Preparing for Data Center Development: What Municipalities and Water Utilities Need to Know
According to the Cleanview Data Center portal, as of September 2026, approximately 2,090 data center projects are planned across the United States, potentially representing 380 gigawatts (GW) of new electric demand and substantial new water demands if fully built out[1]. For perspective, this electric demand is equivalent to more than one-quarter of the approximately 1,400 GW[2] of existing U.S. generation capacity. The scale of this growth has implications beyond the power grid: data centers can place significant demands on local water supplies and infrastructure, both directly through facility operations and indirectly through power generation and other supporting activities. These demands come at a time when the American Society of Civil Engineers (ASCE) gives the nation’s energy and drinking water infrastructure grades of D+ and C-, respectively[3].
For municipalities and water utilities responding to proposed data center developments, understanding the developer’s anticipated water needs and where water fits within the broader site selection and due diligence process can be critical. Water demands and infrastructure requirements may evolve as environmental and permitting constraints such as site contamination, air permitting, wetlands and sensitive habitat, and stormwater and flood risks, are evaluated through the development process. Environmental and permitting constraints can materially affect site selection, development feasibility, and project timing,[4] with resulting changes in project configuration, size and schedule altering the water and infrastructure needs.
Thoughtful resource planning, technical expertise, and coordinated project review will be critical to accommodate continued data center growth while protecting existing infrastructure, resource reliability, and the communities and customers these systems serve.
For municipalities and water utilities evaluating proposed data center development, water supply and infrastructure are important considerations within a broader set of site development, environmental, and community issues. Understanding the implications of a proposed data center development requires looking not simply at how much water data centers use, but at the project as a whole, how it may evolve through the development process, and where, when, and how water fits within that process.
Water demands cannot be determined from facility size or cooling technology alone, and may evolve based on facility cooling, power generation, construction, wastewater discharges, project phasing, environmental and permitting constraints, and cumulative effects on existing customers and watersheds that affect how and when the site is ultimately developed. Managing these demands will be an increasingly important challenge for communities across the country, but data center development can also bring substantial near- and long-term economic benefits.
This article provides municipalities and utilities with a practical framework for understanding data center water demands and environmental considerations, evaluating proposed projects, and proactively engaging with developers.
How much water do data centers use?
When evaluating a new data center development, one of the first questions to ask related to water is the obvious one: how much water will this project use? Unfortunately, it is not possible to apply a single published water-use rate to every data center and get an accurate answer. Water use can vary widely depending on location, scale, cooling technology, power-generation strategy, climate, operating assumptions, and construction approach. We have seen water demand for two projects with similar capacity vary by 12 times or more on an acre-foot-per-megawatt (MW) basis. To understand the water footprint of a specific development, the utility should request a site-specific water balance from the developer for all phases of the project, including construction and power generation, and conduct technical and third-party reviews as part of diligence activities. The water balance should also be considered in the context of other site-development constraints. Changes in cooling systems, onsite power generation, project phasing, site configuration, or environmental permitting can materially change the timing and magnitude of anticipated development and water demands.
How is water being used?
The conversation around data center water use has centered on cooling. Developers are increasingly using water-efficient cooling technologies, such as closed-loop cooling, that can significantly reduce water consumption at the data center itself. However, those technologies may shift some water consumption to the point of power generation. One estimate shows that approximately 85% of water consumption will likely be from power generation with 15% from cooling[5], with other estimates showing that water use for power generation will be ten-times that for cooling[6]. If the facility includes co-located power generation, the total water footprint may still be significant even when the data center uses water efficient closed-loop cooling or other technologies that push water use for cooling towards zero. Alternatively, if water for power generation is provided to a separate entity, the stress may still appear within the same overall water system, just at a different location.
While the primary water uses are for direct cooling and power generation, other uses need to be considered including construction demands, carbon capture technology, workforce and temporary housing demands, and long-term municipal demands increase with permanent job creation.
What are common environmental challenges to be aware of?
During site selection and due diligence, sophisticated developers will evaluate environmental conditions and permitting requirements that can affect whether, where, and how quickly a data center project can be developed. Important considerations may include:
- Site contamination and brownfield conditions, including the potential cost, schedule, and data center design implications of investigation and remediation;
- Air quality and permitting, particularly associated with emergency or backup generation and other onsite energy systems;
- Wetlands, waters, and sensitive biological resources that may constrain the development footprint or the routing of utility infrastructure;
- Stormwater, drainage, floodplain, and flood-risk conditions that may influence site design and infrastructure requirements;
- Hazardous materials and waste-management requirements associated with construction and operation; and
- Environmental review and permitting schedules, particularly where they may affect the timing or certainty of project development.
Municipalities and water utilities are generally not responsible for evaluating all of these issues. However, they should understand whether significant development constraints have been identified and how those constraints could affect the project schedule, configuration, water demand, or proposed water and wastewater infrastructure. Early identification of these issues and improved planning assumptions can help utilities make infrastructure commitments with a clearer understanding of how the project may evolve and what constraints remain that may lead to delays or changed conditions.
What are the potential impacts and risks to the community?
The potential water and environmental impacts to a community will depend on the specific project and the technologies the developer deploys. Data center development requires the same level of water resource and environmental engineering rigor as any other large-scale industrial development. To accurately understand water and environmental impacts, utilities should evaluate each project independently and consider the broader water and environmental stresses caused by the development. Utilities should request and review appropriate developer studies, including a site-specific water balance, water supply and yield report, wastewater characterization and capacity analysis, stormwater and drainage studies, and applicable environmental diligence reports, including Phase I and Phase II environmental site assessments, wetlands and waters delineation, biological and endangered species studies, air quality and permitting analyses, and other site-specific environmental and permitting studies that cover the portions of the facility’s supply chain that intersect with the community.
