Tonight: San José to Approve $9M Easement for Microsoft Data Center Expansion

Microsoft Corporation is advancing plans for significant data center development in San José, California, negotiating complex agreements with the City of San José and the Santa Clara Valley Water District (Valley Water) to address land use, environmental mitigation, and critical infrastructure needs.

Projects on the Table

The San José Data Center campus (SJDC 04), located at 2515 Orchard Parkway (APNs: 101-02-019 and 101-02-020), seeks a Small Power Plant Exemption (SPPE) from the California Energy Commission. The project envisions two four-story data center buildings with a maximum electrical demand of 97.8 MW, supported by 32 primary 3 MW Tier 4 diesel generators and four additional diesel units, all equipped with selective catalytic reduction and diesel particulate filters. These generators are intended solely for backup during utility outages.

Separately, a proposed data center at 1657 Alviso-Milpitas Road would include two single-story buildings, 224 natural gas-fired generators, and two Tier 4 diesel generators, with a projected 99 MW maximum load. The Draft Environmental Impact Report (DEIR) anticipates that the natural gas generators would operate up to 509 hours per year for maintenance, testing, and demand-response activities.

Prioritizing Trail Connectivity

As part of its Orchard Parkway project, Microsoft entered a funding agreement with the City to support Class I bike trail improvements along Component Drive, connecting to the Guadalupe River Trail. The company voluntarily offered $1 million toward the Regional Trail Connector, with the City tasked with permitting, designing, and constructing the ramp.

Construction is complicated by existing easements held by PG&E and Wickland Pipelines LLC, which currently block the trail. Microsoft is required to negotiate easement amendments for up to one year. If permits are not obtained within 25 years, unused funds must be returned.

Wastewater Facility Buffer Lands and Infrastructure

Microsoft is also negotiating access to buffer lands at the San José-Santa Clara Regional Wastewater Facility (RWF) to support another data center. Two key agreements are recommended for approval:

1. Master Easement Agreement – conveys permanent easements for utilities, McCarthy Lane extension, and temporary construction on Zanker Road. Microsoft will pay $9.27 million, including $549,314 for the City to acquire a potable water line. An oversized stormwater line will be installed to protect burrowing owl habitat and accommodate future development.

2. Site Works Agreement – defines construction of a new visitor center and related site improvements on RWF-leased land, resolving conflicts with existing easement pathways.

Transportation improvements include widening Zanker Road to meet Complete Streets standards, adding raised Class IV bike lanes, pedestrian pathways, and bioretention swales, with completion targeted by summer 2027. The data center is projected to be operational by fall 2028.

Air Quality and Environmental Oversight

The Bay Area Air Quality Management District flagged concerns in its February 2022 DEIR review, noting that the Alviso neighborhood faces high cumulative environmental burdens per CalEPA’s CalEnviroScreen 4.0. Staff recommended enforceable commitments to use renewable fuels for all generators and ongoing annual documentation.

Additional mitigation measures include:

• Off-road equipment (>25 HP) must meet Tier 4 final standards.

• All hauling trucks must meet or exceed 2010 CARB emissions standards.

• Portable diesel engines are prohibited where grid power is available.

• Excavation, grading, or demolition must halt if winds exceed 20 mph.

Complex Negotiations, Significant Public Benefits

These agreements highlight the intricate balance between large-scale industrial development, environmental oversight, and public infrastructure obligations in San José. Microsoft’s projects underscore the intersection of high-demand computing infrastructure with community and environmental stewardship, requiring extensive negotiation, compliance, and long-term operational monitoring.