The Arizona Daily Star has been doing a great job in covering Project Blue, the name given to the proposal from a developer to build data centers in metro Tucson for Amazon Web Services (AWS).
Unless I missed it, however, the daily has not answered a burning question that is as burning as stepping barefoot on hot asphalt in Tucson in the summer sun: Why Tucson?
Data centers need staggering amounts of water and electricity for cooling and for powering their banks of computers. But Tucson is one of the hottest and driest cities in the nation, a city with limited water supplies and with high costs for water and electricity.
The same question could be asked about the many data centers that have been built and are planned to be built in metro Phoenix, two hours up the interstate but still in the Sonora Desert. The Phoenix metropolis has better water and power supplies than Tucson, but supplies are still a drop in the bucket compared to supplies of water and electricity in some other parts of the country, including Seattle, where AWS is headquartered.
Putting data centers in the desert seems as foolish and wasteful as putting cranberry bogs in the desert.
Well, Amazon is not foolish, at least not about its balance sheet, profit and loss statement, and market capitalization. The same can be said for other corporate giants investing in artificial intelligence and data centers, such as Google and Meta.
So, why Tucson (and Phoenix)?
The top four reasons are as follows:
First and foremost, owners of data centers get a big tax break from the state of Arizona. If a company invests at least $50 million in data centers in urban locations and $25 million in rural locations, it is exempted from paying state, county and local sales tax on equipment purchases for up to ten full calendar years.
Second, while electricity isn’t cheap in Arizona, it’s not as expensive as electricity in California.
Therefore, although Meta, Google and other big users of AI and data centers are headquartered in California, it makes economic sense to locate the centers in Arizona—at least until the data centers drive up the cost of power in the Copper State. In a real sense, California companies are being subsidized by Arizonans through the tax code and through their electricity bills.
Third, Arizona is largely immune from natural disasters that can knock data centers out of commission, such as earthquakes, hurricanes, floods, and tornadoes.
A fourth reason comes from Novva Data Centers, which is a big developer and operator of data centers:
Arizona’s central positioning within the Southwest allows for rapid connections to major metros like Los Angeles, Las Vegas, Denver, and Dallas. That means lower latency for content delivery, cloud services, and enterprise applications. The state is also crisscrossed with long-haul fiber routes and carrier-neutral interconnection points—making it ideal for hybrid and multi-cloud environments.
Novva gives other reasons that are less important and can be found here.
The situation in the Phoenix suburb of Mesa is instructive. The city of over a half-million people has gone whole-hog into data centers but is now seeing a need to tighten its zoning and regulations governing the industry, as detailed in a Mesa Tribune story at this link.
Mesa’s economic development director says in the story that data centers won’t help the city achieve its stated goal of attracting 100,000 high-value manufacturing jobs. He went on to say:
We want to make sure we prioritize some of the land that’s down here for the manufacturing and high-wage, high-quality jobs that would be in aerospace, defense, clean tech, a bunch of different diverse industries that we’ve been targeting and trying to reach out to . . . I want to say, just in a broad stroke, we’re trying to create those permanent-type jobs.
And so data centers typically aren’t the highest job creation engine out there. We’re trying to create that diverse economy where we’re not putting all of our eggs in one basket. So we’re in support of adopting the proposed text amendment for responsible, sustainable and balanced economic growth going forward.
Finally, there is a balanced analysis of data centers at this link. The analysis is a collaboration between APM Research Lab and the Ten Across initiative, housed at Arizona State University. It addresses the question, “Are data centers depleting the Southwest’s water and energy resources?”
My answer is yes. But admittedly, I’m biased, since I’d rather see cranberry bogs in Tucson than data centers, because I can at least eat cranberries.
Mr. Cantoni can be reached at [email protected].