What's behind Arizona's data center boom, and what comes next?
Arizona is experiencing a data center boom, leading to strong local opposition due to concerns about water and power usage. The Chandler City Council recently rejected a new data center, and Governor Katie Hobbs signed a three-year pause on data center incentives across the state. These actions reflect growing community and governmental scrutiny of data center expansion.
Arizona has become a leading battleground for data center opposition due to a rapid surge in development, positioning it as the nation's seventh-largest data center market. The state's appeal to data center operators was initially spurred by factors such as available land, abundant energy, and a significant state tax break on computer equipment passed in 2013. However, the rise of artificial intelligence is now driving the demand for increasingly larger "hyperscale" data centers, exacerbating community concerns.
Residents and some government officials are expressing urgent worries about the substantial water and electricity consumption of these facilities. This public outcry has led to concrete actions: the Chandler City Council unanimously voted to reject a new data center in late 2025, and another large project, La Osa near Eloy, was significantly scaled back by 80% due in part to protests. Even Project Blue in Pima County, set to cover 13 million square feet, faces controversy.
Industry representatives, including Ryan Gruver of AFCOM and Russell Smoldon of B3 Strategies, highlight the essential role data centers play in the digital economy. However, Andrea Clinton, Vice President of the Arizona Data Center Foundation, admits the industry has struggled with public perception, partly due to non-disclosure agreements surrounding new developments. In response to these growing concerns, leaders in cities like Tucson, Gilbert, Mesa, and Phoenix are beginning to implement stricter regulations for data center projects. Furthermore, Governor Katie Hobbs has enacted a three-year statewide pause on the incentives previously offered to data centers, directly addressing environmental impact concerns.