Tech Jesse Rieser for BI Tech How data centers are deepening the water crisis

Business Insider

24-06-2025

The Colorado River runs over 1,450 miles through seven US states, carving dramatic canyons and providing drinking water for 40 million people before it crosses into Mexico.
Overuse threatens to dry up this critical American artery, which sustains people from Denver to Los Angeles and feeds the crops of California's Imperial Valley and Arizona's Yuma region — two of the world's most productive agricultural areas.
Already, some homebuilders in Arizona have stopped work over fears their developments won't have enough water. Cotton farmers south of Phoenix have left thousands of acres unplanted. Los Angeles residents have stopped watering their lawns. States are renegotiating allocations guided by the 103-year-old Colorado River Compact.
Now, in some of the region's driest stretches, tech companies are bringing a massive influx of water-guzzling data centers.
Documents reviewed by Business Insider show that some of these large data centers, football-field-size warehouses filled with computer servers that power the artificial intelligence revolution, could each demand millions of gallons of water a day, enough for tens of thousands of Americans.
Business Insider found that 40% of the nation's planned and existing data centers are in areas that the nonprofit World Resources Institute, which focuses on sustainability research, has characterized as experiencing "extremely high" or "high" water scarcity. The share is even larger, 43%, for the biggest centers, those that use 40 megawatt-hours or more of electricity each hour.
Two companies stood out in BI's analysis as having the most data centers in high or extremely high water-stressed areas: Amazon, with 81, and Microsoft, with 23. As a share of their data centers, Microsoft ranks first with 52% in such arid spots.
The companies don't seek out locations that are arid — they go to places like Arizona for reasons including abundant land and stable supplies of electricity. They negotiate access with the local officials in cities and towns across the country, arguing that the investment, tax revenue, and other economic benefits they bring will be worth it. It can be an attractive proposition, even in parched places like Goodyear, Arizona, which has negotiated for years with Microsoft over a complex of data centers.
"It's been challenging because they are a big company, and we are a small city," said Bill Stipp, a former Goodyear City Council member who voted to approve various stages of the project despite his concerns about water.
Ben Wilsker, a Microsoft spokesman, said the company's agreement with the city of Goodyear "benefits both parties." He declined to comment on the company's industry-leading percentage.
Data centers historically have needed copious amounts of water to cool their multitudes of powerful computer chips. Use of less water-reliant cooling techniques is growing but remains much less common.
Amazon still prefers water-intensive evaporative cooling technologies, though not all its data centers use that method, said a company spokesperson.
Unlike farmers or golf courses that have learned to make do with recycled water, data centers that do use water for cooling overwhelmingly rely on fresh supplies.
Even before the AI boom, tech giants were known guzzlers. In 2018, the industry was already one of the 10 largest commercial or industrial water users in the US, according to a 2021 paper in Environmental Research Letters. These companies are now pouring hundreds of billions of dollars into expanding their data center operations.
Business Insider used permits that data centers must get for their backup generators to create a comprehensive list of facilities, and mapped the names and addresses onto the World Resources Institute's water scarcity tracker. We found 24 of the largest centers, and 379 smaller ones, in the four states now negotiating over Colorado River allotments. Other water-scarce areas across the US, in places including Texas and the upper Midwest, also host large, water-hungry facilities.
Fragmented oversight
It can be difficult to determine exactly how much water any given data center uses. Hundreds of water districts control the taps, and many decline to disclose customer usage data. The companies closely guard the secrecy of their projects, often using limited liability companies and nondisclosure agreements with local officials.
Business Insider records requests were often blocked in water districts in Western states experiencing acute water scarcity. In Colorado, for example, Denver Water asked data centers in its service area whether they would give permission to release their records. All but one said no.
The utility then initiated legal action to prevent disclosure. In Arizona, Tucson and Scottsdale would release only anonymized data, citing local privacy laws. When Business Insider obtained economic development agreements for data centers, many localities redacted the water use, with at least one citing commercial trade secrets. Still, some data emerged.
