New Mexico is in a historic drought. Oracle and OpenAI designed their newest data center with that in mind

New Mexico lost 209,000 acres of forest to drought and insects last year. Now a data center may pull millions of gallons of water from the same area.

New Mexico’s forests are dying faster than at any time on record. In 2025, the state mapped 209,000 acres of trees killed by bark beetles and other insects, which was more than a 200% increase over the year before, according to a newly released report from the New Mexico Forestry Division. And the main impetus for that arboreal death was the state’s dwindling water supply.

“At the beginning of January 2025, 35% of the state was in moderate drought and 20% in severe drought,” the report read. “By the end of December 2025, 71% of the state was in moderate drought and 52% was in severe drought.”

According to the report, New Mexico recorded its second-warmest year on record. The lower Rio Grande, the river that has sustained farming communities in the southern part of the state for centuries, is now a river of sand most of the year, as the aquifer underneath is dropping by more than a foot each year. The issue has to do with the dry conditions creating the perfect environment for bark beetles to kill trees in record numbers.

And 2026 is shaping up to be no different. “We had a bleak winter and little to no snowpack, and there are areas that are currently experiencing bark beetle attack,” said Victor Lucero, forest health program manager for the New Mexico Forestry Division. Drought stress, he said, is the primary condition that leaves trees defenseless: stripping them of the sustained sap flow that is their only natural shield against infestation. “Things may change with respect to tree mortality if things remain hot and dry,” Lucero said. The one scenario that could turn the tide: “If the summer monsoon rains arrive as predicted, this may improve the resilience of live trees to withstand bark beetle attack.”

Now, just two miles of the Mexican border in the Chihuahuan Desert, Oracle and OpenAI are building one of the largest data centers in the country.

Project Jupiter will span 1,400 acres in Doña Ana County, generate 2.5 gigawatts of electricity, and draw on $165 billion in investment capital if developers hit their targets. That number is bigger than New York’s Central Park, and the sheer expected electricity generation could power more than half of New Mexico.

A novel approach to water usage

Data centers require large volumes of water to cool their server farms running 24 hours a day, a resource conflict Fortune has documented from Georgia to Arizona, where developers were using water in communities already experiencing stress. But Project Jupiter is operating at a different scale entirely given its sheer size and the huge resource allocation needed in the state.

Developers of Project Jupiter purchased existing water rights from a sod farm just west of Sunland Park, New Mexico, for 2,400 acre-feet per year. After a report earlier this year that the project would need close to a million gallons of water a day, Oracle released a statement saying it was switching from water-intensive natural-gas turbines to fuel cells. The company now says the data center and fuel cell system together will use about 11 million gallons of non-potable water in closed-loop, recycled systems—something that

“We are excited to move forward with this updated energy solution, which reflects our commitment to both the latest innovation and community priorities as we advance the next generation of AI infrastructure,” said Mahesh Thiagarajan, executive vice president of Oracle Cloud Infrastructure, in the release. The “fuel cell technology enables us to deliver highly reliable on-site power with a lower environmental footprint—supporting the project’s performance needs while contributing to stronger environmental outcomes.”

Oracle has a formal goal to halve water use in water-stressed regions by 2035 and claims a 53% reduction in potable water use at its owned facilities since 2015. OpenAI, new to the data center space, hasn’t published any sustainability reports yet.

Despite local opposition to construction, the state’s official groundwater authority believe the state’s limited water resources won’t be put under any more strain. As a result, the water constraints on the state would be even lower than what’s required to keep a typical golf course green.

“What’s happening with Project Jupiter is they’re just taking a water right that exists and using it for something else,” New Mexico State Engineer Elizabeth Anderson told NPR. “It’s not gonna be taking water away from farmers.”

New Mexico’s own reporting on data centers

New Mexico’s official 50-Year Water Action Plan, developed by the governor’s office, projects the state will have 25% less water available in rivers and aquifers within 50 years and faces a shortage of 750,000 acre-feet without sustained action. That number becomes all the more concerning considering it was calculated before the New Mexico Forestry Division’s report was released.

Then in January of this year, the New Mexico Groundwater Alliance released a report warning groundwater levels are plunging to historically low levels, threatened by drought, climate change, water-hungry data centers, and PFAS contamination, and without a proactive strategy, more communities will face aquifer depletion and service disruptions. Groundwater provides more than half of the state’s total water supply. The report, written by coalition of water policy experts, EDF, water district officials, and lawyers, directly references “water-hungry data centers” language.

Economic development for areas in need

Doña Ana County genuinely needs investment. It has low-income residents, high unemployment, and one in four children living in poverty. Project Jupiter has pledged $360 million for schools and local infrastructure, $50 million for an upgrade to the county’s deteriorating water utility, and $12 million annually to the county budget.

But what these projects can provide to communities comes as a crossroads as data centers have driven half of U.S. electricity demand growth while communities across the country have moved to block or delay projects worth more than $85 billion. A Gallup poll from this spring found that 71% of Americans oppose an AI data center in their local area, a higher opposition rate than nuclear power plants.

That tension is building across the country. Nearly 50,000 Lake Tahoe residents have to figure out their next power source when their utility redirects power to serve tech facilities. The political pressure from rising electricity costs driven by the AI buildout is already reshaping the 2026 midterm landscape.

This story was originally featured on Fortune.com