The case serves as a critical early test for Imperial County’s Lithium Valley development strategy, which envisions shifting agricultural water to support decades of industrial growth, including lithium processing and data centers.
Imperial Valley Computer Manufacturing (IVCM) is suing the Imperial Irrigation District (IID) after the utility denied the company’s request for about 260 million gallons of Colorado River water per year, or roughly 750,000 gallons per day, to cool a planned 330 MW AI data center in Imperial County. The case tests whether water historically used for agriculture can be redirected to industrial projects envisioned in the county’s emerging Lithium Valley plan.
Lawsuit Centers on Agricultural-to-Industrial Water Transfers #
The developer says it has leased 160 acres of farmland that historically consumed about the same amount of water and plans to retire that land from production, arguing the conserved water should instead supply the proposed 950,000-square-foot campus.
IID rejected the request on May 1, setting up a legal fight that extends well beyond a single project to the broader question of whether agricultural water can be lawfully, physically, and environmentally redirected to industry under existing service rules and regional water-rights frameworks.
The lawsuit comes as Imperial County advances its proposed Lithium Valley Specific Plan. A newly released Water Supply Assessment (WSA) concludes that the region can support decades of new lithium processing, manufacturing, logistics, and data center development by shifting Colorado River water from retired farmland to industrial uses.
Today, about 149,000 acre-feet of Colorado River water is delivered annually to agriculture within the Lithium Valley planning area, according to the WSA. The assessment projects that industrial development would require about 63,243 acre-feet per year after 20 years and 77,776 acre-feet per year after 30 years, remaining below current agricultural demand if sufficient farmland is retired.
Rather than identifying a new water source, the county’s strategy assumes that industrial projects can use water made available as farmland transitions out of production. Under the proposed Water Phasing Policy, developers relying on reduced agricultural demand would have to demonstrate that enough farmland has been retired to offset a project’s water use or provide an alternative supply. The WSA also assumes industrial facilities will recycle increasing amounts of water over time, beginning at roughly 20% and rising to 80% by 2055.
IID’s Current Policy and the Gap to Long-Term Demand #
The WSA acknowledges that the county’s vision cannot be achieved under IID’s current Interim Water Supply Policy. IID currently provides 18,620 acre-feet per year for new non-agricultural water users. The county projects that more than three times that amount will be needed within two decades and concludes that changes to IID policy would be required to accommodate full buildout.
One Project, a Larger Test for Coupled Infrastructure #
Neil Osnato, founder of Persistence Analytics Group, told Data Center Knowledge that the case illustrates a broader challenge as utilities evaluate large AI campuses that depend on multiple critical resources.
“A data center is not a 330 MW electric load with a separate water issue,” Osnato said. “It is one coupled infrastructure obligation, and utilities will get into trouble when they evaluate those dependencies in isolation.”
Osnato said utilities increasingly must evaluate electricity, water, wastewater, and other infrastructure together rather than treating each independently. Retiring farmland may reduce water use, he added, but it does not automatically establish that the water can be legally, physically, and environmentally redirected to support a large industrial project.
Long-range plans may assume industrial growth can be accommodated through land conversion and new infrastructure, while utilities must evaluate individual applicants under existing service rules, physical capacity, and resource constraints. When those frameworks are not aligned, the result can be litigation, development delays, or public opposition, Osnato noted.
To support future growth, Imperial County’s plan proposes a regional backbone water conveyance system, 12 water storage facilities, and a special district to build and manage new infrastructure.
Why This Matters for Lithium Valley Projects #
The proposed IVCM campus would require about 880 acre-feet of water annually, only a small share of the planning area’s projected industrial demand. But the lawsuit could become an early test of whether Colorado River water can be redirected from agriculture to support the industrial buildout envisioned for Lithium Valley.
If IID ultimately declines to allow such transfers under current or revised policies, that stance could influence future proposals for lithium processing plants, advanced manufacturing facilities, and AI data centers across the region.