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Project Blue near Tucson: the city said no, and the project was built anyway

The county sold the land 3-2 under an NDA that hid the customer. The Tucson council voted to end its involvement. The water story improved after a redesign, but there is still no confirmed tenant and a rate clause is in court.

Project Blue near Tucson: the city said no, and the project was built anyway
Background photo adapted from NOIRLab/NSF/AURA/P. Horálek, Wikimedia Commons (CC BY 4.0).

Case #5 in my data center series, Project Blue, Pima County, AZ. Part of My Case. The blank template is here.

This is a case where the community said no and the project was built anyway. It is also a case where the project got better after the fight, which you do not see often.

I want to give credit where it was earned and still ask what is left.

How to read this. Claims by companies, officials, and advocacy groups are labeled as claims. Where I could not find a number in the sources I opened, I wrote it down as an unknown and turned it into a question. Anything in a “My lean” column, and the conclusion, is my position on the evidence, and I am open to changing it. Facts are as reported through Oct 29, 2026.

The short version

This is a case where the community said no and the project was built anyway. Pima County sold the land by a 3-2 vote under a non-disclosure agreement that hid who the customer was. Tucson’s council voted unanimously to end its involvement over water and power. The developer then redesigned the campus around air cooling, which cut its planned water from about 1,910 acre-feet a year to wells permitted for 96.5, and got a ten-year power contract with minimum bills and a termination fee. The weak points are process and certainty: the contract’s rate-setting clause is being challenged by the Arizona Attorney General, and I could not find a confirmed tenant for a campus that could draw up to 286 MW.

Key numbers

  • 286 MW First-phase power agreement (Up to 286 MW from Tucson Electric Power under a 10-year contract. City officials’ fact sheet cites up to 600 MW at full buildout [6])
  • 3-2 County vote to sell the land (Pima County supervisors, June 17, 2025, at about $20.8M for 290 acres. Tucson’s council later voted unanimously to end its involvement [1][3])
  • 96.5 vs 1,910 Acre-feet of water a year (Permitted on-site wells now, against the original municipal supply plan in city documents [6][10])
  • 180 Permanent jobs, county claim (At an average of $64,000, from a chamber-commissioned study; the county’s contract requires 75 on site at $75,000 [1][2][6])

For the five-step test I use below, see the framework template. Most tables have a “My lean” column so you can see where my reasoning goes and argue with it.

The project

  • What: Project Blue, a data center campus on 290 acres. The county says the first phase could hold four buildings and the full property up to 10, with up to 2.25 million square feet [1][2]. It is developed by Beale Infrastructure. The county said in 2025 that Beale would not be the operator and the operator would be named later [1].
  • Where: County-owned land in the Southeast Employment and Logistics Center on South Houghton Road, north of the Pima County Fairgrounds, outside Tucson’s city limits [1][6]. The county says the site is not directly adjacent to residential neighborhoods [2].
  • Land deal: Pima County supervisors voted 3-2 on June 17, 2025 to sell the land for a market-appraised $20.8 million. The deal requires at least 75 full-time employees on site at an average of $75,000, with a county right to buy the land back for non-performance [1]. An affiliate of the developer closed on Dec 24, 2025 [10].
  • Power: Tucson Electric Power (TEP) has a 10-year energy supply agreement for up to 286 MW at 138 kV, approved by the Arizona Corporation Commission 4-1 on Dec 3, 2025. Service was expected to start in May 2027 and ramp over 18 months [4][5][6].
  • Water: The original plan, per city documents, used about 1,910 acre-feet a year of municipal water. After Tucson refused, Beale switched in September 2025 to a closed-loop air-cooled design. Two on-site wells are permitted under grandfathered groundwater rights totaling 96.5 acre-feet a year [6][10].
  • Status: Construction began in late April 2026 [9]. The Attorney General’s challenge to the power agreement is pending in Maricopa County Superior Court [7][8]. Pima County’s planning commission voted 8-1 on Oct 28 to advance new data center rules, heading to supervisors in early December [13].
  • Who decides what: The county (land sale, zoning, new ordinance), the City of Tucson (water service, which it refused), the Arizona Corporation Commission (the TEP contract), the Arizona Department of Water Resources (wells), and the courts [3][4][10].