Water use can vary widely. A pair of Amazon facilities in Hermiston, Oregon, used 66.8 million gallons of water in 2023. In Mesa, Arizona, Meta struck an agreement allowing a facility to use up to 4 million gallons of water a day — enough for nearly 49,000 people, based on an Environmental Protection Agency estimate that Americans use 82 gallons a day.
Even those numbers understate the total impact. The 2021 research paper, which was done by scholars at Virginia Tech and the Lawrence Berkeley National Laboratory, found that only about a quarter of data centers' water use was direct, through cooling. The other 75% was used indirectly, through the electricity generation data centers depend on.
Many tech companies don't incorporate the demands of electricity generation in calculating their water use, said Shaolei Ren, an associate professor of computer engineering at University of California, Riverside.
"We know the lifecycle water footprint of almost every agriculture-related product," reads one of his recent presentations. "But we have almost zero information about AI's real water footprint."
Melanie Roe, a spokesperson for Meta, described the amount of water the company was permitted for as a "theoretical maximum" and said actual use was expected to be less.
Across the West, public officials and utility managers are coming to grips with the increased demands on the region's water resources.
"The data centers bring up a little bit of a conundrum," Rebecca Mitchell, a member of the Upper Colorado River Commission who is the state's leader in the Colorado River talks, said in an interview. "If you're creating a larger draw on the system, you have to figure out where that comes from. And it's got to come from your own bank, not somebody else's."
Conserving water in Colorado
In Denver, the data center developer CoreSite withdrew its request for a $9 million tax break in October after the city council questioned the company's plan to use up to 805,000 gallons of water a day, or enough for 16,000 homes, The Denver Post reported. "I am very concerned about a tax incentive for a company that is using some of our most valuable resources," Councilwoman Flor Alvidrez said at an August council committee meeting.
In nearby Aurora, water officials have been among the most proactive in the country in limiting water use by data centers and other industrial superusers such as bottling plants and mines. Aurora has been one of the nation's fastest-growing large cities, and sees its water supply as a potential limiter on that growth.
"If you're going to come to Aurora," said Marshall Brown, Aurora Water's general manager, "you're going to have to figure out how to be efficient."
Several data center companies have gone to Aurora to meet with water officials, only to lose interest once they learned of its stringent water regulations, Greg Baker, then an Aurora Water spokesperson, said in August.
QTS, one of the nation's largest data center operators, with 34 US facilities by BI's count, has deployed a more expensive cooling technology that uses refrigerant for cooling. The annual water allocation for its facility in Aurora will be 525,600 gallons, according to Aurora Water records obtained by BI. That's less than what some facilities use in a single day, and equivalent to what a handful of restaurants might use, a QTS spokesperson said, adding that none of it would be used to cool the center's servers. Any more, and it will have to pay a surcharge, though that total doesn't include water for irrigation and other uses outside the QTS facility that are expected to require 1.1 million gallons of water a year, according to an Aurora Water official.
As of 2023, roughly half of the company's data centers used this water-conserving technology. A spokesperson for QTS, which is owned by the investment firm Blackstone, said none of the data centers the company had built since 2018 used water for cooling.
"A typical data center can consume up to 5 million gallons of water daily," QTS wrote in a 2023 white paper. "There is rising concern over how these facilities will impact water supplies, especially in areas that are already water-stressed. To be good neighbors, data centers need to adopt water conservation strategies."
Data centers in the desert
In August, Yadi Wang stood in the dried-out riverbed of a Colorado tributary about 100 miles southwest of Phoenix. The temperature was rapidly approaching triple digits, and it wasn't yet 10 a.m. Wang, the manager of Oatman Flats Ranch, explained how water once flowed through this stretch of the Gila River, populated by beavers and cottonwood trees. Now, he said, sporting a brimmed leather hat and Carhartt jeans, it's among the most barren places in the state.
"This is no different than the Sahara desert," Wang said, picking up a handful of the sandy soil. The bone-dry grains easily slipped through his fingers.
Since the 1990s, Arizona has been in an extended drought. Rising temperatures have only increased water needs. Phoenix set a record last year with 113 straight days of high temperatures at or above 100 degrees Fahrenheit.
