A company’s opaque plan to build a massive data center outside Tucson, Arizona has roiled the desert city over the past few months, the latest US community to push back as tech companies aggressively seek to build out infrastructure for cloud computing and to power the AI boom.
The proposed data center, known as Project Blue, would span 290 acres in Pima county, and become the biggest development ever in the county, or anywhere in the southern part of the state.
The $3.6bn project wasn’t on most Tucsonans’ radar until 17 June, when the county board of supervisors narrowly agreed to sell and rezone a parcel of land just south-east of town to the developer Beale Infrastructure.
The San Francisco-based company hoped to get the project annexed by the city, a necessary step for it to be supplied by the public utility, Tucson Water.
But since the parcel sale agreement, the proposed center has faced stiff pushback from a community upset over the enormous amounts of water and electricity it would require, and the lack of transparency with which the developers and some in local government have pursued the project.
Conflict over the project made what is normally a sleepy time for Tucson politics – the city council is off in July amid searing heat and, with luck, monsoon downpours – into “the craziest seven weeks I’ve seen in Tucson”, said Michael Bogan, an aquatic ecologist and hydrologist at the University of Arizona who has long worked in the area.
The episode in Tucson illustrates the secretiveness and tenacity with which developers are rushing to build data centers throughout the US, and the emotionally charged mix of issues that confront communities, weighing sometimes murky promises of economic incentives and jobs against effects on the environment and natural resources.
In Memphis, Elon Musk’s xAI built one of the world’s biggest supercomputers, bringing in tax revenue to an economically depressed area, while also setting off a battle over air quality concerns related to the development’s methane turbines. Phoenix has one of the nation’s largest concentrations of data centers, which keeps expanding, encouraged by tax incentives and local business leaders; local opposition and ordinances around noise pollution and water use are also on the rise. High-profile projects have been postponed or cancelled due to local pushback in recent months in northern Virginia, the nation’s biggest data center hub; in St Charles, Missouri; and in several towns in Indiana.
But in even more locations, data centers are moving forward, often under a cloud of secrecy.
Quest for AI computing power
The project in Tucson is one of many emerging in the quest for AI computing power and to serve data-intensive companies.
The project envisions a massive warehouse full of computers in the Sonoran desert, including $2.4bn worth of equipment. Community outrage over the project grew soon after the city council’s 17 June vote, and much of it centered around the issue of water.
Data centers use water in two ways: to maintain a steady humidity, and to cool off the hot computers, which is often accomplished by running cold water past the machines, consuming water in the form of steam.
Communities throughout the US have seen groundwater depletion and contamination after data centers crept up. Tucson has long embraced water conservation, and this protective ethos is more salient there than many other communities, said Ed Hendel, president of Sky Island AI, a Tucson-based company. As one example, the city treats wastewater and releases it to the Santa Cruz River, home to wildlife such as endangered fish.
Hendel’s daily work relies on data centers, but he said they should be built where they make sense. Placing water-guzzling warehouses of computers “in a hot desert is not a good starting point”, he said. “Putting them in a hot desert in the midst of a drought is even more absurd, because that water is precious.”
Beale did not detail exactly how much water it would use and from where in the weeks after the June vote, even though it claimed the project would be “water positive.” In absence of details, Bogan set out to analyze how the project would be water positive, projecting it would be most likely to use treated water that now flows into the Santa Cruz. But even if the company went that route, Bogan wrote in a 11 July white paper, it could dry up significant portions of the river, harming the many plants and animals that live there.
City manager Tim Thomure, acting as an intermediary between Beale and the public, released the first concrete details about the project’s planned water use in mid-July after Bogan’s white paper came out: Project Blue would not affect the Santa Cruz River, he said. It would use three sources of water, including from two locations where treated wastewater is currently stored underground for future use, as well as the Tucson airport remediation plant, which treats contaminated groundwater that currently stays on site. And it gave an estimate of water use: over 1,900 acre-feet, or 620m gallons, enough to supply more than four typical 18-hole Pima county golf courses, according to Thomure.