Step 1: Define the community

Scale What they get and what they carry Who decides My lean
Immediate neighbors (south Houghton Road, fairgrounds area) Construction traffic and dust, and a large industrial campus on public land. The county says the site is not next to homes [2]. Anti-data center signs line the roads near the fairgrounds [10]. Unknown – noise, lighting and traffic studies for nearby residents. Pima County, through its land sale and zoning. Residents did not vote. Neutral on the siting itself. Industrial land near high-voltage lines is the right place if any.
City of Tucson No jurisdiction, but the city’s water, its residents as TEP customers, and its reputation. Council voted unanimously on Aug 6, 2025 to stop all staff work and later rejected any use of city water [3][9]. Hundreds of residents opposed it [6]. Mayor and council decided on city services, but not on the land, which is outside the city. The council’s no was clear and was bypassed. That is the central problem.
Pima County (about 1.08 million residents) Sold the land, took the political cost, and would receive part of $250 million of projected taxes over 10 years (county-cited figure) [2][14]. A county planning commissioner said the project came under a non-disclosure agreement and ‘we had no idea what we were actually voting for’ [13]. Board of Supervisors, 3-2. A split decision with a thin margin on a $3.6 billion project is a signal.
TEP customers (southern Arizona) Share the system. The ACC and TEP say protections prevent cost shifts [4][5]. Commissioner Walden dissented, saying the contract did not go far enough [4]. The Attorney General says one clause lets TEP and the developer set rate schedules between themselves [7]. Arizona Corporation Commission, an elected board. Tucson’s city attorneys had sought a public hearing [6]. The decisive scale. The contract’s remaining weak points are about exit and rates.
State of Arizona Gets an estimated $93 million of the $250 million in taxes over 10 years (county’s study) [2]. Enforcement of rate authority is in front of a state court [7][8]. ACC, the Attorney General, and ADWR for groundwater. A good test of whether the ACC can enforce a rule it wrote.

Step 2: Net-benefit test

Costs first. Each row says who carries it, what the record shows, and where the gap is.

Cost Who bears it Evidence My lean
Power contract risk if the tenant leaves or never arrives TEP customers. The 10-year agreement has minimum monthly bills, credit security and a termination fee, with multi-year notice required after May 2027. The developer pays for line extensions and a new switchyard [4][5]. TEP says there are no discounts or incentives [5]. But commissioners asked how certain it was that Beale would find an operator, and Commissioner Walden called the contract less favorable to ratepayers than similar ones elsewhere [6]. Unknown – the minimum-bill level and the termination fee amount in dollars. The best terms of any case here on paper, and the thinnest on counterparty. Get the figures published.
No confirmed tenant Customers, county, community. County documents and a 2023 NDA named Amazon Web Services as the intended user. Beale said it had no agreement with AWS, and an AWS spokesperson later said it was not considering the site [11][6]. The Arizona Republic reported a hunt for a new operator and reporting of talks with Meta that it could not confirm [6]. I found no public confirmation of a tenant as of Oct 29, 2026. A speculative build on public land. Make the tenant a condition.
Rate-setting authority All TEP customers. The Attorney General argues a contract provision lets TEP and Beale set rate schedules between themselves, which the Arizona Constitution reserves to the Commission [7]. ACC attorneys say the contract requires compliance with state law, so approval is still needed. At the Sept 24 hearing the judge discussed adding a stipulation to make that clear and issued no ruling [8]. Likely fixable with a clarifying clause. Worth fixing.
Water on site Local aquifer users. Two wells are permitted for up to 96.5 acre-feet a year, about 31 million gallons, mainly for potable and fire-suppression use. Beale estimates 15,000 to 20,000 gallons a day at full operation, which it compares to two or three restaurants [10]. The original plan was about 1,910 acre-feet, 6% of the local water system’s supply, per city documents [6]. The best-mitigated water profile in this series, at a real electricity cost.
Water behind the power Water users where the power is made. Air cooling saves site water but uses more electricity, and electricity carries water at the power plant. On national averages the two cancel when the switch raises power use by about 8.3% [17]. Unknown – the size of Project Blue’s cooling energy penalty. Ask for the energy figure.
Construction water Tucson Water. Tucson’s city manager said a contractor took Tucson drinking water through a construction meter for dust control and moved it out of the service area. The city revoked the meter on May 4, 2026 and asked for two acre-feet of water credits. Beale said the contractor followed standard procedure and that it is sourcing non-potable water elsewhere [9]. Small volume, large trust cost.
Future power supply TEP customers, air quality. The agreement covers only the first phase. Future phases would need new agreements through the same public process, and TEP has said it would likely develop a mix including new gas generation [6]. The developer pledged to buy renewable energy credits to offset fossil generation, which is an accounting offset, not a physical one [6]. The next fight.
Secrecy and process Public, voters. The county signed a 2023 NDA with AWS for up to five years or until completion [11]. Commissioners say they were misled [13]. The board later cut the maximum NDA term from five years to two and expanded enhanced due diligence to large water and power users [12]. In 2025 supervisors voted 3-2 against applying a similar review to Project Blue [6]. The process lesson is now written into county policy.

