AI Data Center Sues for Colorado River Water in California

Developer seeks to redirect farm water to AI infrastructure

A developer planning California's largest AI data center has filed a lawsuit seeking access to 287 million gallons of Colorado River water, setting up a legal battle that illustrates the growing tension between traditional agriculture and energy-intensive tech infrastructure in the water-scarce American West.

Imperial Valley Computer Manufacturing filed the lawsuit this month after the Imperial Irrigation District denied its request for water to support a proposed 330-megawatt data center in Southern California's Imperial Valley. The Colorado River serves as the sole freshwater source for the region and supplies water to 40 million people across the Southwest, according to details first reported by Business Insider.

Developer Sebastian Rucci told the publication his company would not increase overall demand on the river. Instead, the project would fallow nearby farmland and redirect that agricultural water allocation to cool the data center. Rucci characterized the water demand as equivalent to a 160-acre farm and said the approach would have "zero impact" on Colorado River allocations.

Why it matters

The case crystallizes a policy question that water-scarce regions will face repeatedly as AI infrastructure expands: Should water historically allocated to agriculture be redirected to power data centers? The answer carries implications for rural economies, food production, and the governance structures that have managed Western water for decades. As climate change intensifies drought conditions and AI companies race to build computing capacity, these conflicts will likely multiply across the Southwest.

Agricultural communities push back on "buy and dry"

Water policy experts say the lawsuit raises concerns beyond the volume of water involved. Michael Cohen, a senior fellow at the Pacific Institute who focuses on Colorado River Basin water use, told Business Insider the core issue is the developer's plan to purchase farmland, remove it from production, and reallocate the water for industrial purposes.

"There's a lot of resistance in any agricultural community to 'buy and dry' because that's jobs," Cohen said.

The Imperial Valley's economy has long centered on agriculture, producing cattle, alfalfa, lettuce, and spinach. Rhett Larson, a water-law expert at Arizona State University, noted the region's importance to national food supply, particularly winter produce. While individual landowners may profit from selling land or water rights, Larson said the economic damage often falls on farm-related businesses and workers who lack assets to sell.

Rucci countered that the data center would deliver substantial economic benefits, citing an independent study projecting 1,688 construction jobs, over 100 permanent positions, and $2.95 billion in economic impact over 30 years. He pointed to Imperial County's 17% unemployment rate as of May as evidence the region needs economic diversification.

Governance and control of water rights

Eric Reyes, executive director of the advocacy organization Los Amigos de la Comunidad, expressed concern the lawsuit attempts to circumvent the Imperial Irrigation District, a publicly owned utility with an elected board that has historically held water rights in trust rather than allowing individual landowner control.

Reyes characterized the developer's approach as a "private deal with a landowner" that could shift power over water allocation away from the public utility. He suggested some landowners prefer to "farm water instead of farmland" because selling water rights can be more lucrative than agricultural production.

Rucci rejected the characterization, stating that farmers have the legal right under state law to assign water and that the proposal would not require additional Colorado River allocation.

Larson framed the dispute as emblematic of broader Western water conflicts that extend beyond conservation. "The Colorado River basin has to decide what we want to be when we grow up and what it will take to get there," he said. "We have enough water to do a lot of great things. But we don't have enough water to do every good thing."

Business Insider's Kelsey Vlamis first reported the lawsuit and its implications for Western water policy.