The rapid expansion of AI infrastructure is creating a growing divide in Silicon Valley, where San Jose officials are seeking more data center projects while residents and environmental groups raise concerns about their impact on electricity, water, pollution and quality of life.
San Jose, California’s 3rd-largest city with nearly 1 million residents, has promoted data center development as part of its plans to become an AI infrastructure hub. Last year, city officials announced an agreement with utility PG&E to speed power connections for large energy users such as data centers. The city estimates each new facility could generate $3 million to $6 million in annual tax revenue for services including police, fire protection, libraries, roads and parks.
However, many residents question whether those benefits will be widely shared. “The companies have to prove to us why they deserve our resources and how they’re going to give back to the community,” said Ellina Yin of the I Love San Jose coalition.
Residents and environmental groups are seeking stricter public reviews, greater transparency on energy and water use, and studies of possible health and environmental effects. Mayor Matt Mahan said development should continue but with stronger safeguards.
“People are right to question, ‘Is this pushing up my energy costs? Is it using our clean water supplies? Will it degrade quality of life in my city?'” Mahan told Reuters. “These are very fair questions.”
Air quality is another concern. A coalition led by the Center for Biological Diversity has asked the Bay Area Air Quality Management District to strengthen oversight of diesel backup generators at data centers. The district is considering whether stronger protections are needed.
The debate has also moved to Sacramento. California lawmakers recently approved bills covering data center electricity costs and transparency around energy and water consumption. State Senator Steve Padilla said California has an obligation to lead because many major technology companies are based there.
The Data Center Coalition, whose members include Google, Meta, OpenAI and Anthropic, supports responsible growth but says the proposed rules unfairly target data centers. It warned that stricter measures could discourage investment and move jobs, tax revenue and projects to other states.
Governor Gavin Newsom has until the end of September to sign or veto the legislation.
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