Casa Grande's Planning and Zoning Commission meets Thursday to consider the first data center project to go through the city's newly created conditional use permit process, a proposal for a 945-acre campus of as many as nine buildings southwest of the Maricopa-Casa Grande Highway near Montgomery Road. The hearing arrives less than a year after the city had to carve out an exemption from those same rules to avoid an eight-figure legal bill, making Thursday's vote the first genuine trial of a permitting system that almost didn't survive its own creation.
According to KJZZ, the city council adopted Ordinance 3479 last October, amending the zoning code so that data centers in I-2 industrial districts need a conditional use permit and a hearing before the Planning and Zoning Commission rather than automatic by-right approval. That change came after the city's own planning department had earlier told developers, in a written interpretation issued in early 2025, that data centers were already permitted by right under existing industrial zoning, according to the City of Casa Grande.
A $140 Million Lawsuit Forces an Exemption
The new rules immediately ran into Arizona's Proposition 207, the Private Property Rights Protection Act that voters approved in 2006 with 64.8% support. The law requires governments to compensate landowners, or waive the new rule, when a zoning change reduces a property's fair market value. Two landowners sued Casa Grande over the data center ordinance, claiming $140 million in damages tied to lost property value, the station's report notes.
Facing that claim, the city council voted 7-0 in August to grant a binding Prop 207 waiver covering a 480-acre property near Bianco and Clayton roads owned by the Barnes family, according to AZBEX. The waiver exempts that site, planned for up to 13 data center buildings totaling 3.25 million square feet, from the conditional use permit requirement, though the city still enforces limits on water, power, and noise there. It is the same legal mechanism Phoenix was forced to use in July for an AI firm's warehouse conversion, after that city passed its own data center zoning standards, as Hoodline has reported.
The Grande Valley Campus Under Review
Thursday's application, filed by Colliers Energy on behalf of LKY Development Company, did not get the same waiver and is now moving through the full conditional use permit process the city created. Per the same account, the Planning and Zoning Commission will consider a 954-acre campus that would include an on-site natural gas plant and battery energy storage systems, located roughly eight miles from downtown Casa Grande. Casa Grande City Manager Larry Rains said the site sits directly between two copper mines that are actively preparing to begin mining.
The permit application itself leaves several specifics unanswered. It does not disclose a cap on the number of data center buildings, how much energy the project will require, or the primary fuel source, and the planning director is expected to receive additional project details later. Public hearing notices reviewed by Rural Arizona Engagement put the building count at nine, alongside the on-site gas generation and storage systems.
Water Limits and an Off-Grid Power Bet
The developer has designed the project to operate without connecting to the regional power grid at all, saying that approach would prevent shifting infrastructure costs onto other utility customers. A formal interconnection process is still outlined in the permit as a fallback, but the developer would bear those connection costs, with final terms determined by the utility. The site falls within Arizona Public Service's service territory, and developers across Pinal County have been turning to on-site natural gas and fuel cells in part because APS's own grid can't keep pace with demand; the utility recorded a peak summer demand of 8,200 megawatts in 2024 against data center interconnection requests totaling up to 19,000 megawatts, forcing APS to turn away some projects, Hoodline has previously reported. The developer has said fuel cells, if used instead of standard combustion, would help limit emissions at the site.
Water use is capped at 300 acre-feet per year for cooling servers and generating power, an amount a state water agency says is roughly equivalent to the annual water use of 600 to 900 homes. That limit comes as the federal government announced significant Colorado River water cuts in September, with the Central Arizona Project facing a reduction of approximately 50%, according to Antonio Ramirez, Rural Arizona Engagement's political director. Ramirez said the cuts will directly affect the Central Arizona Project, which conveys Colorado River water across the state and helps replenish groundwater aquifers throughout Casa Grande. He added that the San Carlos Irrigation Project, which serves parts of Pinal County, is undergoing divestment and customer offloading to other systems. Rural Arizona Engagement plans to participate in Thursday's hearing, citing concerns that the project could threaten community water and energy supplies.
Mayor Defends New Oversight Process
Casa Grande Mayor Lisa Navarro Fitzgibbons said the city council created the conditional use permit system to gain more oversight of data center projects without overstepping state property rights law. She said the public should be able to participate in and observe how project conditions are set, and that she supports the water, energy, and noise-mitigation parameters built into the permit process. The council may continue assessing whether the conditional permit requirements are working as more applications arrive.
Casa Grande's test case lands amid a statewide reckoning over data center growth. Arizona ranked seventh nationwide in data center capacity as of July, with nearly 98 operating facilities and another 86 planned or under construction, much of that growth pushing outward from Maricopa County into Pinal County, according to the Arizona Capitol Times. Lawmakers responded this year with a three-year pause on state sales tax exemptions for new data centers, signed into law by Governor Katie Hobbs as part of the FY2027 budget, following legislative sessions in which data centers came up in 84 proceedings, including committee hearings, caucus meetings and floor sessions. Just south of Casa Grande, the Pinal County Planning and Zoning Commission voted 7-2 in April to recommend approval of the 3,385-acre La Osa Energy and Data Center campus near Eloy, a project proposing up to 59 buildings and two on-site gas-fired power plants that has drawn resident opposition over emissions and groundwater drawdown, as detailed in Hoodline's earlier coverage of the La Osa proposal.
Governor Hobbs has also proposed a dedicated state water usage fee on data centers, floated in her January State of the State address as a way to fund a $30 million Colorado River Protection Fund, according to the Arizona Governor's Office of Resiliency. For Casa Grande, Thursday's hearing will show whether its hard-won conditional use permit process can actually impose enforceable water, energy, and noise terms on a project of this scale, or whether it becomes another test of how far Proposition 207 can stretch against local zoning ambitions.
