# Big Tech’s data center boom is igniting a political revolt in the Bay Area

> Source: <https://www.mercurynews.com/2026/09/02/bay-area-data-center-boom-backlash-regulation/>
> Published: 2026-09-02 11:00:52+00:00

**Getting your**

[Trinity Audio](//trinityaudio.ai)player ready...The 438,500-square-foot Amazon data center was already under construction, [rising up against Gilroy’s bucolic farmland when the outrage began.](https://www.mercurynews.com/2026/06/04/amazon-data-center-south-bay-gilroy/)

City staff had approved the project the previous summer under a decades-old development rule that did not require a hearing before the City Council. Amazon had purchased the land in 2020 and undergone a yearslong environmental review, and the city had posted information about the project online. Still, many residents said they only found out about it earlier this year, as work began on the first of two massive warehouses — each nearly the size of four football fields.

**REATED: Three-story data center proposed for San Jose industrial site**

The resulting uproar mirrors a debate spreading across the Bay Area as cities scramble to respond to an industry expanding faster than many of their rules can keep up. At least six Bay Area cities have imposed moratoria, promised public hearings or begun rewriting their development codes amid concerns about electricity and water use, noise, transparency and what communities receive in return.

The California Legislature, meanwhile, sent Gov. Gavin Newsom seven data center-related bills aimed at balancing new regulations with the broader economic benefits — from construction jobs to local tax revenue — that supporters say the industry brings to the state. The measures include proposals intended to protect ratepayers, require environmental review and make companies disclose their water and energy use.

Data centers have long been essential to the internet’s core functions, with cloud services, streaming, web hosting and other day-to-day uses accounting for the majority of their capacity. But the artificial intelligence boom has created a new surge in demand, with the debate unfolding as part of a broader conversation about AI’s impact on the economy and society and reshaping the political environment ahead of the 2026 midterms.

“There’s a gold rush going on, and officials are trying to learn how to regulate without killing economic opportunity,” said Travis Ritchie, who researches electric utility rates and regulation at UC Berkeley’s Center of Law, Energy and the Environment. “I think the best answer is for local communities and officials to stay involved and stay informed. These projects have the potential to provide benefits, but it will require careful oversight and regulation.”

#### Backlash in the Bay

In Gilroy, the intense backlash prompted the city to approve new public-notice and review requirements for large developments. Future commercial and industrial projects of at least 15,000 square feet must hold a community meeting, notify residents and property owners within 1,000 feet, and publish a newspaper notice. Projects requiring an environmental impact report must also go before the Planning Commission rather than being approved administratively.

“We need to be ahead of the developments that are coming into our town,” Councilmember Dion Bracco said at a meeting last month. “We need to be going through and changing the rules now, not wait until it’s too late.”

Many Gilroyans, though, are still pushing the city to halt data center development altogether. Residents recently packed the council chambers with green signs that read “No Data Centers in Gilroy” as they continued to make their appeal to the council.

Whether cities should enact full-blown moratoria, find other ways to regulate data centers or obtain community benefits from their tech owners has been at the center of the debate.

Earlier this year, the [Southern California city of Monterey Park became the first city in the United States to permanently ban data centers](https://www.mercurynews.com/2026/06/02/2026-election-results-with-overwhelming-support-monterey-park-on-cusp-of-states-first-data-center-ban/) through a ballot measure that passed with 88% of the vote.

In April, [Oakley became the first city in the Bay Area to institute a temporary moratorium](https://www.mercurynews.com/2026/04/15/oakley-oks-temporary-ban-on-data-centers-a-first-for-the-bay-area/) as city officials update zoning codes that do not define or regulate data centers. [Pittsburg officials pledged in August that future data center applications would receive public hearings](https://www.mercurynews.com/2026/08/04/pittsburg-pledges-greater-public-scrutiny-of-data-centers-after-backlash/) before the Planning Commission and City Council rather than being approved by a zoning administrator. [Hayward this month will take up the issue as it considers adopting a moratorium](https://www.mercurynews.com/2026/07/21/hayward-approved-a-massive-data-center-then-it-rewrote-the-rules/) in response to public outcry over a 310,000-square-foot “hyperscale” data center approved last year.