Now the benefits.

Benefit Who gets it Evidence My lean
Land sale Pima County general fund. About $20.8 million at an appraisal-based price, one time [1]. The county can buy the land back for nonperformance [1]. Real but small against the risk.
Tax revenue (county claim) County, Tucson, state. The county cites $250 million over 10 years: $97 million to Tucson, $60 million to Pima County, $93 million to Arizona [2]. The analysis was commissioned by the Chamber of Southern Arizona, which supports the project [6]. Because the city never annexed the site, I read the Tucson share as unlikely to arrive as stated. Unknown – the revised split. Treat the Tucson line as unreliable.
Construction jobs Regional trades. County: more than 3,000 direct jobs over 2026 to 2028 and $1.2 billion of construction spending [1][2]. Unknown – local share and wages. Real and temporary.
Permanent jobs Region. County: about 180 including contractors, averaging $64,000, with 75 on-site employees required at $75,000 [1][2]. At 286 MW that is 0.63 jobs per MW including contractors and 0.26 for the required 75, against a benchmark of 0.15 to 0.35 for direct operating staff [16]. A modest number, with a clawback.
Infrastructure South Houghton corridor. Expanded reclaimed water lines and other infrastructure that the county says make nearby land more attractive [1]. Unknown – costs and who pays. Good if the developer pays.
Community funds (developer claim) Pima County. Beale pledged a $5 million scholarship fund and $10 million more in later phases. In November 2025 the county said it had not reached an enforceable agreement on such commitments [6]. A pledge until it is signed.
Grid benefit (utility claim) Other TEP customers. TEP says large users spread fixed system costs, and Vice Chair Myers said the data center would reduce transmission costs for others [4][5]. Plausible, unquantified.

Back-of-envelope calculator

Defaults are the figures reported above. Swap in your own numbers to test any project. This is my arithmetic, not a forecast.

Inputs (defaults)

  • Contracted load (MW): 286
  • Load factor (%): 100
  • Water now: permitted wells (acre-feet a year): 96.5
  • Water originally planned (acre-feet a year): 1910
  • Permanent jobs (county, incl. contractors): 180
  • Required full-time employees: 75
  • Projected taxes ($ million): 250
  • Share claimed for Tucson ($ million): 97
  • Years: 10

What they give

  • Annual energy at full load: 2,505 GWh
  • Direct water intensity now: 0.048 liters per kWh at the permitted well volume, against 0.375 for the 2023 U.S. data center average [17]. This is a ceiling on what the wells allow, not measured use.
  • Direct water intensity of the original plan: 0.94 liters per kWh, which is 20 times the permitted wells
  • Permanent jobs per MW: 0.63 including contractors, 0.26 for required employees (benchmark 0.15 to 0.35 for direct staff) [16]
  • Tax per year: $25 million a year across all governments, of which 39% was claimed for Tucson

Step 3: Weight by need

Indicator What the data says What it means for the weighting My lean
Unemployment Pima County was 4.8% in September 2026, not seasonally adjusted, and 5.6% to 5.7% from June through August [15]. Moderate need, with seasonal swings. Jobs matter, but this is not a distressed labor market.
Income and poverty Median household income $72,067 against $81,486 for Arizona. Poverty 13.5% against 11.7% statewide [14]. Somewhat below state averages, with a larger tax-base need than a wealthy suburb. Weight revenue moderately.
Education and skills 37.9% hold a bachelor’s degree, above the state’s 34.7% [14]. A workforce with options. Technical roles may be filled locally. The scholarships help only if they are enforceable.
Water and energy affordability Tucson’s water system is close to the site, and the original plan was 6% of supply [9][6]. TEP customers already worry about summer bills, as speakers at the ACC hearing said [6]. The scarce resources here are water and cheap power, not jobs. Weight resource risk above revenue.
Housing Median home value $349,500 [14]. Pressure from 3,000 construction workers is a question the record does not answer. Ask for a housing plan.