Water access determines everything. In 1980, the state passed the Groundwater Management Act requiring cities and developers in some of the most populous areas to prove they had enough water for the next 100 years before they could break ground on a new project. Since then, the battle for water has only grown more intense. Gov. Katie Hobbs recently limited residential housing growth in an area outside Phoenix that failed to prove it had enough groundwater. Agricultural producers have set out to conserve water.
Yet, Arizona has become one of the country's largest data center markets. If all permitted Arizona data centers Business Insider identified go online, it will be the country's second-largest market after Virginia in terms of energy consumption and the sixth in terms of number of facilities, with 52. Maricopa County, home to Phoenix, features one of the nation's largest data center clusters, with 48 campuses.
Robust tax incentives, passed by state lawmakers in 2013, have propelled that growth. Companies flocked to the desert to take advantage of the free money, cheap and plentiful electricity, and affordable land. In 2021, lawmakers extended the breaks through 2033.
The state's fragmented system of water management hasn't kept pace. Water from the Colorado River is tightly regulated, and the 1980 law governs groundwater extraction near population centers, but wells outside those areas can operate largely without limit.
Big Tech firms can shop for municipalities willing to allocate the water that data centers require. They have found many takers, often in Phoenix's less prosperous outskirts, where officials in cities such as Goodyear and El Mirage have approved massive data center developments in recent years.
"The appetite of the council has been to welcome economic development into our city," Mayor Alexis Hermosillo of El Mirage said in an interview. Approving data centers, she added, was "in alignment with that thought process and those priorities."
5 million gallons a day
Ron Rayner has been watching as data centers go up to Phoenix's west. He and his family have farmed in Goodyear for decades, growing cotton, alfalfa, and other crops on land they own or lease. Their largely agricultural community has been transformed by development, including new Amazon warehouses, residential housing, and data centers.
Several years ago, Rayner pinned an aerial photograph to his office wall showing the land he and his brothers at the A Tumbling-T Ranches had under cultivation. Any time an owner of land they leased sold one of the plots to developers, they put a big X on the parcel. Rayner estimates they've lost about 2,000 acres, roughly a third of the land they once farmed.
"This map has just got all these big X's all over it," Rayner said. "They're gone, they're done, you know. They'll never be back."
One of those leases, for 260 acres in Goodyear, was terminated in 2018. The new owner was Microsoft, which bought that land and another 19 acres for $48 million to build a data center campus.
Initial water plans for the campus didn't survive. Microsoft went to the city council seeking fast-track authority to start constructing the first two centers on the campus, which it proposed would be cooled through direct evaporative cooling, one of the more water-intensive cooling technologies.
According to Goodyear city documents, Microsoft planned for each of the five buildings on its Goodyear campus to use 1 million gallons of water a day, for a total of 1.83 billion gallons a year. On average, that's enough water for roughly 61,000 Americans, or a bit more than half the city's population.
Microsoft's purchase of the land gave it ownership rights to underground supplies, but the thought of sucking up that much water for data centers in such an arid climate was daunting.
"The water situation was a little scary in the beginning," Stipp, the former Goodyear City Council member, told Business Insider, saying early projections suggested the company would have needed more water than its supplies could have provided. "You look at it and say, 'Holy smokes, that's a lot of water.'"
Microsoft won fast-track approval. Stipp said that he thought the anticipated tax revenue from Microsoft was too good for Goodyear to pass up and that the city's water supplies could handle the demand. But the company and the city still needed to figure out how to handle the enormous flow of wastewater that would result. Microsoft planned to treat its water discharge and send it by pipeline to a Goodyear drinking-water treatment plant, city documents said. As long as the treated wastewater complied with pollution rules, it could be fed into Goodyear's drinking water supply.
Microsoft soon changed course: The discharge from its data centers would overwhelm Goodyear's infrastructure. "Microsoft," reads a March 2023 city council report, "has effectively abandoned its original plan."
