Project Blue developers close on purchase of Pima County land for Tucson data center

As expected, the sale of Pima County land to the developers of the controversial Project Blue data center on Tucson’s Southeast Side was completed on Christmas Eve.

The closing of the deal, which the Board of Supervisors approved back in June, followed the completion of all of the steps required in the contract, Pima County Administrator Jan Lesher said in a memo Wednesday morning.

Lesher confirmed to the Sentinel that the deal had closed. 

Pima memo: Update on Closing on the Land Sale for Project Blue

Beale Infrastructure, the developers of the project and other planned data centers around the Tucson area, triggered the closing last month by exercising their option to waive certain conditions of the contract. Among them were a requirement that the land be annexed by the city of Tucson and served by Tucson Water. 

After the public learned of the scale of Project Blue, which prompted an outburst of objections, the City Council walked away from further city involvement in the deal, nixing the annexation and providing water with a unanimous vote.

But Beale, despite public statements that the city’s involvement was key to the project, chose to forge ahead anyway.

The developers — who were originally using the Beale-associated entity Humphrey’s Peak Property, LLC, to purchase the property — assigned the purchase rights to another shell company, Bobcat B1 LLC, before the deal closed. The same person, Matthew Weisberg, signed for Bobcat B1 and has signed papers for both Beale and Humphrey’s Peak.

“Such assignments to affiliates under common control are common for phased commercial real estate developments,” Lesher wrote to the elected members of the county board. “Notwithstanding this assignment, all rights, interests and obligations outlined in the acquisition agreement and memorandum of agreement remain in full effect.”

The memo she referenced is a side deal, negotiated by the developers to assuage public sentiment against the massive data center project by contributing $5 million to scholarships and $10 million in future unspecified “community-focused donations,” and signing a vaguely outlined “renewable energy commitment.”

The Board of Supervisors approved the “memorandum of agreement” last week on a 3-2 vote.

Beale, the developer, will “use commercially available means to match 100 percent of its energy consumption with renewable energy in accordance with Arizona law and the MOA terms,” Lesher told the supervisors in a memo before that meeting.

Document: MOA: Project Blue ‘community benefit commitments’ with Pima County

“Beale commits to providing a total of $15 million community donation” over the life of the project, coming in phases as it is built, she wrote. That includes an initial $5 million donation for STEM scholarships and funding for trade schools. The remaining $10 million has yet to be determined. While county officials will be able to provide input on the recipients of the funds, the data center company will make the final determinations, the agreement says.

The agreement, attached to Lesher’s memo to the supervisors, declares that the developer has submitted site and building permit applications to the county for the first phase of the project. But no project-related permit documents are available to the public on the county’s Development Services Department web portal.

The agreement lays out that “Beale will use commercially reasonable efforts to match one hundred percent (100%) of its energy consumption with renewable energy (the “Renewable Energy Commitment”) in accordance with Arizona law and the terms hereunder.” 

But it does not indicate how Beale would do so.

The agreement further states that the “renewable energy commitment” shall not affect any energy supply agreement between Tucson Electric Power, and that the commitment cannot “jeopardize” the approval of any energy deal by the Arizona Corporation Commission.

Beale previously said it will pursue “100 percent renewable
energy” for Project Blue, promising to accelerate Tucson Electric
Power’s efforts to access “new renewable energy resources” to cover the
data center’s needs—”at the data center’s cost,” in a Nov. 7 press
release.

“While these new projects are coming online, the
commitment to 100 percent renewable energy will be fulfilled with
purchases of renewable energy credits,” Beale said. These
credits are an attempt to build a market for carbon production.

“Achieving 100 percent renewable energy not only reduces the
project’s lifetime carbon emissions, but also supports Pima County’s
Climate Action Plan and broader regional goals to pull forward the
delivery of new renewable energy generation,” Beale said.

Closing conditions waived; Developers remain close-mouthed on details

The developers have been tight-lipped throughout the process, insisting that county and city officials sign non-disclosure agreements and refusing to provide public info about the ultimate customer who would use the planned series of three data center complexes. Beale is also pursuing the construction of two data center complexes in Marana.

Last month, Project Blue’s backers waived a set of closing conditions for the purchase of the county property,
after the city of Tucson refused to annex it and provide the facility with water
service.

Those developers are apparently moving ahead to build the complex of
cloud computers on the Southeast Side, despite not having a publicly
committed customer. Amazon Web Services had been the intended end-user
from the beginning of the project, but recently walked away from the
deal, according to numerous sources with knowledge of the ongoing
discussions.

Earlier this month, the Arizona Corporation Commission approved, on a 4-1
vote, a special deal between the developers and Tucson Electric Power,
setting a rate schedule for the massive amount of power that will be
required for the data center.