Step 4: Opportunity cost

Alternative What the record shows My lean
Other employers on the same land The county says the infrastructure upgrades would make the rest of the logistics center more attractive to other employers [1]. Unknown – any comparison of jobs per acre with other users. A data center gives few jobs per acre. Ask for the comparison.
Power for other uses The 286 MW contract uses existing resources plus solar and storage in development, per TEP [5]. Unknown – what other customers could have used that capacity for. TEP says it can serve phase one from existing resources plus solar and storage already in development.
Water for other uses The original plan would have taken 6% of Tucson’s supply [6]. Wells now limit that [10]. The redesign answered the largest alternative-use objection.
A different site Opponents said there is plenty of room in the United States to build in places better suited than Tucson [3]. A fair point. Arizona draws data centers for competitive operating costs, low natural disaster risk and strong fiber, per the Arizona Republic [6].
A rules-first approach The county is now writing rules that would limit data centers to heavy industrial land, about 2% of county land, under conditional use review [13]. The rules came after the first project. The sequence matters.

Step 5: Leave AI out of it

Imagine a 286 MW foundry on county land. The county would not have signed an agreement keeping the buyer’s name from its own staff, the city would have asked what it burns and what it drinks, and the commission would have asked who was paying if the business failed. The framework asks the same questions of every project. What stands out in Project Blue is not that it is a data center. It is that a public body sold land under an agreement that stopped it from telling its own board who the buyer was, and the intended buyer later said it was not considering the site.

What other places do

Tool What it does Does it reach Project Blue?
Large-load tariffs and minimum bills Michigan required a 19-year term and an 80% minimum bill for the Saline Township project. Virginia requires 85% and 60% minimums at 25 MW and above. Yes, in a 10-year contract with minimum bills and a termination fee [4][5]. The figures were not in the sources I opened.
Land-sale clawback A right to buy land back if jobs and capital are not delivered. Yes. The county has it [1].
NDA limits Shorter terms and a duty to name the company before a vote. Yes, after the fact. County policy now sets a two-year limit and a sunshine period before approvals [11][12].
Large water user rules Require large users to apply and show conservation. Tucson adopted one after the vote [11]. Unknown whether it reaches sites outside the city.
Enhanced due diligence Extra review of large water and power users. Added to county policy in September 2026 [12].
Zoning limits Restrict where data centers can go and require conditional use review. A draft is moving, with a supervisors’ vote expected in early December [13].

Questions the public should demand answers to

  1. Who is the tenant, and when will the county and the commission be told in writing?
  2. What is the minimum monthly bill and the termination fee in dollars, and how long does the security last?
  3. Will the court require a clause making Commission approval of any rate change explicit?
  4. What would happen to TEP customers if the campus is built and never fully leased?
  5. How much extra electricity does air cooling use, and what water does that power consume?
  6. What does Beale’s actual well pumping look like each year, and will ADWR reports be public?
  7. Does the project use Arizona’s data center tax incentives, and what do they cost the state?
  8. How will the $250 million tax estimate change now that the site was not annexed into Tucson?
  9. Is the $5 million scholarship pledge enforceable, and who administers it?
  10. How many of the 75 required jobs will be filled by Pima County residents, and at what wage?
  11. What are the backup generator and air permits, and who monitors them?
  12. Will the county’s new rules apply to later phases of this campus?

Where I land

This conclusion is my own position.

Project Blue is what happens when the process is the problem and the project improves anyway. The city said no, the county sold the land by a one-vote margin under an agreement that hid the buyer, and the developer then fixed the biggest objection by cutting its water plan from about 1,910 acre-feet to wells permitted for 96.5. The power contract has real protections. My concern is that a campus that could draw 286 MW has no publicly confirmed tenant, and the Attorney General has asked a court to fix a clause on who sets rates. So I land at conditional. If the customer is named, the termination and minimum-bill numbers are public, and the rate clause is fixed, the net-benefit math looks decent. If not, ratepayers were handed a billion-dollar bet they were never asked about. Here is the framework. Where does it break? Change my mind.