Microsoft's new proposal would instead send discharge to the city's wastewater treatment plant, making it more difficult for it to later be used as the city's drinking water. Then, another amendment: Microsoft's wasted water was so voluminous, 1.2 million gallons a day, that it would overwhelm the wastewater treatment plant, too.
Finally, Microsoft agreed that any buildings it constructed after the first three would employ mechanical air cooling, which uses more energy but less water. Goodyear agreed to expand its wastewater plant to process 3 million more gallons a day, enough to handle Microsoft's flow, at a cost of $90 million. Microsoft covered $36 million of that, and Goodyear the rest.
Wilsker, the Microsoft spokesperson, said the company altered course after conducting a feasibility study and also paid $9 million for other water infrastructure. Its three facilities use direct evaporative cooling only at certain temperatures, reducing water's use in cooling to less than 40% of the year, he said. Goodyear officials told Business Insider that data centers bring jobs and other economic benefits, and that Microsoft's current water plan let it rely on its state-designated water rights, so it wouldn't draw from the city's official supplies.
The offsets game
Microsoft, with 44 US data centers already built or underway, according to BI's tally, has pledged to be water positive by 2030 despite consuming a net 2.1 billion gallons of water in 2023, its sustainability report said.
Meta has said it will "return more water to the environment than we consumed for our global operations" by 2030. It has 32 data centers built or permitted, 28% of them in high or extremely high water-stressed areas, by BI's count.
Google — with 47 permitted US data centers, 19% in those acutely arid locations, Business Insider found — pledged to "replenish 120% of the freshwater" it consumes by 2030. In 2023, Amazon pledged to be "water positive" by 2030. The company said it was 53% of the way there by the end of last year. QTS set a goal of reducing its "water usage effectiveness" by 5% each year.
Like QTS, other companies are developing water-saving technologies. Google uses nonpotable water sources for some cooling, and Devon Smiley, a spokesperson, said the company had switched a Mesa facility to air cooling and wouldn't use water to cool future data centers in areas seriously short on water.
Microsoft is moving toward a design at its newest data centers in the Phoenix area that uses minimal water thanks to a closed-loop liquid cooling system, said Alistair Speirs, a senior director for cloud infrastructure at the company. At older data centers, Microsoft relies on adiabatic cooling, which uses water to wet a mesh-like material and forces air through the material with big fans to cool it down. When the ambient outside air temperature is below 85 degrees, that air is brought inside to cool the servers.
In August, Microsoft said all new data centers would be designed to cool the servers at the computer chip level, eliminating the need for water other than to fill the system during construction.
Industry experts say much data center technology still relies on millions of gallons of drinking water. Steve Solomon, a Microsoft vice president in data center engineering, said in an interview that data centers require drinking water if their cooling technology involves wetting the air that circulates inside the data center. If humans are to inhale it, the water must be free of bacteria or other pollutants, he said.
Google's data centers consumed 6.1 billion gallons of water in 2023, a 17% increase over the previous year, of which the vast majority was potable. In a 2024 report, Google said its data centers used the same amount of water needed for 41 golf courses in the Southwest. Ren, the UC Riverside researcher, calls the comparison "unfair at best," as many golf courses use wastewater, not drinking water, for irrigation.
Increasingly, municipalities in the arid West are deciding that data centers and other large water users require careful watching, and in some cases are pushing back on companies' asks.
In Mesa, where city officials limit water supplies to large users, Meta found a partner in the Gila River Indian Community, one of 30 tribes that live in the Colorado River Basin and the victor in a 2004 legal challenge that gave the community access to some of the river's contested water.
The water the community won would not only supply the needs of the 15,000 residents of its reservation just south of Phoenix, but also promised to power its economy.
The community partnered with a local utility to create Gila River Water Storage, which took the community's unused Colorado River allotment and created an underground reserve of 1.62 trillion gallons.
The community was standing by in 2021 when Mesa's officials told Meta it would need to find additional supplies for the water its proposed data center required. The city at the time limited large water users to about 500,000 gallons a day from city supplies (a cap it lowered last year), and Meta needed 2.5 times as much.
