Our desert region has become a bellwether for the nation's data center growth as the tech sector grapples with rising temperatures and scarce resources.

Why it matters: Arizona is an extreme microcosm of the challenges the AI boom is running into across the country, as tech companies race to build data centers demanding massive amounts of power and testing local water supplies.

"What took our utilities 100+ years to build, we need to double that within the next four to five years to keep up with demand," Arizona Corporation Commissioner Kevin Thompson said at an Axios Live event in Phoenix on Tuesday.

• "How do you do that and not put the cost onto the existing customers?" he continued

State of play: As regulators debate who should bear the costs of AI-driven infrastructure growth, states leading the data center boom are also beginning to reassess how much development they want to encourage.

• Arizona just paused certain data center tax incentives for three years.

"This three-year process gives us a little breathing room," director of the Arizona Governor's Office of Resiliency said at the event.

• She said the pause could help the state determine whether it should offer incentives for certain types of data centers or technologies that put less strain on the desert environment.

Case in point: Google's first Arizona data center in Mesa uses air-cooled technologies instead of the more water-intensive evaporative method due to the water scarcity issues facing the American southwest, a Google executive said.

Zoom in: Water can be used both to cool AI chips and to remove heat from the broader facility.

• Google says its Arizona site recirculates water in a closed-loop system for the chips while relying on air-based chillers to cool the facility.
• Air cooling generally uses more electricity but less water than evaporative cooling.

"There's certainly a tradeoff," Thompson said Tuesday. "In Arizona, we're more concerned about our water usage, and so that's why you're seeing a lot of — if not all — of the data centers now switching" to less-water intensive cooling methods."

Go deeper

Data centers need to win back community trust if they want to continue to move into Arizona, government and business leaders told us during Tuesday's Axios Live event in downtown Phoenix.

The big picture: Neighborhood opposition to data center projects has exploded statewide as residents question the health impacts of the megasites.

What they're saying: We asked Mahoney and Arizona Chamber of Commerce and Industry president and CEO Danny Seiden if the bad blood between neighbors and data centers could be overcome.

• Here's what they told us:

Mahoney: "Government needs to ensure that transparency is at the core of development."

• She said that public officials must play the role of convener, and bring all stakeholders to the table for "honest conversations."
• "Distrust and misinformation are rampant," she said.

Seiden: "The way we do business … has to change, and is already changing, particularly as it relates to data centers."

• He said that for too long, data centers projects have been subject to NDAs and secrecy, with little work done to build trust with surrounding communities.
• Seiden told us the Chamber has launched a campaign to urge businesses to do neighborhood work on the front end.

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Arizona isn't among the 33 states where Juneteenth is a state holiday, but there aren't still plenty of ways to commemorate emancipation across the Valley.

Juneteenth Celebration: Take the family to Gilbert for storytelling, music, drum and dance performances, arts and crafts and educational activities.

• Today, 10am-noon, Southeast Regional Library

Juneteenth Block Party: Free all-ages event in downtown Tempe featuring live music, dance battles and other performances, soul food trucks, interactive art and activities, a pop-up roller rink and an on-site bar.

• Tomorrow, 7-11pm, Centerpoint on Mill

Black Cowboy Cookout: Juneteenth Edition: Enjoy food trucks, dancing, live music, vendors, pony rides, a petting zoo and even a mechanical bull from the Black-owned nonprofit Black Hawk Freedom Ranch in south Phoenix.

• Tomorrow, 6pm, Robinson Ranch, 1231 E. Ardmore Road

Juneteenth Family Day: The theme of Goodyear's 5th annual event celebrates the traditions, culture and experiences of homecoming at an HBCU, with educational speeches, live performances, workshops and interactive activities.

• Tomorrow, 6-10pm, Goodyear High School

6th Annual Juneteenth Freedom Celebration: Live music and other entertainment, a community art wall, exhibitions for Black artists and authors, food and a kids' zone in downtown Phoenix.

• Saturday, 6-11pm, Arizona Center

Celebrate freedom

🎉 The grand opening for Buc-ee's first Arizona location in Goodyear will be Monday. Doors open at 6am. (12 News)

🏀 Suns star Devin Booker is changing his jersey number from 1 to 15 in honor of his father, who wore No. 15 as a college player at Missouri. (Arizona Sports)

⚡ The Arizona Court of Appeals overturned a controversial fee that APS imposed on customers with solar panels on their homes. (KJZZ)

🚫 Activists opposed to ICE's planned immigration detention center in Surprise took out a petition to dissolve the city and place it under county control. They need two-thirds of the city's qualified electors — about 70,000 people — to sign within six months. (Arizona Mirror)

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