Last month, the developers — who are operating under a pair of linked
LLCs: Humphreys Peak Properties as the buyer of the property and Beale
as the entity to build the data center, with both controlled by a
national firm, Blue Owl — told county officials that they were waiving
closing conditions related to annexation, water and electricity, and
wanted to close on the purchase of the property before Christmas Day.

The company behind the controversial Project Blue
had been Amazon, but now sources say the end-user may be Meta (formerly
Facebook). AWS seemingly backed out when the developers shifted their
plans to a more power-hungry cooling system after the city refused to
provide them with the large amount of water their initial cooling plans
would have required. That means the complex will have about 20% less
power available to run the giant banks of servers inside.

According to a letter from the developers
sent to county officials last month, Humphrey’s Peak Properties was waiving three conditions on the sale, including
requirements the facility be annexed by the city of Tucson, zoning, and a
requirement the facility would receive “all necessary utilities” to run
the data center—including power, water and discharge services “within a
commercially reasonable time-frame.”

The company said the sale of the property “must occur on or before 45
days” from their Nov. 10 notice, giving the county a deadline of Dec.
25, 2025, for all the necessary steps from county staff.

The
county Board of Supervisors voted 3-2 in June to rezone and sell the
property to Humphrey’s Peak/Beale for $20.8 million. As part of the
deal, the developers would ask the city of Tucson to annex the property,
giving the massive data center access to Tucson Water to cool the
planned operation.

However, that plan derailed in early August, after the Tucson City Council unanimously rejected
the deal after a firestorm of community opposition. The initial plan,
hashed out between the developer on behalf of Amazon Web Services and
Pima County and city officials, would have used reclaimed water —
consuming enough to supply more than 3,000 homes for a year in just its initial
phase.

In September, the developers announced they
would use a “closed-loop” air-cooling system, consuming significantly
more power while not using water to dissipate the heat from the server farm.

“While the
Tucson City Council chose to discontinue engagement with the project,
Beale remains committed to ensuring that it advances Southern Arizona’s
digital infrastructure needs while reflecting the priorities of the
local community,” the company said in an unsigned letter to Lesher that
month.

The alternate cooling system will consume more electricity
than would have been required by the reclaimed water system, the
company said.

“Simply put, less energy is made available for compute, as more energy is reallocated towards cooling,” Beale reps told Lesher.

After
the public learned about Project Blue, city officials faced withering
criticism over the company’s plans, a furor that grew during a trio of
public meetings—including one online over Microsoft Teams, and two
in-person meetings at which crowds of 800–1,000 wielded signs and
catcalls, while urging the city to vote against the annexation.

The
developers said the $3.6 billion project is expected to generate $152
million in tax revenue over 10 years—$58.5 million for Pima County and
$93.5 million to the state of Arizona—and create 3,000 temporary
construction jobs. The company has said it will prioritize local union
and trade labor organizations, but has made no promises. Once the
project is completed, there will be around180 permanent positions
earning an average of $64,000 per year — although their contractual
commitment was only to hire 75 workers.

This is just the first
phase of a larger build-out of data centers under the Project Blue
umbrella. A second phase may be built on the county’s former property,
and the company told city officials a
third site was being studied outside of the city limits. 

Beale is also moving forward with plans for a large-scale data center in Marana. That project received preliminary approval from the town’s planning commission earlier this month.

In October, the developer Beale Infrastructure submitted applications
to develop the two sites, just south of Pinal Airpark Road and west of
Interstate 10 to build a data center campus. The new plan has to conform
to Marana’s data center ordinance, which was put into place last
December.

One parcel is owned by the Church of Jesus Christ of
Latter-day Saints and the other is owned by the Kai Family Trust —
linked to Marana Councilmember Herb Kai.

Beale Infrastructure said they would build an “advanced” air-cooled
system, avoiding the massive amount of water usually needed to cool
large-scale data centers. Under their original proposal in Tucson,
Project Blue planned to use potable water to cool their servers, but
that proposal faced public outcry and Beale has shifted their plan to
use air-cooled systems instead, using potable water only for kitchens
and restrooms.

The company noted the two parcels are currently
used for agriculture, consuming around 2,000 acre-feet of non-potable
water each year. Each acre-foot — the amount of water it would take to
cover one acre with a foot of water — is equivalent to the annual water
use for a few households.

With the change to an air-cooled
facility, Beale said the amount of water used on the parcels will drop
95 percent to about 40 acre-feet annually.

“Marana’s data center
ordinance was thoroughly and thoughtfully developed with the safety of
Marana residents in mind,” Beale company representatives wrote, adding
the company “will be fully compliant with all requirements in the town’s
data center ordinance,” including requirements to mitigate noise and
building design.