Webinar Recap: State Policy Solutions for Data Center Water Impacts

As data centers continue to threaten local resources, ratepayers, and communities, understanding how these facilities impact water supply and infrastructure is essential. State policy actors have a vast array of tools and policy mechanisms for regulating water usage, discharge, and water service costs, and requiring data disclosure and analysis to protect their water resources. Solutions for safeguarding states’ water resources are explored in Climate XChange’s State Policy Toolkit for Data Center Regulation on Water Impacts.

We convened a webinar to review the water impacts of data centers, what water efficiency technologies are available, and how state policy can mitigate adverse impacts to water supply, quality, and costs. Our speakers included:

• Margaret Cook, Vice President of Water and Community Resilience at the Houston Advanced Research Center (HARC) and author of Thirsty Data and the Lone Star State: The Impact of Data Center Growth on Texas’ Water Supply
• Kristen Soares, State Climate Policy Network Manager at Climate XChange and author of the State Policy Toolkit for Data Center Regulation on Water Impacts

Margaret Cook, HARC

Learn more by watching the webinar at 04:06. 

Margaret provided a deep dive into the water demand from data centers and what methods and technologies are available to reduce water usage, pulled from HARC’s recent publication, Thirsty Data and the Lone Star State: The Impact of Data Center Growth on Texas’ Water Supply. Highlights from her presentation include:

• Data center growth can impact communities’ water supplies, even in areas without existing water scarcity, due to consistent and cumulative water withdrawals.
  • When making decisions on where to site facilities, data centers often prioritize factors like land cost and availability, electricity rates, and proximity to fiber-optic infrastructure over water availability.
• Data centers can utilize public water resources in many ways, including on-site infrastructure cooling, which requires water consumption and wastewater discharge, as well as indirect water usage from electricity generation, especially for fossil fuels.
• The type of cooling method and computing equipment, as well as the size and type of data center can influence a facility’s water use levels.
  • Different types of cooling methods include cold plate cooling, one-phase cooling, two-phase cooling, and dry cooling.
• Texas Case Study
  • Texas is a water-stressed state with 464 existing data centers consuming 0.4 percent of the state’s water as of September 2025.
  • Proposed data centers could substantially increase water demand to 2.7 percent of the state’s water by 2030.
• Methods to reduce water demand from data centers include:
  • Technology and management changes, such as the use of:
    • Water-lean energy technologies, like solar and wind
    • Dry cooling, paired with water-lean technologies
    • Alternative water sources, like reused and gray water
    • Energy-efficient operations, including non-peak demand periods
  • Requirements for data centers to pay for their fair share of water usage
  • Public-private partnerships with communities where data center companies provide water replenishment services to local watersheds
  • Policy drivers to incentivize water efficiency
• Challenges of estimating water demands from data centers include lack of transparency and research on water use, as well as current water plans including historical data rather than predicted growth data.

Kristen Soares, Climate XChange

Learn more by watching the Q&A at 26:00. 

Kristen provided an overview of state-level policy approaches to regulate data centers’ on-site water demand for cooling, including policies and examples from the recently-released State Policy Toolkit for Data Center Regulation of Water Impacts. Highlights from their presentation include:

• There were at least 30 proposed bills across 13 states addressing data center water use in 2025, with only two states enacting legislation: Minnesota’s HF 16 and Maryland’s HB 270/SB 116.
  • During 2026 sessions, there have been at least 30 proposed bills across 16 states, with four states enacting legislation: Idaho’s H 895, South Dakota’s SB 135, Utah’s HB 76, and West Virginia’s HB 4983.
• States must approach data center regulation holistically across water, energy, emissions, and economic priorities, and work alongside local governments and communities to create meaningful solutions.
  • Tangible, enforceable regulations that apply to all data centers operating in a state are ideal.
  • Attaching guardrails to incentives should only be a last resort.
• States can reduce on-site potable water demand by:
  • Establishing water efficiency standards (e.g., South Carolina’s SB 902 (proposed, 2026) and Virginia’s B 1448 (failed, 2025))
    • Water efficiency standards should target values lower than the average WUE for U.S. data centers, which is 0.48 L/kWh.
  • Requiring the use of water efficiency technology (e.g., Minnesota’s HF 16 (enacted, 2025))
  • Requiring the use of non-potable water like recycled or stormwater, (e.g., Minnesota’s HF 16 (enacted, 2025) and Illinois’ SB 3830 (proposed, 2026))
• States can assess and mitigate adverse impacts to water resources by:
  • Prohibiting permit approval for data centers if the facility will cause adverse impacts to watershed health or supply (e.g., Minnesota’s HF 16 (enacted, 2025) and West Virginia’s HB 4832 (proposed, 2026))
  • Requiring full environmental review and impact mitigation plans, with robust community engagement and benefit agreements (e.g., Maryland’s SB 978 (failed, 2025))
• States can mandate disclosure and analysis of water usage and impacts by:
  • Banning Non-Disclosure Agreements (NDAs) between developers, landowners, and local governments (e.g., California’s AB 1370 (passed, 2025))
  • Requiring that data centers report on water sources, withdrawals, consumption, discharges, efficiency measures, and more (e.g., Utah’s HB 76 (enacted, 2026) and Illinois’ SB 3830 (proposed, 2026))
  • Requiring public notification of disclosures (e.g., Utah’s HB 76 (enacted, 2026) and Virginia’s HB 2035 (failed, 2025))
  • Assessing and analyzing statewide impacts of data centers on water resources (e.g., Maryland’s HB 270/SB 116 (enacted, 2025) and Virginia’s HB 496/SB 553 (awaiting Governor’s signature, 2026))
  • Establishing processes for disclosed data and statewide assessments to inform future data center regulation (e.g., Illinois’ SB 2181 (proposed, 2026))
• States can require data centers to pay their fair share for water usage:
  • Requiring data centers to pay for all service and infrastructure costs incurred by providing water to, and wastewater treatment from, data centers (e.g., Illinois’ SB 4016/HB 5513 (proposed, 2026) and West Virginia’s HB 4832 (proposed, 2026))
  • Collecting fees from data centers to fund local water conservation and remediation, including permitting fees, noncompliance fees, and tax revenue carveouts (e.g., Illinois’ SB 4016/HB 5513 (proposed, 2026) and Arizona’s HB 2893 (failed, 2025))

Q&A

Learn more by watching the Q&A at 49:35. 

Q: If the most effective way for data centers to conserve water is to eliminate or minimize the use of evaporative cooling systems by adopting waterless or low-water cooling technologies, why is this not being adopted by developers and required by land use and government regulations at both local and state levels?

Q: Is the industry looking at using processed grey water or black water, rather than groundwater, as a source of makeup to their cooling towers?

Q: Has any state had success with prohibiting NDAs, at least for water-use cases?

Q: Have you come across any bills that specifically support local capacity building? Small communities may need support to adequately assess how a data center may impact their community and their water supply.