Sources

Numbers in brackets in the tables refer to this list.

  1. Supervisors approve billion-dollar development deal with data center provider. Pima County (county claims), Jun 17, 2025. https://content.govdelivery.com/accounts/AZPIMA/bulletins/3e58e79
  2. Project Blue FAQ. Pima County (county claims). https://www.pima.gov/project-blue-faq
  3. Tucson City Council votes to end Project Blue. KOLD 13 News, Aug 6, 2025. https://www.kold.com/2025/08/06/city-council-votes-end-project-blue/
  4. ACC Approves TEP Energy Supply Agreement, Ensures Customer Protections from Costs Related to Data Center Project. Arizona Corporation Commission, Dec 5, 2025. https://www.azcc.gov/Rene-Lopez/news/2025/12/05/acc-approves-tep-energy-supply-agreement--ensures-customer-protections-from-costs-related-to-data-center-project
  5. Data Center Campus Proposal. Tucson Electric Power (company claims). https://www.tep.com/data-center-esa/
  6. Regulators OK power deal for Project Blue, but Amazon looks to be out. Arizona Republic via Yahoo Finance, Dec 4, 2025. https://finance.yahoo.com/news/regulators-ok-power-deal-project-120247012.html
  7. Attorney General Mayes Appeals Arizona Corporation Commission’s Approval of Tucson Electric Power Data Center Deal for Project Blue. Arizona Attorney General, Feb 19, 2026. https://www.azag.gov/press-release/attorney-general-mayes-appeals-arizona-corporation-commissions-approval-tucson
  8. Last attempt at rehearing Project Blue’s energy service agreement rests on Maricopa County judge. KJZZ, Sep 24, 2026. https://www.kjzz.org/fronteras-desk/2026-09-24/last-attempt-at-rehearing-project-blues-energy-service-agreement-rests-on-maricopa-county-judge
  9. Project Blue developers improperly used Tucson water, city has shut it off. AZPM, May 6, 2026. https://www.azpm.org/news/2026-05-06/229644-project-blue-developers-improperly-used-tucson-water-city-has-shut-it-off
  10. Arizona water officials approve wells tied to Project Blue data center. AZPM, May 28, 2026. https://www.azpm.org/arizona/2026-05-28/229919-arizona-water-officials-approve-wells-tied-to-project-blue-data-center
  11. Pima County NDA confirms Amazon is behind Project Blue data center. Arizona Luminaria, Oct 1, 2025. https://azluminaria.org/2025/10/01/pima-county-nda-confirms-amazon-is-behind-project-blue-data-center/
  12. Board of Supervisors updates county NDA policy following data center controversy. AZPM, Sep 9, 2026. https://www.azpm.org/news/2026-09-09/231146-board-of-supervisors-updates-county-nda-policy-following-data-center-controversy
  13. Pima County planners advance changes to data center rules. KOLD 13 News, Oct 28, 2026. https://www.kold.com/2026/10/29/pima-county-planners-advance-changes-data-center-rules/
  14. Pima County, AZ profile. Census Reporter (ACS 2024 1-year). http://censusreporter.org/profiles/05000US04019-pima-county-az/
  15. Unemployment Rate in Pima County, AZ. FRED, St. Louis Fed, Sept 2026. https://fred.stlouisfed.org/series/AZPIMA9URN
  16. Data Center Employment Forecast Analysis. USC Zage Business of Energy Initiative, Dec 2025. https://hamminstitute.org/site-files/documents/data_center_workforce.pdf
  17. Data-center water use: the direct and indirect numbers (citing LBNL 2024). Who Pays for Data Centers, Aug 2026. https://whopaysfordatacenters.com/water/

Where this fits

Previous: Case #4, Meta Hyperion, Richland Parish, LA. Next: Case #6, xAI Colossus, Memphis and Southaven. The full series starts at My Case.

Send me a project

If there is a data center near you that you want run through this test, reply to my post on X (@arietrouw) with the project name and location. I will pick some and publish them here.

Framework by Arie Trouw (@arietrouw). Licensed CC BY 4.0.

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