Water for Arizona’s silicon desert
From the clouds to the Cloud … Municipal water wars … And five bullets for DOGE.
Welcome back, readers. The Agenda newsroom took a short Spring Break last week to catch our breath and refocus for the next publishing quarter.
While we were out, ASU recapped last month’s Rethinking Water West conference, where a panel explored AI’s growing role in water management.
Ruijie Zeng, an assistant professor at ASU, predicted water utilities “will become more of a service provider than a commodity provider” thanks to AI.
In the past month alone, new research has highlighted AI’s potential to boost efficiency in municipal water, wastewater treatment, and agriculture.
But AI needs water too. And it’s taking water from Arizona to feed its data centers and semiconductors.
Data centers are giant computer warehouses that run the internet, and semiconductors are the ultra-tiny computer chips that power everything from phones to missiles.
Is the Southwest desert the right place for AI to quench its thirst?
We’ll dig into that today, plus report from the frontlines of the Municipal Water Wars.
Paid subscribers also get this week’s Extra Credit: Five Bullets for DOGE — where we flip the script on Elon and ask what DOGE and Trump have really done for water this year. Worth keeping them on the federal payroll?
Arizona powers the internet
Missed the headlines? Here’s a recap of Arizona’s big tech moves in 2025:
Republic: ASU wins $1.2 billion funding for semiconductor research
KTAR: Meta announces Mesa Data Center is operational
Daily Star: Why $100B from chip giant TSMC to be boon for Arizona
Mirror: Senate bill to fast-track nuclear reactors for data centers advances
Republic: Arizona Gov. Katie Hobbs to visit Taiwan to talk business, trade
Digitimes: Intel expands in Arizona, betting big on foundry revival
KTAR: AI data centers have huge impact on Arizona’s power grid, water
Republic: Data center company buys 173 acres for $296M in metro Phoenix
ABC15: PhoenixNAP set to build its second Valley data center
inBusiness: Metro Phoenix remains third in U.S. data center absorption
AZFamily: Peoria residents worried about planned semiconductor facility
Republic: Arizona tech giants Intel and TSMC (Taiwan) explore joint venture
The boom will keep booming. But why do these companies love Arizona?
The same thing that worries locals — lack of water — is part of the draw. Dry air reduces condensation and corrosion on delicate equipment.
Add to that: room to grow, low natural disaster risk, cheap energy, and generous state incentives.
A brief history
Since 2020, over 35 semiconductor companies have answered Arizona’s call to build here, accounting for 25% of national growth. And there are now over 121 data centers in the Phoenix area.
But Arizona’s “silicon desert” roots go deep.
1949: Motorola comes to Phoenix, builds first semiconductor fab (1955)
1980: Intel opens Chandler fab, becomes state’s top industrial employer
1987: Microchip Technology founded and headquartered in Chandler
1994: NXP Semiconductors opens Chandler fab
2007: IO Data Center opens in Scottsdale
2012: CyrusOne builds 57-acre data center in Chandler
2019: Arizona offers 10-year sales tax waiver for data centers
2020: TSMC announces $12B Phoenix fab
2022: CHIPS Act signed — $52B to boost U.S. chipmaking
2023: Google breaks ground on $600M Mesa data center
2024: Hobbs & AZ universities establish semiconductor dev relations with Baja California; Amazon buys 220 acres in Laveen for data center campus
2025: TSMC ups AZ investment to $100B
Despite concerns, the incoming expansion gets broad support — unlike industrial ag from California, Saudi Arabia, China, and Minnesota. Why? Data uses far less water and delivers much more economic punch.
Before we dive into water usage and money trails, let’s look at why this industry needs water in the first place.
Irrigating the internet
Data centers use water mainly to cool the constant heat from servers running 24/7. In Arizona, the go-to method is evaporative cooling: water pulls heat from equipment, then circulates to a tower where some evaporates, releasing heat before cycling back through.
It’s a desert-tested technique — forms of evaporative cooling have been used for thousands of years — and it's usually cheaper here than full electric cooling.
Semiconductor fabs are a different beast. Their water needs are much higher and more specialized.
Each delicate silicon wafer must be washed repeatedly, and even a single salt ion can ruin it. The solution? “Ultrapure water” — thousands of times cleaner than drinking water.
Producing it would embarrass your Brita filter: Around 15 gallons of regular water are purified many times to make 10 gallons of ultrapure. And as microchips keep shrinking, the water must be purer.
So… how much water are we talking about? Let’s get into the numbers.
Ag-to-tech
Big numbers don’t mean much without context. So here’s a side-by-side look at water use, economic impact, and value per gallon across ag and big data.
(sources: bea.gov, oeo.az.gov, azwater.gov, bluefieldresearch.com)
Agriculture
72% of AZ water use — 5 million acrefeet
0.45% of AZ GDP — $1.9 billion
$0.001 per gallon value
Semiconductor Fabs
1% of AZ water use — 65,000 acrefeet1
2% of AZ GDP — $10.6 billion
$0.50 per gallon value
Data Centers
0.5% of AZ water use — 33,600 acrefeet
0.9% of AZ GDP — $4.9 billion
$0.48 per gallon value
Yes, 100,000 acre-feet is a lot of water for tech. But it’s a drop in the bucket compared to ag, and 500x more profitable per gallon.
