Arizona municipalities have spent the last several years constructing what looks, from the outside, like a coherent defense against high-volume industrial water use. Nine large municipal water providers in the state, including both the Town of Marana and the City of Tucson, have now adopted ordinances restricting or outright denying water service to industrial categories they have deemed incompatible with long-term supply security.1 Marana went the furthest: its ordinance prohibits providing any water service to data centers for cooling, humidity control, or similar operations.2 Tucson followed in August 2025 with a large quantity of user definition pegged at monthly use exceeding roughly 7.48 million gallons.3
These are serious policy actions. They reflect genuine fiscal and resource pressure on providers within the Tucson Active Management Area, where Designations of Assured Water Supply require demonstrating 100-year supply adequacy across the entire service territory.
Neither Marana’s ordinance nor Tucson’s ordinance regulates groundwater. Both regulate the delivery of municipal water from the provider’s own distribution system. That is a meaningful distinction under Arizona law, and one that a sophisticated industrial applicant will quickly identify.
The regulation of groundwater wells in Arizona is a state function, administered by the Arizona Department of Water Resources (ADWR) under Title 45 of the Arizona Revised Statutes. A municipality has the latitude to determine the terms under which it will provide service from its own system. It does not have the authority to prohibit a lawfully permitted private well on privately owned land. The Arizona courts have long held that a municipal water provider must treat similarly situated customers consistently and may not deny service in an arbitrary or capricious manner, but the converse is also operative: a provider’s decision to deny service does not extinguish the applicant’s separate right to seek a state-issued groundwater withdrawal permit.4
A.R.S. § 45-515 is the provision that closes this loop, and it does so in a direction that will surprise those who assume municipal refusal is the end of the matter.
Under § 45-515, a person may apply to ADWR for a General Industrial Use permit authorizing withdrawal of groundwater for any non-irrigation industrial purpose, including data center cooling. “General industrial use” under the statute means a non-irrigation use of groundwater, expressly including animal industry and, by interpretive extension, the high-volume evaporative and mechanical cooling applications associated with hyperscale computing infrastructure.5
The issuance criteria under § 45-515(A) are structured as a checklist: the ADWR Director “shall issue” the permit if all statutory findings are satisfied. Those findings include, among others, that uncommitted Central Arizona Project water is not available at comparable cost, that other surface water or effluent is not available within a 25% cost premium, that the active management area’s management plan can be adjusted to accommodate the use, and that there is an assured water supply for the intended use at the intended point of withdrawal for the life of the permit.6
Crucially, a permit issued under this section is valid for up to fifty years, subject to renewal under the same criteria.7 That is not a temporary accommodation; it is a half-century groundwater entitlement.
The Morrison Institute’s Kyl Center for Water Policy explicitly identified this dynamic in its September 2025 survey of large-volume water-user ordinances across Arizona. The report notes that when a proposed industrial use is located within 3 miles of the exterior boundaries of a municipal service area, the applicant must first request water service. If the city, town, or private water company denies service at the customary rate and in the customary manner, and the other statutory criteria are satisfied, ADWR must issue the General Industrial Use permit.8
The municipal refusal is not a barrier to groundwater access. Under the statute’s architecture, it is a precondition that, once satisfied, obligates the state to act. A data center that approaches a town, receives a denial consistent with that town’s ordinance, demonstrates that CAP water is not available at comparable cost and that effluent is not adequate, and shows hydrogeologic adequacy at the proposed well site, has navigated most of the § 45-515 checklist through the ordinary course of a municipal permitting interaction.
The Morrison Institute report is direct: “Refusing to serve large-volume water uses within a provider’s water service area does not necessarily protect the provider against all of the impacts of large-volume water users.”9 That means the ordinances, as currently written, may provide political cover and delay, but they do not provide structural protection against determined industrial groundwater extraction, which appears to be exactly what is being seen with Project Blue right now in Tucson.
Tucson Mayor Regina Romero acknowledged this gap in the same session in which the August 2025 ordinance was adopted. She indicated that the city would seek community input on updated zoning requirements for data centers and similar water-intensive industries.10 That framing points toward the only legal mechanism that can close the § 45-515 pathway: prohibiting the underlying land use entirely rather than conditioning the water service.
If a data center cannot obtain zoning approval or a conditional use permit for a given parcel, there is no operational use to support. A general industrial use groundwater permit requires an actual permitted use at the point of withdrawal. Zoning prohibition, if crafted carefully and applied consistently, could remove the predicate that makes the § 45-515 pathway viable.
This is, however, a more complex and legally exposed undertaking than adopting a water service restriction. Blanket exclusion of data center uses from large industrial or mixed-use zones raises questions under Arizona’s property rights framework, fair treatment doctrines, and potentially the state’s interest in economic development within AMAs.
Both Marana and Tucson sit within the Tucson AMA, a regulated groundwater basin in which ADWR manages extraction to achieve long-term management goals. The AMA framework provides tools, but it does not foreclose industrial groundwater permitting: § 45-515 was written to operate inside the AMA regime, not around it. The management plan adjustment criterion under § 45-515(A)(5) puts the burden on ADWR to evaluate compatibility with the basin goal, but it is a balancing factor, not a veto.11
The practical implication is that a hyperscale data center operator with access to competent water rights counsel faces a regulatory environment that is more navigable than the current municipal ordinance landscape suggests. The ordinances are real constraints on municipal water delivery. They are not constraints on groundwater access.
That is the structural vulnerability in the current policy framework. It is the gap that the broader region must work through, as industrial water demand arrives in increments of hundreds of acre-feet per year per facility, in a basin already under long-term stress.
The water wall has a door. The door is A.R.S. § 45-515, and the key is a municipal denial letter.
The Sonoran Think Tank is a Southern Arizona civic research organization. All content is free and accessible to everyone.
Sources
[1] Morrison Institute for Public Policy, Kyl Center for Water Policy, “How Arizona Municipal Water Providers Are Regulating Large-Volume Water Users,” Arizona State University, September 2025.
[2] Id. at 2 (Marana’s large-volume user definition).
[3] Id. at 4 (Tucson’s large quantity water user definition).
[4] Veach v. City of Phoenix, 102 Ariz. 195, 197 (1967). See also Morrison Institute report at 2 (discussing authority to limit or condition service).
[5] Arizona Department of Water Resources, “General Industrial Use Permit,” azwater.gov. A.R.S. § 45-511 (defining general industrial use).
[6] A.R.S. § 45-515(A)(1) through (7).
[7] A.R.S. § 45-515(B).
[8] Morrison Institute report at 5, citing A.R.S. § 45-515.
[9] Morrison Institute report at 5.
[10] Rodrigo Cervantes, “After Ousting Project Blue, Tucson Adopts New City Regulations for Large Water Users,” KJZZ, August 21, 2025.
[11] A.R.S. § 45-515(A)(5).
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