What process should municipalities and utilities use to evaluate proposed developments?
Municipalities and utilities should establish a repeatable due diligence process for evaluating data center service requests, supported by policies and procedures that require data center developers to provide the engineering and scientific information necessary for that review. The level of review should be proportional to the size and complexity of the proposed project, but should be sufficiently comprehensive to characterize the full range of project-related water demands, discharges, infrastructure needs, and environmental constraints, and should provide decision-makers with the information needed to evaluate potential impacts and necessary mitigation. At a minimum, the due diligence process should address the following:
- Understand the proposed development. Request information regarding project phasing, ultimate buildout, cooling technology, anticipated operating profile, onsite power generation, construction schedule, and projected water and wastewater demands.
- Require site-specific water analyses. Generic industry water-use factors should not substitute for a project-specific water balance. Developers should provide sufficient information to evaluate peak and average demands, seasonal variability, construction water, water quality requirements, wastewater characteristics, and changes in demand through project buildout.
- Evaluate system impacts and supply reliability. Consider source capacity, water rights, drought and shortage conditions, conveyance and treatment capacity, infrastructure improvements, recycled or alternative water supplies, wastewater capacity, and potential effects on existing customers.
- Understand relevant environmental constraints. Request or review environmental diligence and permitting information sufficient to identify conditions that could materially affect the project footprint, utility infrastructure, schedule, or water demand. Depending on the site, this could include contamination and remediation, air permitting, wetlands and biological resources, stormwater and flooding, hazardous materials, and other significant environmental constraints.
- Identify uncertainties before making long-term planning assumptions. Distinguish between confirmed project requirements and preliminary developer estimates, particularly for phased projects whose ultimate buildout may occur over many years.
- Establish an efficient review process. Data center developers often operate on aggressive site-selection and development schedules to meet the rapidly increasing demand for compute associated with artificial intelligence. If municipalities and utilities want to attract developments while requiring appropriate water resource and environmental studies, they should have the technical resources and internal processes necessary to review and comment on developer submittals promptly. An efficient review process can support the speed and scale of data center development, while ensuring that potential impacts to communities, water users, and watersheds are appropriately evaluated.
New California Data Center Water Planning Requirements
Recently, California Assembly Bill (AB) 2469 and AB 2619 established new water supply planning and disclosure requirements for data centers[7] and create a more formal coordination role between data center developers, local land use agencies, and water suppliers, including:
- AB 2469 prohibits cities and counties from approving construction of new data centers – or expansions that increase peak water demand – unless the applicant provides a Water Supply Assessment (WSA)[8], projected water use and efficiency measures, and beginning January 1, 2028, a drought-responsive water scarcity plan.
- AB 2619 complements these project-level requirements by requiring data center owners and operators, before seeking a local business license or permit, to provide their water supplier with estimates of the facility’s anticipated water source and maximum day, maximum month, and average year demand, and to subsequently report actual annual water use. This expressly covers data centers of all sizes.
- For designated Urban Water Suppliers[9], AB 2619 also expressly requires data center demand to be considered as part of “unconstrained demand” in their Water Shortage Contingency Plans (WSCPs) and Annual Water Supply and Demand Assessments (AWSDAs).
Collectively, these laws give water suppliers a more defined role in evaluating and planning for data center development by requiring earlier and more detailed information on anticipated water demands, drought-period needs, and associated infrastructure requirements. For suppliers, this should improve the ability to assess system capacity and long-term supply reliability, while also increasing the need to understand available capacity, potential supply constraints, and how proposed data center demands can be incorporated into existing water supply and infrastructure planning.
Where can I learn more about data centers?
At EKI, we’ve worked with municipalities, utilities, and data center developers. Our experience includes supporting hyperscale data center site selection and due diligence, giving us perspective from both sides of the development process. We understand the water and environmental information developers evaluate when considering a site, the information municipalities and utilities should request when considering service, and the issues that can affect project feasibility, schedule, infrastructure requirements, and community impacts. We would be happy to talk with your team and answer any questions you may have.
Additionally, data center development is a focus of many professional associations in the water and environmental space. Now is the time to be actively engaged in professional associations and be aware of the fantastic resources that are and will be available. EKI is monitoring research on the topic, is engaged in these associations, and can help guide you in the right direction to find reliable information that is needed to make critical decisions around data center development.
[1] https://cleanview.co/data-centers
[2] https://www.publicpower.org/system/files/documents/Americas-Electricity-Generation-Capacity_2026-Update.pdf
[3] https://infrastructurereportcard.org/cat-item/drinking-water-infrastructure
[4] https://www.cbre.com/insights/articles/key-factors-to-consider-for-effective-data-centre-site-selection
[5] Li, P., Yang, J., Islam, M. A., & Ren, S. (2025). Making AI less “thirsty.” Communications of the ACM, 68(7), 54–61. https://doi.org/10.1145/3724499
[6] https://itif.org/publications/2026/07/06/the-data-center-water-problem-is-soluble/
[7] For more information, see: gov.ca.gov/2026/09/21/governor-newsom-signs-most-comprehensive-data-center-laws-in-the-nation-providing-communities-more-control-on-water-electricity-and-land-use/
[8] Applies to data center projects over a specified acreage/floor area/employment threshold or projects whose water demands are equivalent to at least a 500-unit residential development.
[9] Per California Water Code, §10610-10656 and §10608, defined as urban water suppliers that either provide over 3,000 acre-feet of water annually, or serves more than 3,000 urban connections.