Data Center Water Use Legislation in Michigan, Illinois, and California
As data center development accelerates nationwide, state legislatures are evaluating how to address water demands of these facilities. Recent legislation in Michigan, Illinois, and California demonstrate that there is no uniform approach to regulating data center water usage. As states tailor their regulatory framework to applicable water rights doctrines and water resource concerns, compliance obligations and permitting requirements vary by jurisdiction. While many existing data centers are in urban areas, a growing number of proposed facilities are planned for less populated communities where water availability, infrastructure capacity, and environmental impact have prompted legislative action. This alert summarizes developments in Michigan and Illinois, and recently signed law in California, and outlines what to watch for at the local level.
A. Michigan
Michigan governs private groundwater use by the Reasonable Use Doctrine, which rests on correlative rights, through which no one's use preempts anyone else's use. Neither individual property owners nor the state “owns” (i.e., has the right to make exclusive use of) groundwater. Instead, property owners may reasonably use the water beneath their land, provided they do not unreasonably interfere with the rights of adjacent property owners to do the same, decrease the value of adjacent lands for legitimate uses, or unreasonably affect groundwater quality.
Michigan’s proposed legislation leaves the Reasonable Use Doctrine intact and addresses reporting, permitting, and infrastructure cost allocation. Senate Bill 1046, introduced in June 2026, would require the Michigan Department of Environment, Great Lakes, and Energy (EGLE) to publish annual reports, beginning in July 2027, on data center water use for the preceding year in each public water supply service area. It would also:
- Require a permit for individuals proposing to develop a withdrawal capacity to make a new withdrawal of more than 550,000 gallons of water per day for consumptive use;
- Prohibit a person that uses, or is expected to use, an annual average of 550,000 gallons of water or more per day from directly withdrawing from waters of the state;
- Cap permitted consumptive water usage at two million gallons per day; and
- Authorize civil penalties and permit revocation for violations.
SB 1046 also requires EGLE to report annually, beginning in September 2028, the amount of wastewater effluent and the priority pollutants in the wastewater effluent generated by the individual permit holders.
Additionally, an earlier proposal from December 2025 included Senate Bill 763, which would prevent residential ratepayers from bearing water infrastructure costs if a permit holder seeks to increase withdrawals and infrastructure improvements are necessitated.
B. Illinois
Illinois also applies the Reasonable Use standard to groundwater, and its lawmakers are likewise working within that framework. However, Illinois proposed legislation goes further than Michigan’s to address broadly water resource planning, public disclosure, and infrastructure cost allocation. The principal measure is titled, “Protecting Our Water, Energy, and Ratepayers (or the “POWER Act”), found in Senate Bill 4016 and companion bill House Bill 5513, introduced in February 2026. The bills establish one of the nation’s most comprehensive regulatory frameworks for data center water usage, including requiring data centers to:
- Maintain and update quarterly public reports on projected water withdrawals and efficiency measures;
- Produce a water resources plan with a detailed accounting of the expected water intake, an evaluation of the impact on source water scarcity and drought contingencies, alternative cooling technologies, and conservation;
- Develop water scarcity plans showing how the data center will reduce, modify, or curtail water use during scarcity or supply disruption;
- Obtain facility-specific water impact permits subject to public hearings and renewable every five years; and
- Prohibit shifting utility infrastructure upgrade costs for data center development onto residential customers.
Though SB 4016 did not pass the Illinois General Assembly during the 2026 Spring Legislative Session, Governor Pritzker has indicated that data center legislation may be revisited during the Fall Veto Session beginning in mid-November 2026.
C. California
California’s water law blends the Appropriative Rights Doctrine and the Riparian Rights Doctrine, with the Public Trust Doctrine used to test whether those rights are being exercised reasonably. In California, a water user does not "own" the water itself but holds a right to use a reasonable amount for a beneficial purpose. Consistent with that framework, California’s legislation emphasizes transparency and integration into statewide water management rather than direct limits on use.
Unlike Michigan and Illinois, California has enacted law addressing data center water usage. Governor Newsom signed a seven-bill package into law in September 2026, which included Assembly Bills 2619 and 2469. AB 2619 requires data center developers and operators to report annual water consumption and establishes a one-time deadline of January 2029 for the Department of Water Resources to develop water efficiency best practices, such as closed-loop cooling, rainwater capture, and other conservation measures, for varying sizes of data centers. AB 2469 requires data center developers to disclose projected water usage to local governments before receiving approval to build new or expand data center facilities.
D. Local Data Center Regulation and State Preemption Questions
Local communities may also seek to adopt ordinances, such as moratoriums, as a stopgap until more comprehensive state regulations are in place. However, for such stopgaps to be effective, the local authority must possess the requisite authority, and that authority must not be preempted by state law. Municipalities and counties have only the authority that they are granted by state law. “Home rule” jurisdictions generally have broad authority to regulate local affairs unless state law says otherwise, other types of municipalities can act only by statutory authorization, such as a zoning enabling act. Therefore, the first question is whether a locality has the required authority, and the second question is whether state law preempts that authority. Even where a local measure is authorized and not preempted, statute or case law often prescribe the findings and procedures necessary to adopt a moratorium. Practical considerations for project development are:
- Dual exposure: a project may be subject to local siting, zoning, or mortarium restrictions in addition to any state permitting reporting regime.
- Interaction with state law: if a state enacts comprehensive water regulations, they may displace or limit parallel local rules, or leave room for local regulation, depending on the statutory language and each state’s home rule and preemption principles.
- Litigation risk: local measures may face legal challenges based on authority, preemption, or procedural grounds, which may affect project development timing and certainty.
E. Takeaways
Taken together, the proposals described above reflect a national trend toward greater oversight of data center water consumption. All three states emphasize transparency and accountability, while the mechanisms differ according to each state’s water rights framework. As state legislatures reconvene in the coming months, we expect similar proposals in other states. Please contact us if you would like to discuss how these developments affect your project or portfolio.
