The regulatory environment for data center water use is tightening on multiple fronts simultaneously. At the state level, California, Iowa, Michigan, and several other states have introduced or advanced bills requiring mandatory water usage reporting. At the federal level, new EPA discharge rules are taking full effect in 2026, and Senator Dick Durbin has introduced the Data Center Water and Energy Transparency Act to create nationwide disclosure requirements.
State-Level Legislative Momentum
The state legislative push is notable for both its breadth and specificity. California's AB 1577 requires monthly water consumption reports to the State Energy Commission. Iowa's HF 2447 mandates quarterly reports to the Department of Natural Resources. Michigan's SB 762 requires annual reports to the Public Service Commission. Each bill reflects local concerns — California's drought vulnerability, Iowa's agricultural water competition, Michigan's Great Lakes stewardship — but together they signal a national trend toward mandatory transparency.
Perhaps more significantly, Virginia now requires data centers to use reclaimed water with "no net increase" clauses, directly constraining new development in the nation's largest data center market. Arizona's tightened groundwater certificate requirements have made it nearly impossible for hyperscale projects to secure the water rights they need, effectively blocking major developments in the Phoenix metro area.
Federal EPA Rules Take Effect
The federal layer adds further complexity. EPA rules now require NPDES individual or general permits for all cooling tower blowdown discharges, with strict limits on discharge temperature, total dissolved solids, pH, PFAS, quaternary ammonia biocides, and legionella. Large facilities must also implement mandatory Legionella Risk Management Plans — a direct response to the health risks posed by industrial cooling systems operating near residential areas.
New NPDES general permits specifically tailored to data centers are being rolled out in Ohio, Iowa, Texas, and Georgia, creating a patchwork of state-federal requirements that operators must navigate.
The Closed-Loop Mandate
Most consequentially for facility design, South Carolina and Kansas are exploring legislation that would mandate closed-loop cooling systems — technologies that recirculate water without evaporative loss. While closed-loop systems are more expensive to install and operate, they virtually eliminate a facility's water footprint. If these mandates spread, they could force a generation of retrofits across the existing data center fleet.
"The era of unlimited water access for data center cooling is ending. Operators who don't proactively invest in water efficiency will face escalating regulatory costs and community opposition." — UC Berkeley Center for Law, Energy & the Environment
For data center developers and operators, the water regulatory landscape now requires the same level of strategic attention as power procurement. Site selection models that do not account for current and projected water regulations risk stranding capital in jurisdictions where operational costs may escalate dramatically.