Water Rights and Groundwater Permits for Data Centers

A site’s water story has three parts: physical supply (is there water in the river, aquifer or city system), legal right (who may take it, how much and when) and delivery (pipes, wells, treatment and the agreements that govern them). Engineers often focus on the first and third. Deals usually stall on the second.

The amount at stake varies with the cooling design. Lawrence Berkeley National Laboratory estimated that U.S. data centers directly consumed about 17 billion gallons of water in 2023.¹⁰ A campus using evaporative cooling at scale can need a firm daily supply comparable to a small town’s, while a closed-loop design may need only fill water and domestic use. Our guide to data center water requirements covers those demand figures; this guide covers the legal side of securing them.

For a landowner, the practical point is that land does not always come with usable water. In some states, water rights can be owned, sold and leased separately from the ground above them, and a parcel’s rights can be junior, partly abandoned or already committed. In others, the right is tied to land that touches the water and is limited by the reasonable needs of neighbors and by state permits.¹

U.S. water law grew up as two broad systems, with many state variations and hybrids.¹

Prior appropriation

Under prior appropriation, the first person to divert water and apply it to a beneficial use gains a senior right to that quantity, and that right must be satisfied before any junior right in a shortage.² Colorado is the classic example. Its Division of Water Resources, led by the State Engineer, administers every right according to priority, through division offices in the state’s major river basins and water commissioners who enforce court decrees.² A new appropriation in a heavily used basin may be so junior that it is curtailed in dry years, which is why buyers look at the priority date, not just the decreed volume.

Most prior appropriation states require a permit before a new withdrawal. The state typically investigates whether water is available and how the new use would affect existing users, a process that can be expensive and slow.¹¹ Many states exempt small domestic or stock wells from some of that process, but a data center is rarely small enough to rely on an exempt well.¹¹

Riparian rights and regulated riparianism

In riparian states, owners of land along a water body share a right to reasonable use. Because that common-law standard is imprecise, many humid states have added administrative permit programs for large withdrawals, an approach often called regulated riparianism.⁷ Georgia is a useful example: any user withdrawing more than 100,000 gallons per day on a monthly average needs a permit from the state Environmental Protection Division.⁸

Groundwater is often governed separately from rivers and lakes, and it is where on-site supply for a data center usually comes from. The rules vary more from state to state than for surface water.

• Texas. The rule of capture lets a landowner pump water beneath the land without liability to neighbors.³ Groundwater conservation districts are the state’s preferred management tool and may modify the rule of capture within their boundaries, issuing permits, setting well spacing and limiting production under management plans approved by the Texas Water Development Board.³ A site’s prospects can change across a county line because the next district’s rules differ.
• Arizona. Within Active Management Areas, groundwater use is regulated under the state Groundwater Code, administered by the Arizona Department of Water Resources.⁴ New subdivisions in those areas must show a 100-year assured water supply, and the state’s assured and adequate supply programs weigh current and committed demand against long-term availability.¹²
• Prior appropriation states. Large wells generally go through the state permit process, which looks at water availability and effects on existing users.¹¹
• Regulated riparian states. Large wells often need a state withdrawal permit much like the one for surface intakes, such as Georgia’s permit for surface withdrawals above 100,000 gallons per day.⁸

A groundwater permit is not the same as a dependable supply. Aquifer decline, interference with neighboring wells and drought restrictions can all reduce what a permitted well actually delivers. Our guide to water stress and drought risk covers how to judge supply over a 20- to 30-year life.

Scrutiny is rising, starting with basic data. At a June 2026 hearing of the Texas House Committee on Natural Resources, lawmakers heard that fewer than a third of the state’s 341 data centers had answered a Public Utility Commission survey on water and energy use.¹³ In September 2026, Gov. Greg Abbott ordered the state’s water agency to penalize data centers that do not report their water use.¹⁴

Most large campuses do not hold their own water rights. They buy water from a city, a regional utility or a water district that holds the rights, the treatment plant and the pipes. The legal question then shifts from “who owns the water” to “what will the utility commit to deliver, at what rate and under what conditions.” Our guide to municipal water and sewer capacity covers the infrastructure side.

Recent agreements show the shape these deals take:

In Lima, Ohio, the city council voted 6–2 to approve a 20-year agreement to sell water to a data center project in American Township, with expected use of 5 million gallons per day and a maximum of 10 million.⁵ Amarillo’s council approved selling Fermi America up to 2.5 million gallons of water per day, despite one council member’s objection that the price was too low.¹⁵ In Hermiston, Oregon, a 25-year agreement approved in February 2025 commits Amazon Data Services to return at least 100 million gallons of drinking water a year to the city.⁹

Terms worth negotiating or confirming include:

• Committed daily and peak volumes, and whether they are firm or interruptible during drought.
• Term and renewal, ideally matched to the campus life and any financing.
• Rates, connection charges and who pays for wells, mains, storage and treatment upgrades (see impact fees and connection fees).
• Conservation, reporting and recycled-water obligations.
• Wastewater acceptance, which is often the tighter limit (see wastewater and cooling water discharge).

Water has become one of the most visible issues in local data center debates, especially in dry regions. In August 2025, Tucson’s city council voted unanimously to stop work on Project Blue, a proposed data center tied to Amazon, after residents and council members raised concerns about water, energy and ratepayer costs.¹⁶

Days later the council adopted rules for large water users. Customers using about 7.5 million gallons a month or more must apply to the city, submit a conservation plan, use recycled water to offset at least 30% of their use and show that water will not be wasted.⁶ Rules like this turn a simple utility hookup into a discretionary approval with conditions. Lima, Ohio, went further after approving its agreement: the council adopted an 18-month moratorium on data center construction in the city and on new requests for city water from developments in other municipalities, leaving the existing American Township deal in place.¹⁷

For site selection, the lesson is to treat water as an entitlement issue, not just a utility line item. Designs that rely on reclaimed water or closed-loop and waterless cooling can reduce both the legal and the political exposure, at some cost in power.

1. 01Estimate demand with the cooling engineer: average and peak daily use, and the range across design options.
2. 02Determine which body of law applies to each possible source, and which agency or district administers it.
3. 03If the land carries water rights, have counsel review the chain of title, priority dates, decreed uses and any history of non-use.
4. 04If buying from a utility, request a written will-serve letter and learn whether a large-user ordinance or council approval applies.
5. 05For new wells, check district or state rules, spacing, production limits and recent permit hearings in the area.
6. 06Build water conditions into the due diligence period so the purchase does not close before supply is confirmed.

Water law is state-specific and often local, so confirm conclusions with a water rights attorney and the relevant agency. State overviews such as our guides to Arizona and Texas add regional detail. If you want an outside view of a parcel’s water position alongside power and land, you can get a site reviewed.