So Meta turned to Gila River Water Storage. Under a 25-year agreement with the city, the company purchased storage credits and transferred them to the city. Mesa then gave the company allowances that, provided Meta meets certain conditions, will let it pull up to 4 million gallons a day.
Jenn Duff, a Mesa City Council member and self-proclaimed "desert rat" who has lived in the Southwest her entire life, was the only council member to vote against the deal. She said she was startled by a report from the Kyl Center for Water Policy at Arizona State University that suggested Arizona might have less water than officials thought.
"We were in a severe drought, and we had a large water user coming in, and I started reading the publications, and I became alarmed," Duff said in an interview. She still carries around that report, its cover now torn, in her bag. "I just don't think water-cooled data centers should be in the desert."
According to the minutes of the vote, Mayor John Giles, who left office this year, voiced his support for the project and noted that the company had been informed about the need to purchase storage credits and advised about the need to be sensitive to water issues.
There's no guarantee that the water will be available through all of Meta's contract, as every claim on the Colorado's waters — including Indigenous allotments — is up for negotiation.
The Meta spokesperson told Business Insider that the company meets periodically with Mesa officials to ensure it stays in compliance with its water commitments to the city. Jason Hauter, a lawyer representing the Gila River Indian Community, said that while the future of available water supplies from the Colorado River was uncertain, "we do not foresee a future where this water supply is eliminated for central Arizona or for the Community in particular."
With less water-intensive cooling technologies still rare, companies have turned to a strategy known as "corporate water stewardship" to meet their goals. This involves paying other people to conserve water and then using a standard calculation to earn credits to offset the company's use.
Meta, for example, has helped fund drinking water access for the sprawling Navajo Nation and irrigation piping designed to prevent evaporation. In total, Meta has 12 projects in Arizona expected to restore 883 million gallons of water once they are built out, according to Roe, the spokesperson.
Microsoft, which also has purchased storage credits from Gila River Water Storage as part of its stewardship efforts, has also engaged in more controversial offset efforts as well. As part of a state conservation program, it helped fund compensation for the Colorado River Indian Tribes to leave 10,000 acres of farmland unplanted, a company report said, even though the practice of fallowing has fallen out of favor in the desert.
"When you fallow farmland in Arizona, you sterilize the land" by allowing nutrient-dense topsoil to blow away, said Dax Hansen, the owner of Oatman Flats Ranch. "It's just bad all the way around. The farmers make a little bit of money, but their land gets destroyed. You end up with more dust, more dust bowls, worse pollution, and all the rest."
"There is a healthy conversation about corporate water stewardship and how we manage it, and we are fortunate that the business community and corporations have been willing to do that," Kimberly Schonek, a project manager for The Nature Conservancy in Arizona, said in an interview. "We also want to be careful that we are not giving them cover."
Hannah Beckler and Rosemarie Ho contributed reporting.
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Series credits
About the data: Business Insider used air permits issued to data center backup generators to identify facility location and ownership, and estimate facility power use. We received permits from all but four states, plus Washington, DC. To identify locations in high or extremely high water stress, Business Insider used data from the Aqueduct Water Risk Atlas built by the World Resources Institute, a Washington, DC, group that advocates for sustainability. Read more about how we investigated the impact of data center growth here.
Reporting: Hannah Beckler, Dakin Campbell, Daniel Geiger, Rosemarie Ho, Narimes Parakul, Adam Rogers, Ellen Thomas
Editing: Jeffrey Cane, Rosalie Chan, Jason Dean, Esther Kaplan, Jake Swearingen
Research: Darren Ankrom, Schuyler Mitchell, Trey Strange, Yuheng Zhan
Design and visuals: Dan DeLorenzo, Isabel Fernandez-Pujol, Jinpeng Li, Kim Nguyen, Randy Yeip, Rebecca Zisser
Photography: Kendrick Brinson, John David-Richardson, Greg Kahn, Brian Palmer, Jesse Rieser
Video: Robert Leslie, Gary Moon, Marco Secci
Copy editing: Mark Abadi, Kevin Kaplan