**RELATED: Billionaire-backed data center proposals cause rift in Oakland**

San Jose, which has roughly 20 data centers with six more under construction and five in the approval process, [is also rewriting its rules](https://www.mercurynews.com/2026/08/03/san-jose-data-center-regulations-august-2026/). Mayor Matt Mahan and several council colleagues are calling for new standards and potential investments by developers that could fund affordable housing, park improvements or energy upgrades. The city estimates that a fully operational data center can generate between $3.4 million and $6.8 million annually in utility and property taxes.

“We’re expanding our goal from mitigating impacts of data centers to holding corporations accountable for making a positive impact in the lives of our residents,” Mahan said in a recent news release. “We can’t just bury our heads in the sand, say ‘no’ and push the jobs and industries of the future to states with fewer environmental safeguards.”

Santa Clara, [which has become a data center hot spot because its city-owned grid offers lower energy rates](https://www.mercurynews.com/2025/01/12/why-are-there-so-many-data-centers-in-santa-clara/), has reaped substantial financial benefits, according to city officials. Its more than 50 data centers contributed about $41 million to the general fund in the 2024-25 fiscal year — roughly 13% of the fund. Even so, the City Council agreed in August to study a potential policy limiting the type and amount of water future data centers could use.

Khara Boender of the Data Center Coalition — an industry group that represents tech companies including Google, Meta, Amazon and Microsoft — said data centers face many “misconceptions.” While much of the conversation has focused on AI, she said data centers largely support cloud services that most people use every day.

A December 2025 report from Goldman Sachs Research estimated that cloud and traditional workloads, including email, accounted for roughly 85% of data center demand, with AI taking up 15%. By 2027, the company projects AI’s share will double to 30%.

The moratoria that many cities are rushing to enact send a “worrisome signal to an industry that really does rely on having certainty,” Boender said, potentially driving away tax revenue depending on how a moratorium is structured.

“That’s really putting those areas at a disadvantage and not being able to capitalize on this certain type of opportunity,” she said.

Industry groups such as the Data Center Coalition say data centers can be a boon for jobs and wages in the communities where they are built. A report commissioned by the coalition estimated that California’s data center industry supported 665,500 direct, indirect and induced jobs in 2024, including 145,820 direct jobs. An August report from the Brookings Institution, using a different method to examine what happened after counties received their first large data center, found a typical county gained roughly 100 to 200 jobs while wages remained largely unchanged.

#### Political pushback

The growing uproar over data centers sweeping the country mirrors the fights that have taken place in recent years over new housing construction, said Megan Mullin, a professor of public policy and faculty director of the UCLA Luskin Center for Innovation.

“These battles are overwhelmingly rooted in local conditions,” she said. “People like their communities the way they look now.”

What’s different, Mullin added, is the sheer number of data center projects “being unleashed across so many communities at such a rapid pace all at once” and the “heat and the fever” around the debate that has thrust the decisions of small cities like Gilroy into the national headlines.

The 2026 midterms will offer the clearest test yet of whether opposition to data centers can sway voters.

[In a memo first reported by Axios](https://www.axios.com/2026/08/19/gop-data-center-memo-ai-election), the National Republican Senatorial Committee warned that data centers have defined the Senate race between Republican Sen. Jon Husted and Sherrod Brown, a former Democratic senator. Brown has spent millions of dollars on advertising in the race, including spots calling his opponent “the face of data centers in Ohio.”

“More than any other thing in this race, data centers are the anchor hanging around Husted’s neck,” the memo said. “If he loses and data centers get the blame, politicians across the country will take notice — and they will not go near the next one.”

