Drive past almost any mid-size American city right now and there’s a good chance a data center is going up somewhere nearby. Most people only think about these buildings when their electricity bill jumps. But there’s a quieter resource crunch happening at the same time, and it’s starting to show up in city council meetings, state legislatures, and now in a major new policy report: water.
A report released this week by the Information Technology and Innovation Foundation’s Center for Clean Energy Innovation makes a bold claim right in its title. It’s called "The Data Center Water Problem Is Soluble," and its author, research director Dr. Robin Gaster, argues that the fight over data centers and water doesn’t need a federal law, a national building freeze, or a new technology breakthrough to get better. It needs something far less dramatic: states that actually know what’s going on in their own backyards.
A Boom That Outran the Rules Written for It
It’s easy to forget how fast this happened. Just a few years ago, data centers were a niche topic for utility regulators and IT trade publications. Today they are one of the most contested land use issues in the country. Our earlier look at how AI data centers are coming for your land, water and power laid out just how much a single large facility can draw from a local aquifer or river, sometimes hundreds of millions of gallons a year, mostly to keep server racks from overheating.
That growth has triggered a political backlash that would have been hard to imagine a decade ago. In 2025 alone, more than 200 bills addressing data centers were introduced across all 50 states, and more than 40 were signed into law. Bans and outright moratoriums are now under active discussion in more than 20 states. Maine is on track to become the first state to formally pause new data center construction, with a hold in place until November 2027. We’ve covered similar fights before, including a wave of state and federal moratorium proposals that range from narrow water reporting rules to sweeping construction freezes.
The financial consequences are already visible. More than $130 billion worth of data center projects were delayed or abandoned in just the first quarter of 2026, according to the ITIF report, more than the total for all of 2025 combined. That’s not a small hiccup. It’s a sign that the current mix of local opposition, patchwork state rules, and industry secrecy is starting to genuinely slow down one of the largest infrastructure buildouts in US history.
What the New Report Actually Recommends
Gaster’s central argument is refreshingly narrow. He isn’t asking Congress to pass sweeping new water legislation, and he isn’t asking the industry to invent some miracle cooling technology that uses zero water. Instead, the report says plainly: "The water problem is soluble. The technology exists. The policy instruments are available." What’s missing, according to the report, is institutional coordination, regulatory specificity, and a shared set of standardized metrics that states, utilities, and data center operators can all use to talk about the same thing.
The recommendations are built around three ideas. First, standardized reporting, so that a data center in Ohio and one in Arizona are measuring and disclosing water use the same way, instead of each state inventing its own definitions. Second, watershed-based reviews, meaning decisions get made based on the actual health of the specific river basin or aquifer a facility would draw from, rather than a blanket statewide cap that ignores local conditions. Third, performance standards that reward facilities for using less water and recycling more of what they do use, instead of treating every project the same regardless of how efficient its cooling system is.
Crucially, none of this requires a new federal water mandate or a national zero-water technology standard. The report frames its recommendations as achievable using tools that already exist on the books, ready for adoption by governors, state legislators, public utility commissions, water authorities, the Department of Energy, and the General Services Administration. That’s a deliberately practical pitch aimed at people who actually have to implement policy, not just debate it.
The Data Gap Is Already a Real Problem
If you want to see why "regulatory specificity" matters in practice, look no further than Texas. State regulators asked data center and cryptocurrency mining operators to voluntarily report their water use through the Public Utility Commission, and the response has been dismal. Even the mandatory version of the survey, run by the Texas Water Development Board, saw its response rate fall from about a third of operators in 2024 to just 17 percent in 2025. Companies cite competitive and proprietary concerns, and since the penalty for skipping the mandatory survey tops out at a $500 misdemeanor fine, there’s little reason for anyone to comply. One state lawmaker described the participation rate bluntly as "pretty pathetic."
Not every state is starting from zero, though. Ohio already has a working example of the watershed-based approach the ITIF report is pushing. Under the Great Lakes-St. Lawrence River Basin Water Resources Compact, any facility in the Lake Erie watershed that wants to withdraw more than a million gallons a day has to get a consumptive-use permit and prove it won’t significantly harm the basin. It’s one of the few frameworks in the eastern US that actually targets water consumption itself, not just the volume pulled out of the ground. Virginia and California are both moving in a similar direction, tightening reporting requirements even as they remain two of the biggest data center hubs in the country.
Why This Matters Beyond Policy Wonks
It’s tempting to file this under "regulatory inside baseball" and move on, but the stakes are pretty concrete for anyone living near one of these facilities. Communities that can’t get a straight answer about how much water a proposed data center will use have every reason to assume the worst and fight the project outright, which is exactly what’s fueling the moratorium wave in the first place. Meanwhile, operators that are already investing heavily in efficient cooling get lumped in with the worst offenders because there’s no standardized way to prove the difference.
That’s part of why the engineering side of this story matters just as much as the policy side. Some operators are already leaning into designs like modular data centers built for faster, more efficient deployment, which can pair naturally with closed-loop cooling systems that recycle the same water instead of constantly drawing fresh supply. If states adopt performance standards that actually reward that kind of investment, it gives operators a real incentive to build smarter instead of just building fast.
The Bottom Line
Nobody expects the fight over data centers to cool off anytime soon. AI demand isn’t slowing down, and neither is the need for the physical infrastructure behind it. But the ITIF report makes a case worth taking seriously: the choice isn’t really between unchecked growth and a nationwide construction freeze. There’s a middle path built on states actually knowing what’s happening in their own watersheds, and holding operators to consistent, comparable standards.
Whether governors and state legislators pick up that playbook before the next wave of moratorium bills lands is the real question. Given how much money is already being delayed or walking away entirely, the incentive to get this right is only going to grow.
