On Feb. 20, 2026, a downtown Phoenix courtroom turned into a battleground over how Arizona decides where the Valley can keep growing. Homebuilders argue that the Arizona Department of Water Resources has quietly rewritten decades-old rules that determine which subdivisions qualify for the certificates they need to sell lots. ADWR insists it is simply using updated science to protect groundwater aquifers and the millions of people who depend on them. At the heart of the case is a pointed legal question: can complex modeling and staff interpretation stand in for formal rulemaking, or does that cross the line set by state law.
Courtroom showdown sharpened the core question
During the Feb. 20 hearing, Maricopa County Superior Court Judge Scott Blaney pressed ADWR attorneys on whether the agency's updated regional groundwater models amounted to "the creation of a new rule," cutting straight to the builders' claim that the department overstepped its authority. Lawyers for ADWR answered that they were carrying out long-standing statutory duties, only now with newer hydrologic data, in order to safeguard water for both current and future users. The tone of that back-and-forth, and the way both sides framed the fight, was detailed by KJZZ.
How ADWR changed the rules
In late 2024, ADWR rolled out what it calls an "Alternative Path to Designation of a 100-Year Assured Water Supply" (ADAWS). The idea is to give certain water providers another way to qualify for a service-area designation by bringing in alternative water supplies and offsetting groundwater pumping. The department says ADAWS, along with related policy steps, is meant to protect existing certificates while creating a controlled way to approve new housing where it can be supported without deepening groundwater overdraft. ADWR has published program descriptions and early implementation details on its website.
What builders say and why they sued
The Home Builders Association of Central Arizona, represented by the Goldwater Institute, filed suit in early 2025. The complaint says ADWR's use of Active Management Area-wide "unmet demand" projections and depth-to-water thresholds has the practical effect of denying Certificates of Assured Water Supply without going through the public rulemaking process that state law requires. The plaintiffs, joined by some legislative leaders, have also described portions of ADAWS as adding an extra buffer on new alternative supplies that works like a de facto surcharge. That critique and the legal theory behind it are laid out by the Goldwater Institute.
Who’s defending the agency
On the other side, utilities and city interests have stepped in to back ADWR in court. Salt River Project, the city of Chandler and the Arizona Municipal Water Users Association argue that refusing to use updated hydrologic information would hollow out the value of existing certificates and threaten "certainty and stability" for current homeowners. They say the department's approach is aimed at preventing long-term damage to the region's water security rather than blocking growth for its own sake, according to coverage of the Feb. 20 hearing by KJZZ.
Legal crossroads for Arizona water policy
In late January, the court rejected a motion to dismiss the case, keeping the lawsuit alive and setting up a potentially significant ruling on how far state agencies can go in interpreting statutes. Legal observers have noted that the dispute highlights a growing tension between region-wide hydrologic modeling and the more traditional, site-by-site assessments that have anchored Arizona's 100-year assured water supply program for decades, as reported by the Rose Law Group Reporter.
What it means for West Valley growth
The ripple effects are already being felt in fast-growing edges of the metro area, including Buckeye and Queen Creek. There, ADWR's updated hydrologic findings led to a pause on new groundwater-based certificates, putting some subdivision plans on hold. The department and the governor's office have promoted ADAWS and related programs that move water from agricultural uses to urban ones as ways to eventually restart growth without putting more pressure on aquifers. State and business coverage has noted that ADWR has begun issuing groundwater credits and the first ADAWS designations that could reopen parts of the West Valley to development, according to reporting from inBusinessPHX.
Next steps
The lawsuit will keep moving through Maricopa County Superior Court. If the judge ultimately finds that ADWR exceeded its authority, the ruling could force changes in how the state measures and enforces 100-year water supplies, whether through court-ordered limits, new rulemaking or fresh legislation. In the meantime, ADWR and various water providers are continuing to lean on alternative pathways they say are meant to allow more housing while still protecting groundwater. Legal analysts and stakeholders say that basic balancing act will remain a central battleground for Arizona's growth, and they have outlined the stakes and the expected timeline in recent coverage by the Rose Law Group Reporter.
