Arizona Homebuilders Sue Over State’s Groundwater Restrictions

The legal battle between Arizona’s homebuilders and the state’s water department has reignited, threatening to disrupt the established groundwater protection system. This case, which questions the authority of the Arizona Department of Water Resources (ADWR), could reshape how groundwater is managed in the state.

Initially filed early last year, the lawsuit challenges the actions taken following a 2023 report from Governor Katie Hobbs’ administration. This report revealed unexpectedly low groundwater levels in the Phoenix metro area, prompting ADWR to halt the issuance of necessary certificates for developers in regions such as Buckeye and Queen Creek.

The Homebuilders Association of Central Arizona claims that ADWR exceeded its boundaries by imposing these restrictions, and they seek to have the department’s regulations overturned. The ADWR defends its actions, citing the necessity to protect the water supply for current and future developments.

Support for ADWR comes from entities like the Salt River Project, the city of Chandler, and the Arizona Municipal Water Users Association. They argue the measures are essential within the Active Management Area (AMA), where developers must demonstrate a 100-year water supply before building, as outlined by the 1980 Groundwater Management Act.

This recent enforcement marks the first instance of ADWR acting on hydrological findings with broad growth restrictions, drawing criticism from developers and some lawmakers who accuse the administration of stifling growth.

The core of the lawsuit rests on whether ADWR’s actions constitute new rulemaking without proper procedure. Judge Scott Blaney questioned if updating the modeling equates to creating new rules, with ADWR responding that it’s a matter of applying new data to existing rules.

Homebuilders contend that their industry is unfairly singled out, as other types of developments, like multifamily homes and data centers, aren’t held to the same water supply proof standards. They also highlight that subdivisions consume significantly less water compared to agricultural operations.

ADWR’s request to dismiss the case was previously denied. Attorney Jenny Winkler, representing Chandler and the water association, argues that ignoring the hydrology report’s findings would render water certificates valueless, removing essential “certainty and stability” for homeowners.

Judge Blaney’s decision, expected within 60 days, will be pivotal for Arizona’s water policies. The assured water supply system is a cornerstone of state groundwater management, and any shifts in data could undermine the validity of water certificates.

In addition, a separate lawsuit by homebuilders challenges another ADWR rule permitting development in areas with low groundwater, arguing it imposes undue burdens, as detailed here. This rule, part of the Alternative Path to Designation of an Assured Water Supply, was adopted in late 2024.