AI data center plan tests New Mexico’s strained water supply

Oracle and OpenAI are advancing a large AI data center project in southern New Mexico, putting a major tech buildout in a state already under severe water pressure. The project matters because data centers can require substantial water and power, and New Mexico’s own reports warn that drought and falling groundwater are worsening.

Project Jupiter is planned for Doña Ana County, near the Mexican border in the Chihuahuan Desert, according to Fortune. The development is expected to cover 1,400 acres, draw as much as $165 billion in investment if developers meet their goals, and use 2.5 gigawatts of electricity, Fortune reported.

The site is being developed as New Mexico’s forests show sharp signs of stress. The New Mexico Forestry Division said in a newly released forest health report that insects, including bark beetles, killed trees across 209,000 acres in 2025, more than triple the prior year’s level.

The same report tied the damage to worsening drought. It said 35% of New Mexico was in moderate drought and 20% was in severe drought at the start of January 2025; by the end of December, those figures had risen to 71% and 52%, respectively.

New Mexico also had its second-warmest year on record, according to the Forestry Division report cited by Fortune. Fortune reported that the lower Rio Grande, long central to farming in southern New Mexico, now runs dry for much of the year, while the aquifer beneath it is dropping by more than a foot annually.

Water rights and cooling systems

Project Jupiter’s developers bought existing water rights from a sod farm west of Sunland Park for 2,400 acre-feet a year, Fortune reported. After reporting earlier this year that the project could need nearly 1 million gallons of water a day, Oracle said it would use fuel cells rather than water-intensive natural gas turbines.

Oracle said in an April statement that the data center and fuel-cell system would use about 11 million gallons of non-potable water in closed-loop, recycled systems. The company said the revised power plan would lower the project’s environmental footprint while meeting performance needs.

Oracle has set a target to cut water use in water-stressed areas by half by 2035 and says potable water use at its owned sites has fallen 53% since 2015, according to Fortune. OpenAI has not released sustainability reports or total water-use figures, Fortune reported, and neither company responded to the outlet’s requests for comment.

New Mexico State Engineer Elizabeth Anderson told NPR the project is shifting an existing water right to a new use rather than adding a new claim on water. She said it would not take water from farmers, according to NPR.

State warnings and local tradeoffs

New Mexico’s 50-Year Water Action Plan, produced by the governor’s office, projects that rivers and aquifers will have 25% less water available within 50 years. The plan says the state faces a 750,000 acre-foot shortfall without continued action.

The New Mexico Groundwater Alliance warned in January that groundwater levels are falling to historic lows. Its report cited drought, climate change, PFAS contamination and water-hungry data centers as threats, and said groundwater supplies more than half of New Mexico’s water.

Doña Ana County has strong economic needs, according to Fortune, including high unemployment, low incomes and a child poverty rate of one in four. Project Jupiter has pledged $360 million for schools and local infrastructure, $50 million for upgrades to the county water utility and $12 million a year for the county budget, Fortune reported.

The debate reflects a broader conflict around AI infrastructure. Fortune reported that data centers have accounted for half of recent U.S. electricity demand growth, while communities have delayed or blocked more than $85 billion in projects; a Gallup poll this spring found 71% of Americans oppose an AI data center near where they live.

This story draws on original reporting from Fortune.