Beale also pledged to invest $100m in a pipeline to transport and use treated wastewater, and create 180 jobs.
But this is not “water positive”, and it would rather cause “net depletion of our groundwater resources to supply Project Blue”, said Bogan, the aquatic ecologist. He pointed to a city document which notes that if Project Blue were to use more groundwater than it could replenish, it could make payments, or “water positivity rates” to make up for it.
Lisa Shipek, executive director of southern Arizona’s Watershed Management Group, agreed with Bogan’s assessment. By possibly paying for using up groundwater, Project Blue, Shipek said, would potentially “replace wet water with ‘paper water’”. The tactic – paying for consuming wet water, or offsetting it in another type of way, whether in the form of water conservation or education measures – has been used to deplete groundwater throughout the world.
Water not the only concern
Water wasn’t community members’ only concern. Beale Infrastructure is not a typical developer, but rather a subsidiary of the asset management company Blue Owl. On 21 July, the local news site Arizona Luminaria published a story revealing that Pima county staff possessed a memo stating that Project Blue would be financed by Amazon Web Services (AWS). The story prompted fresh outcry from community members frustrated with Amazon’s anti-union actions, and overtures by its owner, Jeff Bezos, to the Trump administration.
An AWS spokesperson said: “AWS has previously engaged in standard due diligence processes in Arizona, like we do in any geographic location we consider building and operating our infrastructure. We do not have any commitments or agreements in place to develop this project.”
But the company declined to answer a question about whether AWS was affiliated with Project Blue in the past, or, potentially, in the future.
A Beale spokesperson said: “We cannot comment on our tenants until a more advanced stage of the project.”
Another wrinkle that added to the uproar was a news release from Tucson Electric Power (TEP) put out hours after the county vote on 17 June, announcing it was requesting a 14% rate increase to offset grid investments and inflation. With data centers driving up electricity demand across the country, many community members assumed the rate hike was related to Project Blue, said county supervisor Matt Heinz.
It wasn’t. The timing was coincidental, and a huge mistake, he said. “It’s unfortunately really plagued this whole project.”
TEP spokesperson Joseph Barrios said that the rate increase had nothing to do with Project Blue, but was based on costs already incurred in 2024 and prior.
“We understand that any rate increase could have an impact on our customers and it’s not something we take lightly,” he said.
Outrage over Project Blue grew rapidly over the summer. Eliseo Gomez, a local high school teacher and organizer, convened with a small group at the base of Tucson’s “A” mountain shortly after the 17 June vote. “We were like: what can we do?” They decided to target the annexation vote. The group started a website and social media channels named No Desert Data Center, encouraging people to express their concerns with the mayor and city council.
In response, the city arranged for two public meetings with presentations from Beale Infrastructure, as well as Tucson Water and TEP. The majority of attendees at both meetings were clearly opposed, most wearing red shirts saying “no to Project Blue” or holding protest signs. Union members, enticed by promises of construction jobs, made up a supportive minority at the events. Attendees grew increasingly upset, Gomez said, as they felt their concerns and queries were dodged or ignored. By the second meeting, on 4 August, many locals appeared fed up. Beale executives gave similar speeches, without providing much further detail, incensing the crowd, whose boos and shouts made it difficult for presenters to continue.
Many citizens presented their own research. “I feel like I learned more about Project Blue from the public than the city,” said city councilman Rocque Perez.
On 6 August, in an unscheduled vote, council members unanimously decided to discontinue discussions with Beale, each sharing short speeches revealing sharp opposition to Project Blue. Tucsonans packing the council chambers cheered and celebrated; Beale executives, appearing stunned, were booed as they left.
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Impact on Tucson politics
Still, Beale hasn’t given up. In mid-September, the company proposed moving forward with an air-cooled system that uses less water than the original design. Beale co-filed a state application with the TEP, to be supplied with up to 286 megawatts – enough to power to up to 250,000 homes.
