When a Data Center’s Promise Dries Up (and What It Means for Arizona)

By Alexander Lomax

A cautionary tale is unfolding in California’s Imperial Valley, and it has direct implications for Arizona. Imperial Valley Computer Manufacturing promised its planned AI data center would avoid drawing from the Colorado River. The developer said the project would rely on reclaimed and recycled water from local cities, not supplies from the drought-stressed river. That pledge has since collapsed. IVCM is now suing in Imperial County Superior Court for 260 million gallons of water per year from the Imperial Irrigation District, roughly 750,000 gallons a day. The company calls it a last resort. Critics call it a bait and switch.

Photo Credit: CNN

The story matters in Arizona for one simple reason: all of Imperial Valley’s fresh water comes from the Colorado River. And Arizona draws from that same system.

Arizona Is Already in the Crosshairs

The Phoenix metro is not watching this from a distance. It is in the middle of it. As of last spring, the Phoenix area had 75 data centers operating and 49 more planned. That growth is accelerating precisely as the Colorado River system faces sustained pressure.

Developers have increasingly sited large projects just outside municipal boundaries to avoid Arizona’s Assured and Adequate Water Supply law, which requires proof that a development can meet its water needs for 100 years. Building beyond city limits allows developers to sidestep that requirement while still relying on nearby water infrastructure. In early May, a data center in Arizona was caught taking public water without authorization, discovered only after residents complained about dust control issues.

The Numbers Are Staggering

The scale of the problem is hard to overstate. AI data centers consumed roughly 264 billion gallons of water in 2025 alone, equivalent to the annual water use of 1.8 million Americans. A 100-megawatt facility can consume approximately 500,000 gallons per day. Multiply that across dozens of planned Phoenix-area facilities and the math becomes uncomfortable.

What Comes Next for Arizona

The Imperial Valley saga is a preview of disputes Arizona will face if it doesn’t establish clear rules now. Other states are moving. Denver passed a moratorium on new data center construction while the city drafts regulations covering energy use, water consumption, noise, and placement. California passed legislation requiring water use disclosures before facilities go online.

Arizona has some of the most sophisticated water law in the West. It also has some of the most severe exposure to Colorado River cuts. Those two facts are on a collision course.

The question is whether the state will write the rules before the water runs out, or after.