water shortage planning. Urban water suppliers must incorporate data center water demand, as well as that of irrigators and “other large [water] users,” into their annual water shortage assessments and contingency plans, including as a component of current-year unconstrained demand. This means that data centers will, for the first time, appear as an identified demand category in local water supply planning reports that local agencies use to evaluate system reliability.

Practical Implications for Data Center Development

Because AB 2469’s disclosure requirements must be satisfied before a local agency can approve development permits, projects already in the entitlement pipeline should assess whether existing application materials meet the new conditions or whether supplemental filings are needed. The WSA requirement applies immediately upon the January 1, 2027, effective date, while the water scarcity plan requirement does not take effect until January 1, 2028, giving developers a window to prepare for that additional obligation.

Site selection decisions will also carry new water supply considerations that may extend beyond the traditional due diligence checklist. The broad requirement to prepare a WSA for all new data center construction means developers must evaluate whether sufficient water supplies exist to serve the project alongside all existing and planned future uses in the community. In water-stressed areas, that demonstration may be difficult to make. The infrastructure cost-shifting provisions for the expansion of water infrastructure improvements should also be factored into project proformas and site-selection analyses early in the process.

AB 2619’s licensing requirement, under penalty of perjury, means operators must maintain accurate water use records and be prepared to report cooling system type and water source at each license renewal. Companies operating multiple California facilities should develop standardized internal tracking systems before the January 1, 2027, effective date.

AB 2469’s disclosure requirements may be easier to satisfy for projects that reduce their potable water demand. For instance, projects designed to rely on non-potable or recycled sources may face less scrutiny after completing AB 2469’s disclosure requirements.

Early coordination with water suppliers, cities, counties, and other local stakeholders before the formal entitlement process begins allows all parties to identify water supply concerns and evaluate whether they can be adequately addressed. AB 2469’s disclosure requirements give local residents and water agencies new tools to evaluate proposed projects, and the information reported under AB 2619 will become part of the public record through the business licensing process. Developers who engage early on water supply, efficiency, and infrastructure cost questions will be better positioned to anticipate and address the issues that these disclosures will reveal.

Broader Legislative Context

AB 2469 and AB 2619 are two pieces of a larger package. The same day, Governor Newsom signed SB 886 (dedicated electricity tariffs for data centers), SB 887 (removing CEQA categorical exemptions for data centers), AB 1577 (monthly energy reporting to the California Energy Commission), AB 2383 (transmission and distribution cost allocation), and SB 1168 (rate structures for data center electricity). Together, these laws establish a comprehensive regulatory framework covering water, electricity, environmental review, and ratepayer protection for data center development in California.

The Allen Matkins Water, Environmental, Land Use, and Real Estate teams are monitoring implementation of these new laws and their implications for developers and water users. For questions about how these requirements apply to a specific project, please contact the authors.