That’s a key reason Arizona is pivoting toward ag-to-urban water reallocation — more on that in a future edition.
Water positivity
Some cities are worried about industrial water use competing for their limited municipal water supplies. In 2015, Chandler established limits on how much water data centers can use. In December last year, Marana adopted an ordinance that prohibits its water department from providing potable water to data centers. Back in 2021, Mesa Vice Mayor Jenn Duff was the lone dissenting vote against Meta’s planned data center.
"Data centers are not a responsible use of our water and it's time to stop and allow other forms of manufacturing and technology to infill in this area," Duff said.
But local concerns may dry up over time.
Semiconductor fabs have already improved their ability to recycle water from 80% to as much as 98% — TSMC currently has a 90% water recycling rate. And many companies in the state claim they’ll soon be “water positive” with recycling and offsetting their water consumption by funding water restoration projects.
Some facilities aren’t even using new water — they’re piping in treated effluent from municipalities. And some data centers are already using “zero water” cooling systems, with newcomers promising to do the same.
Not only will the tech boom keep on booming — it might help push Arizona’s water recycling technology forward along the way.
Are we seeing more signs of Arizona’s solarpunk future emerging?
Sedona’s Pay-per-view
In case you missed the trend: Companies have been buying up Arizona’s water utilities, grouping them, and equalizing rates across multiple communities. Why? Shared costs mean fewer steep rate hikes when one system needs repairs or upgrades.
But what happens when a community wants something extra?
Sedona says other ratepayers should help foot the bill for its custom underground water tank — which was designed to preserve views and “property values” in their AirBNB-infested tourism town. The aboveground facilities are even disguised as upscale Sedona homes, concealing pumps that are needed in lieu of gravity pressure.
The Arizona Corporation Commission must approve rate adjustments. But the Residential Utility Consumer Office (essentially the public’s utility watchdog office) says Sedona should pay the premium for its own aesthetic choices — not pass costs to others. Sedona disagrees.
“Deconsolidation for purposes of the East Sedona Water Tank would be a step backward,” City Manager Anette Spickard wrote to the ACC.
But if Sedona gets its way, it shouldn’t be surprised when neighboring towns follow Sedona’s precedent and ask for “special” upgrades too — and everyone’s water bill keeps quietly creeping upward.
Rate Expectations
Tucson is making another bid to charge higher water rates for its customers in unincorporated areas, which make up one-third of Tucson Water users. The city implemented a 10% hike for those customers in 2021, but a 2023 court ruling reversed it, saying the differential rate was unjustified discrimination.
Now the city is packing what it hopes is a solid legal argument: unincorporated ratepayers benefit from the city’s “capital assets” by way of water delivery infrastructure, and they should pitch in extra dough. This time they’re pursuing a ~20% rate hike, along with a small reduction for city resident rates.
Pima County Supervisor Rex Scott says the city is reverse engineering an argument to fit a political objective: pleasing Tucson voters. And Tim Steller, writing for the Daily Star, says there may be another angle: motivate areas to annex or incorporate.
“In the 2021 effort, city officials made this idea an overt part of their argument in favor of charging more to customers in the unincorporated county. This time, it goes unsaid,” Steller writes. “It is bad that there are around 380,000 residents of the Tucson metro area who live in unincorporated areas: They don’t bring in as much state shared revenue as they would if in an incorporated jurisdiction.”
As the metro Tucson area continues to sprawl out, and new neighborhoods depend on water from the city municipal system, higher water prices might motivate incorporation.
We’ll keep the Other News short and droll today. Enjoy!
KTAR — Hobbs negotiates Starter Homes Act with incredulous demands: homes should be affordable and have water
Republic — SRP’s river guy says monsoon season might offer drought relief … sighs deeply, stares into distance
AZBigMedia — $1 billion Scottsdale development designed to collect rainwater that the ancients said will one day come to our arid homeland
AZFamily — After decades of contamination, Wellton officials don’t bother testing town’s water anymore, state gives them a vending machine
Arizona Daily Star — Historic Santa Cruz farm and natural habitat narrowly misses golden opportunity to become a golf course
Arizona Game and Fish — State agency lures Arizonans to lakes, uses catfish as bait
Center for Biological Diversity — New well data shows definitive proof of Fort Huachuca pumping San Pedro River dry — Fort says chart is upside down
Amid a spree of DOGE layoffs and budget cuts in February, Elon Musk sent threatening emails to federal employees and civilian contractors requesting proof of work accomplished.
“Please reply to this email with approx. 5 bullets describing what you accomplished last week and cc your manager,” the emails read.
Fair point. Let’s see if U.S. taxpayer dollars are being well spent on DOGE and Trump’s management of water resources.
Five bullets for DOGE
On the day that California finally got the Los Angeles wildfires under control, DOGE agents showed up at the Schafer and Terminus Dams to oversee Trump’s order for 2.2 billion gallons of water to be released, which was supposed to help with fire fighting but had no way of getting to the city, and wasn’t actually needed. Instead, the water slowly sank into a basin, no longer available for local farmers who rely on it during droughts.
