The No Desert Data Center Coalition filed a lawsuit last week against Pima County in southern Arizona for approving a land sale and rezoning request from a data center developer — just the latest move in the battle over data centers amid water concerns in Arizona.
In August 2025, the Tucson City Council rejected Project Blue, a proposed $3.6 billion data center complex spanning 290 acres. But the Pima County Board approved the land sale and the rezoning request.
The latest lawsuit alleges the county hid a “bodyguard of lies” to mislead the public. This included hiding the project’s true intent by incorporating phony “potential” plans for the land.
“The democratic process requires open meetings and public disclosure of what our government is working on in order to hold people accountable and we didn’t get that opportunity,” said Reed Spurling, a member of the No Desert Data Center Coalition. “They didn’t give us that opportunity.”
Beale Infrastructure, the developer, is simultaneously pursuing another data center project in Marana, which neighbors Tucson in Pima County. The town council unanimously approved the data center’s rezoning application for two 300-acre parcels of land on Jan. 6.
The No Desert Data Center Coalition plans to respond with a referendum.
As The Associated Press reported, these two proposals are in competition to become “the first large-scale data center in southern Arizona,” a possibility that the federal government welcomes.
Local opposition to data centers in Tucson, a Democratic stronghold, Marana, a conservative-leaning district, and Chandler, a Republican suburb, suggests bipartisan consensus over concerns of water scarcity and rising energy costs.
Arizona AG blocks secret energy deal tied to data center
Concurrent with this lawsuit, Arizona Attorney General Kris Mayes has stepped in to block the project from striking a deal with a Tucson utility company and the developer.
In a recent filing, she argued that a “loophole” allowed Tucson Electric Power and the developer to set their own electricity rate in private. Typically, rates are regulated by the elected members of the Arizona Corporation Commission.
The loophole would bypass the evidentiary hearing where interested parties have a chance to present their evidence.
In a statement, TEP President Erik Bakken denied Mayes’ claims and dismissed the allegation of its association with the controversial data center project.
“Our customers deserve honest, accurate information about decisions that affect their energy future,” said Bakken.
“Recent statements by those attacking Tucson Electric Power’s agreement to serve Project Blue are false and at the very least misleading,” the president of the Tucson utility company added.
“Facts matter and the public deserves clarity.”
In September 2025, the Arizona Corporation Commission approved Mayes’ request to intervene in TEP’s request to hike electric rates by nearly 14%.
“This is blatant corporate greed. TEP’s parent company reported $1.6 billion in net earnings last year,” Mayes said in a press release at the time. “This is a billion-dollar company that wants to increase the average Tucson consumer’s monthly bill by 14% following back-to-back rate hikes over the past five years. It’s time to say ‘enough.’”
Beale Infrastructure, the data center developer, said the data centers will be air-cooled instead of using millions of gallons of water to “wash” the heat away from servers.
But the trade-off in this case is a massive energy draw in an already strained region.
Arizona reconsiders tax incentives for data centers
Arizona became a hub for data centers because of generous tax incentives and the steady weather.
There are 146 operating data centers in the state, with 136 of them concentrated in Phoenix, nine in Tucson and one in Nogales, according to a database.
Arizona’s three major utility companies are receiving a high number of requests from data centers for connectivity.
According to KTAR News, Arizona Public Service, which provides 8,200 megawatts of electricity, has requests of up to 30,000 megawatts sitting in its queue.
“We’ve never sat in a position before where somebody’s asking you to triple the size of your company,” Jacob Tetlow, APS’s executive vice president, recently told the news outlet.
On Jan. 12, Arizona Gov. Katie Hobbs in her State of the State address, said that she no longer supports the tax breaks for data centers because of the strain on local resources.
“It’s time we make the booming data center industry work for the people of our state rather than the other way around,” the Democrat lawmaker said.
“Make data centers pay their fair share for the water they use,” she said. “The average Arizona family pays one cent for every gallon of water used in their home. If data centers were to pay the same amount we could make a multimillion-dollar deposit into the Colorado River Protection Fund every single year.”
In the desert Southwest, air conditioning is a necessity in the summer months. Depending on the season, 1 megawatt can power between 200 and 750 homes.
Project Blue in Tucson requested 286 megawatts for its first phase. That’s enough power for more than 200,000 homes.
Kyrsten Sinema at the forefront of Arizona’s data center debate
Former Arizona Sen. Kyrsten Sinema has been lobbying in favor of data centers since leaving the Senate in 2024. She founded the AI Infrastructure Coalition last year and unsuccessfully lobbied for a $2.5 billion data center project in Chandler, a Phoenix suburb. She also serves as the president and CEO of an advocacy organization, Arizona Business Roundtable, which lobbies for more artificial intelligence data centers in her home state.
Her coalition includes Big Tech giants like Google, Microsoft and Meta and works “hand-in-glove with the Trump administration to ensure American AI dominance,” as Sinema previously noted during a city planning and zoning commission meeting.
At the time, she warned Arizona officials that the federal government’s intervention would ultimately bypass any local zoning regulations, which is why state leaders need to get on board with proactively approving such projects.
“Chandler right now has the opportunity to determine how and when these new innovative AI data centers will be built,” she said.
“When federal preemption comes, we’ll no longer have that privilege. It will just happen.”
It’s worth noting a proposal for a 10-year moratorium on state and local regulations around artificial intelligence passed the U.S. House in 2025 but was struck down by the Senate. But Sen. Ted Cruz signaled that such a law may become necessary.
“Do you want Karen Bass and Comrade Mamdani setting the rules for AI,” he asked the audience at Politico’s AI & Tech Summit in September last year. Cruz was referring to mayors Karen Bass of Los Angeles and Zohran Mamdani of New York City.
Sinema recently visited Utah and participated in an onstage conversation with Utah Gov. Spencer Cox at the annual economic outlook summit hosted by the Utah Chamber of Commerce.