In a statement, Beale has described the new design as a closed-loop system that “uses minimal amounts of water that are continuously recirculated, thereby eliminating water loss”.
Several local leaders said the Republican-led Arizona Corporation Commission, which oversees electricity use in the state, is likely to approve the project’s electricity request. That would mean Beale’s main remaining hurdle is finding a water source. The company has not said how it would obtain any such water, however, and given the city council’s vote, they cannot be supplied by the city’s public utility.
Meanwhile, the controversy has had a profound impact on Tucson politics. Even supporters acknowledge the Project Blue process started poorly, partly because non-disclosure agreements between Beale and city staff dating back to 2022 meant that most elected leaders knew little to nothing about it until some time this year.
Supervisor Jennifer Allen said the first meeting between Beale and the board in late May was short on details, including water use, and her requests for more information turned up nothing concrete. It was “a lot of greenwashing”, she said. She voted no on 17 June, as did her colleague Andrés Cano.
Heinz, a long-time Democrat, said he voted for the rezoning and sale because the project had long been championed by city staff, including city manager Thomure, and because the tens of thousands of hi-tech jobs in the area will need access to nearby data centers.
Though there weren’t detailed water use estimates at first, Heinz said he wasn’t worried as Beale would be working with Tucson Water and the city would be “putting in those guardrails”.
The new design, he said, “will be an even better fit for southern Arizona”.
“I frankly wish they’d approached us with this air-cooled design to begin with.”
Heinz, as well as supervisors Rex Scott and Steve Christy, have come under withering scrutiny from constituents, who have implored the board to revisit the sale agreement. Heinz said that isn’t going to happen. “There’s no vote before the board,” Heinz said. “It’s done. And I don’t want to reverse it.”
Scott acknowledged that NDAs played a negative role in the affair and noted that both the county and city have already implemented new guidelines for handling them, which should grant more transparency to the process, Scott said.
The city council has also since passed new rules to give more transparency and oversight over big water users, and they are developing specific guidelines and guard-rails to govern any future proposed data centers.
‘Cities across the country are being sold the same story’
While Beale’s air-cooled system may use less water, it has highlighted the other enormous costs of data centers: electricity. Air-cooled systems use huge amounts of energy and are less energy efficient – especially in a desert where the daily average high is 29C (84F).
It’s now a national issue – a 2024 report to Congress co-authored by Oak Ridge National Laboratory researcher AB Siddik estimates that data centers consumed 4.4% of the nation’s total electricity as of 2023, which could rise to as much as 12% by 2028.
TEP’s involvement has brought scrutiny to the private utility; locals have recently been protesting at their headquarters. On 23 September, the mayor and council announced they plan to intervene in the utility’s request to the state for the rate hike, saying in a statement such an increase “will strain families and small businesses and slow the transition to clean, affordable energy”.
The saga has also raised the possibility that the Tucsonans or their leaders could consider pursuing a public utility to replace TEP when its contract is due for review in 2025, though that could be an enormous effort, Perez said.
“I’m disappointed that Tucson Electric Power is partnering with Beale despite strong community concerns,” said councilman Kevin Dahl. “It certainly makes an argument for public power.”
TEP spokesperson Joseph Barrios said that the utility’s involvement with Project Blue will not raise customers’ rates or affect their service.
“We have an obligation to serve, and that includes all customers within our service area,” Barrios said.
As far as the possibility of public power, “we feel our community is better served by continuing to work together”, he added.
Council member and vice mayor Lane Santa Cruz said this isn’t just about Tucson, though.
“What’s happening here isn’t unique to us: cities across the country are being sold the same story, with promises of jobs, innovation, and progress,” she said. “But what’s not being talked about is who really benefits and what it costs us.”
Too often, she added, these projects are extractive, using a community’s water, electricity, and labor – while providing only a small number of jobs – instead of being a sustainable partner.
“We need to be the city that draws the line,” she said.
