The Colorado River in the Western US is a case study for what's at stake when rapacious industrial growth, agriculture and urbanization coalesce to deplete a natural resource that humans have taken for granted for too long. Climate change makes the issue of water security all the more challenging – with lessons for us all.

In the dystopian thriller The Water Knife by Paolo Bacigalupi, the American West has turned into a dark and desiccated world. The rich live in tightly guarded high-rises called arcologies with lush gardens, fountains and vertical farming operations. The millions of less lucky souls subsist in dark and dilapidated suburbs without electricity or running water, hustling and killing for the occasional bottle of water from a humanitarian aid organization. 

In this dark world, water is much more than a resource. Water companies have themselves become rogue states with private militias, making sure that California and Las Vegas stay well hydrated at any cost. Meanwhile, Texas and Arizona are failed states with large refugee populations gnashing at barbed wire fences. Published in 2015, The Water Knife conjures up a hellscape that passes itself off as science fiction. In the mid-2020s, though, it seems a little bit less far-fetched every time a new drought record is broken.

In reality, life in and around the Colorado River Basin has become more tenuous than engineering marvels like the iconic Hoover Dam outside Las Vegas might have you believe. The Colorado River, which meanders for more than 2,300 kilometers southward from the Rocky Mountains before it empties into the Gulf of California, supplies more than 40 million people in seven US states and northern Mexico with water and provides irrigation for 22,258 square kilometers of farmland. But by the time it reaches its mouth, the river is reduced to a murky trickle – the result of decades of overuse. An already tangled web of outdated laws and agreements commonly referred to as "Law of the River" has become increasingly messy, thanks to competing interests among different geographies and a tug of war between agriculture, urban growth and industrial use, all exacerbated by accelerating climate change. This volatile mix forces all who depend on the river to make some hard choices in the very near future.

For the time being, feats of human ingenuity have kept catastrophe at bay. In bone-dry Arizona, the Central Arizona Project snakes its way through barren landscapes for more than 500 kilometers and is the lifeblood for the cities of Phoenix and Tucson. In Southern California, farmers rely on the water flowing through the massive concrete channels of the Yuma Project and the All-American Canal. Without those sparkling arteries, the entire US would have to forgo lettuce and many other crops. Then there are the massive but dwindling artificial bodies of water dammed in Lake Powell and Lake Mead, without which that old Las Vegas magic would come to a standstill.

The arrangement by which Western states tap into the river dates back to 1922 when the Upper Basin, consisting of Colorado, New Mexico, Utah and Wyoming, and the Lower Basin, comprising California and Nevada, signed the Colorado River Compact. Arizona and Mexico then came on board in 1944. Based on just 30 years of hydrological records, the treaty assigned each of the two groups an optimistic 9.3 cubic kilometers (km3) of water annually, plus another 1.2 km3 for farmers south of the border. Largely left out were 30 Native American tribes that have lived in the Basin for ages and to this day are fighting in court for their federally recognized water rights.

Ellen Hanak, an economist and water expert with the Public Policy Center of California in San Francisco, says that agreement cemented a fateful course. "The allocations were made during a relatively wet period and without great knowledge of hydrologic modeling, meaning they created a fundamental imbalance of supply and demand, which today is about 20% off." The sizable mismatch between what the river can deliver and what humans consume was easy to miss as long as the large reservoirs built by a new agency called US Bureau of Reclamation held enough storage for drier years. But, as Hanak adds: "The system has been in long-term decline since about 2000."

Worries over water long predate the current problems. Geologist and explorer John Wesley Powell, who led a historic expedition in 1869 down the Colorado River through the Grand Canyon, warned at an irrigation conference in Los Angeles back in 1893: "I tell you, gentlemen, you are piling up a heritage of conflict and litigation over water rights, for there is not sufficient water to supply these lands." Not surprisingly, ever since the compact came into force, states and powerful water authorities have been wrestling with older water rights versus younger water rights for new entrants such as the booming cities of San Diego or Phoenix.

The ongoing megadrought has not only exposed infamous "bathtub" rings on the canyon walls lining a dwindling Lake Mead and left marinas high and dry, but also laid bare the systemic shortcomings of a scheme that was not designed for today's population growth, large-scale agricultural production and industrialization. Conservation efforts were only instituted as the predicament became more obvious – and pressing. After various stopgap measures at the state and federal level, a renegotiation among all stakeholders is due in 2026. "We will have to figure out how to bring demand down to the new long-term average supply, and how to do that in ways that are economically, politically, socially and environmentally feasible," says Hanak. 

That's easier said than done: Everybody wants to dip their straw into the Colorado River and has good reasons to back up their claims, from farmers who have been tending to their lands for generations to developers who promise new housing will bring fresh tax revenues to communities and economic development agencies that argue building new plants with often water-intensive operations will attract high-value jobs. 

Amazingly enough, however, residential and commercial use are not what's driving the crisis. According to a 2024 study that looked at the overall consumption, alfalfa and hay are responsible for almost half of the river's water use, with all municipal, commercial and industrial uses combined only accounting for just 18%. What's more, booming cities in the Sun Belt and California have over the past decades become much more efficient with their water management.