Data centers also appear to be spurring new political participation across the Bay Area. In Pittsburg, some candidates running for City Council said a previously approved data center project was the reason they decided to enter the race.

“It sounds like phase one is a done deal, but I still have a lot of hope to have a say on that when I’m elected,” Amhari Perkins, one of the main organizers of Stop Pittsburg Data Center, said about her candidacy. “If I am given the ability to put a moratorium or some pause, I’d be happy to do so.”

Ellina Yin, the founder and CEO of the civic-engagement nonprofit Dreaming Collaborative, is working with San Jose residents who oppose the growing number of data centers in the city. She said many are participating in local government for the first time.

“They’re teaching each other things, they are showing up to planning director hearings, they’re looking at memos and doing all of this for the first time,” Yin said. “But they are doing it with enthusiasm and eagerness to protect their communities and they’re doing it with each other.”

Public polling shows that concern about data centers transcends traditional party lines. A [May Gallup poll found that majorities of Democrats, Republicans and independent voters opposed the construction of an AI data center](https://news.gallup.com/poll/709772/americans-oppose-data-centers-area.aspx) in their area, though Democrats were more likely than Republicans to be strongly opposed.

Nationwide, opponents cited environmental issues more often than any other reason, with water use and energy consumption topping the list in the Gallup poll.

#### Power, water and the environment

Pacific Gas & Electric Co. — which provides electricity to most of Central and Northern California — estimates that the electricity demand in its service area will double in the next 20 years, with about a third of the demand growth coming from data centers. The company currently has about four gigawatts of data-center electricity demand under construction or in the final stages of approval — roughly four times the average peak energy demand of the entire city of San Jose.

“Right now we’re living in an era of unprecedented electricity demand,” said Stephanie Magallon, a spokesperson for PG&E, noting that electrification remains the main driver of that demand.

Before a data center can connect to PG&E’s grid, the utility must ensure it has sufficient capacity, which can require new infrastructure to generate and move the electricity. Ritchie said localized strain is unlikely if the necessary upgrades are completed, but the effect on utility bills will depend on who pays for that infrastructure.

Because data centers use large amounts of electricity around the clock, they could pay a greater share of the fixed costs of maintaining the grid, helping lower electricity prices for other customers. PG&E estimates that each additional gigawatt of data center demand could reduce the average household electricity bill by 1% to 2% over time.

But if data centers shut down after connecting, other ratepayers could be left with the cost of infrastructure built to serve them, driving up bills.

Three bills sent to Newsom are intended to address that risk. SB 886 from state Sen. Steve Padilla, D-San Diego, and AB 2383 from Assemblymember Rick Zbur, D-Los Angeles, would require the California Public Utilities Commission to establish special rates and cost-allocation rules for qualifying large electricity users, including data centers. SB 1168 from Sen. Jerry McNerney, D-Pleasanton, would direct the commission to examine data centers’ energy use and ensure that other customers do not bear the resulting costs.

“Done correctly, these massive infrastructure projects can support the grid and provide economic opportunity for the community,” Padilla said in a news release earlier this year. “However, we have seen when these projects are unchecked, they cause skyrocketing energy costs for consumers and environmental damage.”

Another Padilla bill, SB 887, would require data center projects to undergo environmental review while offering expedited court review to qualifying projects that meet specified standards for energy, water, infrastructure costs and community benefits.

All four bills passed the Legislature and are awaiting action by Newsom.

When it comes to water, data center use statewide is dwarfed by industries such as agriculture. But locally, what matters is the size and design of a data center and whether the water system can handle its demand, said Michael Kiparsky, director of the Wheeler Water Institute at UC Berkeley’s Center for Law, Energy and the Environment.

Computers in data centers generate heat as they run and operate best within a certain temperature range, so many facilities use water for cooling. Estimates vary widely because a data center’s consumption depends on its size, location and cooling technology.

