The San Jose City Council has cleared a path for a proposal to reclassify an existing research facility in North San Jose as a data center. Councilmembers voted unanimously on Tuesday to reject an appeal that sought to block the project on environmental grounds, amidst ongoing citywide discussions regarding data center developments.
The decision by the council, with Councilmember Peter Ortiz absent and Vice Mayor Pam Foley recused due to a financial conflict of interest, upholds a July 8 approval by city planners. That approval granted a special use permit to operate a data center utilizing up to 20 megawatts of power within an existing research and development building located at 300 Holger Way, just south of Highway 237. The permit authorizes interior improvements, including the installation of data racks.
Citizens for Responsible Industry, a coalition of labor groups and concerned residents, filed the appeal. They argued that the project proceeded without the necessary environmental review and warned of potential noise and air pollution impacting nearby residents.
However, city planners maintained that an environmental review is not required. They stated that the permit only allows for interior modifications to the existing building and does not authorize new construction, thereby posing no environmental risks.
Erik Schoennauer, a land use consultant representing the property owner, real estate investment firm Menlo Equities, countered claims that the permit would lead to a large-scale data center. He clarified that the permit is intended to provide regulatory coverage for research already taking place at the site. Schoennauer explained that chip maker NVIDIA leases the facility for research and development, and has long operated a chip testing lab there, which includes a data hall and is supplied with 8.5 megawatts of power. NVIDIA intends to continue this existing operation.
Menlo Equities officials voiced concerns that their chip testing work might classify the property as a data center under the city's broad definition, which encompasses developments housing computer systems. They worried that without explicit city approval for data center operations, these research activities could face legal challenges.
Opponents of the permit, however, contended that the project is more extensive than its backers suggest. Kelilah Federman, an attorney representing Citizens for Responsible Industry, argued that a 20-megawatt data center would necessitate significant infrastructure upgrades, inherently posing environmental risks. She stated at the Tuesday meeting that the application should have undergone a more rigorous review, emphasizing that the city's definition of the project overlooked essential electrical and mechanical infrastructure for data centers, such as power distribution, cooling systems, and uninterruptible power supply.
Linda Hutchins-Knowles, co-founder of environmental advocacy group Mothers Out Front Silicon Valley, expressed disappointment in the council's decision, fearing it adds to doubts about city leaders' willingness to protect residents from potential harms of data centers, including increased air and noise pollution.
City officials reiterated that such objections extend beyond the scope of the work covered by the current permit. They affirmed that the property owner would need to apply for a separate permit if any new equipment were to be added to the site.
Jane Vaughan, a partner at Menlo Equities, informed the meeting that NVIDIA was granted a 10-year lease about two years ago and has since invested $100 million in remodeling the building for testing and research. She noted that regulatory uncertainty stemming from San Jose's data center rules has made it challenging to attract further investment to the property.
The permit fight comes amid a citywide conversation about the environmental impacts of data centers. San Jose leaders are currently developing standards to regulate their permitting and operation, including limits on water and energy use. Draft regulations were presented publicly earlier this month.
District 4 Councilmember David Cohen, whose district includes the project site in North San Jose, agreed that the city's definition of data centers requires an update. Cohen expressed frustration at the meeting, stating that the current definition has confused the public and neighbors, causing unnecessary alarm by leading to this application for what he views as not a data center.
