A new California law closes a regulatory shortcut that data center operators have relied on, with major implications for project timelines and costs.
Most California manufacturers and facility operators don't realize that data centers—including those housing servers, GPUs, storage systems, and cooling infrastructure—have quietly operated under a regulatory advantage that is about to disappear.
Effective September 21, 2026, Senate Bill 887 eliminates categorical exemptions from the California Environmental Quality Act (CEQA) for data center projects. What that means in plain terms: any data center development or expansion can no longer skip the full environmental review process.
Until now, certain routine projects could use categorical exemptions—a CEQA provision that allows agencies to approve projects without preparing an Environmental Impact Report (EIR) if they fit into a pre-approved category of minimal environmental risk. Data centers have historically qualified for some of these exemptions.
SB 887 closes that door. Under new Section 21084(f)(1) of the Public Resources Code, data centers are explicitly excluded from categorical exemptions. This means any data center project—whether new construction, equipment upgrades, or facility expansion—now requires a full CEQA review, including preparation of an EIR before entitlements can be granted.
The law applies broadly. CEQA defines data centers to include facilities housing servers, GPUs, data storage, and cooling systems. This covers not just standalone data center operators but also manufacturers and businesses that operate server facilities, cloud infrastructure, or large-scale computing operations as part of their operations.
Small and mid-sized operations are affected equally. There is no exemption based on facility size or project scope.
An EIR is substantially more rigorous—and expensive—than a categorical exemption. The process typically includes:
• Detailed environmental analysis (air quality, water, traffic, noise, biological resources, etc.)
• Public notice and comment periods
• Response to agency and public feedback
• Preparation of mitigation measures
• Potential legal challenges
Timeline: EIR preparation and approval can take 12–24 months or longer, depending on project complexity and public response. Categorical exemptions, by contrast, can be processed in weeks.
Cost: An EIR typically costs $50,000 to $300,000+, depending on project size and environmental sensitivity of the location. Categorical exemptions cost a fraction of that.
The law takes effect upon chaptering on September 21, 2026. There is no sunset date; this is a permanent change to CEQA.
The specific provision is Section 4, amending Section 21084(f)(1) of the Public Resources Code.
If you operate or plan to develop a data center facility in California, now is the time to understand how this change affects your project timeline and budget. The regulatory landscape shifts in September 2026.
For a detailed breakdown of how SB 887 applies to your specific operation, consult with a California environmental law attorney or your industry association.