Amazon has said its two-building Gilroy campus would use about 4 million gallons of water annually for cooling. The city’s environmental review puts the project’s initial total potable water demand at up to 7.5 million gallons a year. Under the city’s conditions of approval, the center must shift nearly all industrial and irrigation uses to recycled water once new infrastructure is completed, reducing potable water use to an estimated 650,000 gallons annually. Amazon is required to pay the cost of building the recycled-water infrastructure.

Kiparsky said the Bay Area’s water supply is relatively robust and the region’s density and high costs make it less attractive for the “hyperscale” data centers that can put greater strain on water supplies. As a result, the Bay Area is less likely than some other regions to face acute water scarcity from data center development.

Knowing that for certain would require accurate estimates and reporting, but the state lacks uniform disclosure requirements. That leaves little public information about how many data centers could affect local water supplies.

[A report led by researchers at Santa Clara University](https://www.next10.org/sites/default/files/2026-05/Data-Centers-Water-Use-Report.pdf) found that most California data centers lacked publicly available environmental impact reports, especially outside Santa Clara County, and noted that even water providers might lack accurate information about their demand. The absence of an environmental impact report does not necessarily mean a project underwent no environmental review, but it can make its water use and other effects harder for the public to assess.

“There’s basically a big information vacuum,” Kiparsky said. “It’s not that data centers are good or bad, it’s that the implications are veiled by a lack of information.”

State Assemblymember Diane Papan, D-San Mateo, is trying to fill that vacuum. Two of her bills passed the Legislature. AB 2469 would prevent local governments from approving data centers unless operators make their water-use plans public, while AB 2619 would require companies to disclose projected water demand and later report actual consumption.

“You can always generate more electricity, you can’t generate more water,” Papan said in an interview. “(Public trust) can erode very quickly if you aren’t transparent … Let’s deal with it. Get the people the information that they need.”

A third measure, AB 1577 from Assemblymember Rebecca Bauer-Kahan, D-Orinda, would require large data centers to report information about their energy use, efficiency, on-site power generation and generator fuel consumption to the California Energy Commission.

Newsom has until Sept. 30 to act on the seven data center bills. Last year, he vetoed a water-disclosure measure from Papan similar to AB 2619, saying he was “reluctant to impose rigid reporting requirements … without understanding the full impact on businesses and the consumers of their technology.”

Newsom has maintained that where data centers get built is a local issue. At a press conference last month, the governor elaborated on those views.

“It shouldn’t be put on and socialized on the backs of ratepayers,” he said of data centers. “They’ve got to invest in the infrastructure, they have to address those anxieties around increased costs and that should be the role of local government and to the extent the state can influence that, that’s table stakes.”

Boender, of the Data Center Coalition, said that while the group wants to ensure “responsible use of those precious resources” such as water and electricity, it does not want the industry singled out.

“We think that any type of these standards should apply to other similar commercial and industrial users because that provides not only context for what the energy or water demands of similar commercial industrial users are, but also provides a holistic view for the state to be able to understand the full amount of electric load or those water demands that are coming online,” she said.

For Kiparsky, the transparency effort is a good first step, but more is required to supplement the “patchwork of regulations” across the state. He and a team of colleagues wrote a report offering policy recommendations to help state and local governments regulate data center water use.

Those recommendations include creating a state-level “strike team” of experts to help local governments that lack the resources to analyze a data center’s effects, encouraging more efficient and recycled water use and having data centers fund the water infrastructure they rely on.

For Ritchie, the energy researcher, transparency and collaboration with local communities are especially important in the Bay Area, where the dense urban landscape may bring data centers into close contact with more people.

“At the end of the day,” he said, “these are incredibly large industrial facilities, and they may not have smokestacks, but that doesn’t mean that they don’t have impacts on the communities around them.”

In Gilroy, neither the city’s new rules nor any measures Newsom may sign will alter Amazon’s data center, which is expected to begin operating by the end of the year. But the backlash has changed what happens next, opening a pathway that allows communities more say in how the AI boom affects the places they call home.

*Hema Sivanandam contributed to this report.*