When the same researcher polled 28 urban water utilities in the region, it was found that total water use between 2000 and 2020 had dropped by 18% while the population grew by 24%. "A lot of smart people have come up with solutions. Cities have really improved their conservation efforts in the face of growth," says Felicia Marcus, who chaired the California State Water Resources Control Board before moving to Stanford. Innovative approaches like replacing lawns with drought-resistant vegetation, monitoring and updating leaky city lines and promoting low-flow fixtures and appliances have made a difference.

Cultivating water-intensive and relatively low-value crops such as hay is problematic for another reason: Roughly one-fifth of those bales are exported by ship to feed cattle in places like Japan, China, the United Arab Emirates or Saudi Arabia. Experts count those exports as billions of liters of "virtual water" that irreplaceably leave the system. To be fair, farmers are considering novel approaches as drastic cuts become more likely. In places like the Imperial Irrigation District in Southern California, they are selling water rights to cities and in turn do not plant or fallow some fields. Other options include switching to less thirsty crops or harvesting fewer times.

In some cases, though, changing traditional ways can have unintended consequences. Fallowing too much acreage, for example, risks creating erosion, dust storms and invasive weeds that will affect surrounding areas. A stop to irrigation threatens species that have become reliant on drainage water such as the endangered desert pupfish. "There's a limit to how much land can be fallowed. Otherwise you destroy the economy of agricultural communities," warns Marcus. "A farmer can trade money for water and walk away. But what about the tractor salesman, the fertilizer salesman, the seed saleswoman? There's a whole economy around growing food that you need to consider."

Saving the stressed basin may require entirely new ways of thinking about the problem. At least, that's the approach Stanford University economist Paul Milgrom is taking. In 2020, he was awarded the Nobel Prize for his pioneering work in helping the US government successfully auction off broadband spectrum to enable modern mobile communications. When Milgrom looked at the convoluted water rights, he saw an equally broken system. "We are trying to meet a 21st-century set of challenges with 20th-century technology and 19th-century laws. What we have, fundamentally, is a market design problem," Milgrom said in late 2023 laying out how water rights could be reapportioned. 

So far, it's just a thought experiment that Milgrom co-authored with Ph.D. student Billy Ferguson that aims to deliver water to those who need it most and are willing to pay for it, adjusting for conditions each year. At its heart is a voluntary "Water Incentive Auction" in which the government first buys back existing rights and then sells to the highest bidders, who would be free to privately trade them. "Radio spectrum and water have more in common than you might think," says Ferguson. "Both are resources where rights were allocated long ago, and many decades later their best uses are different. We did not expect mobile broadband, and the American West was not anticipated to develop as it did."

Making supply and demand meet through a flexible and modern market mechanism, he adds, has the potential to address over-allocation, incentivize conservation and untangle the web of outdated legal arrangements. Equally important, the two authors recommend setting up guardrails to protect weaker communities and to let policymakers prioritize various outcomes that different communities value.  "I have come to appreciate how monumental the challenge is," Ferguson admits. "But I am still young and hopeful. As the Colorado River reaches its breaking point, we want to have our framework sitting and ready." Milgrom concurred when unveiling their proposal: "There's every reason to believe this can work. While it won't reverse climate change or make it rain, it would go a long way toward providing long-run water resilience."

Technological progress, though, adds a new twist to the ongoing water tussle. Data centers, the backbone of cloud computing and the networked economy, and generative AI systems in particular [see “How much water AI really costs,” below], exhibit a large and ever-growing thirst for surface water that has experts alarmed, and not just in the US. But that does not keep parched communities like Phoenix from vying for new data centers or semiconductor factories in the name of economic growth and "digital sovereignty" on the world stage. While the metro region with more than 5 million people smack in the middle of the Sonoran desert kept shattering heat records in 2024, it wooed Intel and Taiwan Semiconductor Manufacturing Company (TSMC) to build three new chip fabs there, which each need tens of millions of liters of ultrapure water every day. 

There's no better place than Las Vegas, the villainous epicenter of the novel The Water Knife, to highlight the cognitive dissonance between blaming agriculture for the deepening water crisis and falling for tech's siren call. The city is home to a new, giant entertainment venue called The Sphere which is powered by 150 Nvidia workstation GPUs (short for graphics processing units), plus lit up by 16 displays and 1.2 million programmable LED pucks. If running at full capacity, this digital monster will draw 28 megawatts of power and consume or evaporate up to 2 billion liters of pristine surface and ground water each year. For now, water expert Felicia Marcus demurs that the nightmarish scenario embroiling Las Vegas described in The Water Knife is far off, but adds an ominous warning: "It could happen if things don't change. We have to learn to live within our means."

GenAI is a game changer for water consumption.

A few dozen AI chatbot queries consume half a liter of surface water according to Shaolei Ren, associate professor at the University of California, Riverside. "The little data that tech companies disclose are just the tip of the iceberg. They don't factor in their whole supply chain beyond cooling, from electricity generation to chip manufacturing," he says.

That includes less obvious factors such as the massive amounts of water needed to dilute the toxic waste created by mining rare earth minerals, the key ingredient for magnets used for the hard drives whirring in data centers. Inez Hua, a Silicon Valley-based sustainability engineer with Purdue University, has calculated that it takes more than 6,900 cubic kilometers, or one-seventh of all the water discharged globally by rivers every year, to neutralize such pollution in East and Southeast Asia alone.

Ren thinks several things need to change to hold Big Tech more accountable for its growing water consumption. Shifting where queries are run and at what time could help lower the load. And sustainable AI standards could be introduced, akin to the labeling found on food.