Could Colorado River Cuts Leave Nevada Projects High and Dry?

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Written by John Egan for IIR News Intelligence (Sugar Land, Texas)

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Summary

Nevada industrial project activity could be blighted, and the Las Vegas area economy would be devastated, by mandatory cuts in water allocations from the Colorado River ordered by the U.S. Bureau of Reclamation, which is part of the reason the Silver State was the first state to sue that agency.

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Nevada: Feds Violated APA, NEPA in Making Water Cuts

Three states--California, Nevada and Arizona--face mandatory cuts in water allocations from the Colorado River in a decision finalized August 21 by the U.S. Bureau of Reclamation (USBR), a branch of the Department of the Interior (DOI). Nevada has the smallest allocation of water from that river, and the federal decision would reduce the Silver State's share of that river 71%, or about 213,556 acre-feet (AF).

Three days after the federal government ordered those mandatory water cuts for the year that begins October 1, the State of Nevada and the Southern Nevada Water Authority sued the USBR, alleging it violated the Administrative Procedure Act (APA) and the National Environmental Policies Act (NEPA).

A 71% reduction in water from the Colorado River would devastate the economy of Southern Nevada, specifically the Las Vegas area, Nevada claimed in a lawsuit filed August 24 in Federal District Court in Nevada. Approximately 90% of the water used in Las Vegas comes from the Colorado River, the plaintiffs said.

The Las Vegas area's economy is "roughly US$180 billion annually, and water is needed to drive every dollar," the suit alleged. "Yet, there is no meaningful analysis of what happens to Las Vegas, its residents, the environment, or southern Nevada's economy" when that water disappears."

That large a loss would cause "devastating environmental, socioeconomic, and health and human safety impacts to southern Nevada and its citizens," the lawsuit asserted.

An acre-foot of water is about 326,000 gallons, or enough to cover an acre of land to a depth of one foot. An acre-foot of water can sustain two to four families for one year. For more on the legal issues surrounding how water from the Colorado River is divided among seven states and Mexico, see May 26, 2026, article - Colorado Mining Summit: Got Water? In Western U.S., the Answer Increasingly is 'No'.

In issuing its water-reduction decision, the USBR failed to follow NEPA, which compels a thorough analysis of the potential social and economic impacts of a proposed federal action, the Nevada plaintiffs asserted.

Further, the suit alleged the federal decision overlooks the efforts and investments Nevada has made to reduce water use even as its population grew.

The federal decision also ignored comments provided by Nevada businesses, citizens and government officials, a violation of the APA.

California and Arizona also will have their water allocations cut under the federal government's plan. To date, neither has joined Nevada in suing the federal government. Arizona stands to lose about 30% of its Colorado River allocation, about 760,000 acre-feet, while California is faced mandatory cuts of about acre-feet, about 10% of its Colorado River share, under the federal decision.

Arizona faces the largest reduction in water volumes from the river because its water rights are the most junior compared to other states. Arizona water officials said the cuts will be difficult, but manageable because the state has made investments in water storage facilities that could cushion the blow. Prices will go up, they said, but water will continue to flow from the taps.

By the Numbers

• 268: Number of industrial projects under development in Navada that could be affected by the U.S. Bureau of Reclamation's plan to reallocate the waters of the Colorado River
• US$134 billion: Approximate dollar value of industrial projects in Nevada that could be affected by the federal government's decision
• 71%: The proposed cuts, about 213,556 acre-feet of water, that the Bureau of Reclamation's August 21 plan would force on Nevada
• US$180 billion: Annual economic activity, in billions, in and around Las Vegas, Nevada's economic hub

New Plan Also Could Gut Nevada's Industrial Project Activity

Nearly everyone who has traveled to Las Vegas has marveled at the water fountains at the Bellagio Resort or the area's numerous, lush championship golf courses. Those features, which anchor Las Vegas' tourist economy, could face a very different future if the USBR's decision is implemented as written.

How those water cuts could affect Nevada's industrial project activity was not addressed in the lawsuit filed by Nevada and the Southern Nevada Water Authority. But that activity could also be significantly impacted by the federal government's decision.

Industrial Info Resources is tracking 267 industrial projects in Nevada set to begin construction between January 2027 and December 2028, the two years covered in the USBR decision. The value of those projects is nearly US$134 billion. The industries most heavily affected would be Electric Power, Industrial Manufacturing and Metals & Minerals. A smaller number of projects in other industries, including Oil & Gas Pipelines, Pulp, Paper & Wood and Food & Beverages, also could be affected. Readers can access a list of projects here.

While the greater number of proposed electric power projects may make that sector the most vulnerable to the proposed water cuts in Nevada, many of the proposed industrial manufacturing projects under development in that state are for data centers--a critical pillar for the U.S. civilian and military economies in the 21st century.

The centrality of water and power in the Desert Southwest, and the vital need for data centers, are some of the reasons why the seven states of the Colorado River Compact have been unable to reach consensus on reallocating the shrinking flows of the Colorado River.

States Can't Decide How to Apportion a Shrinking River

Nevada, California and Arizona are the Lower Basin states, according to the 104-year-old Colorado River Compact that allocates water from the Colorado River. Four other Western states--Colorado, Utah, Wyoming and New Mexico--make up the Upper Basin states, which were mostly unaffected by the reduced water allocations finalized by the USBR's August 21 decision.

Signed in 1922, the compact allocated water to the seven Western states, and later to Mexico. The three states in the Lower Basin were allocated a total of 7.5 million acre-feet of water per year. The four states of the Upper Basin were allocated the same amount of water. Subsequently, Mexico was allocated 1.5 million acre-feet per year.

Those allocations were made when far fewer people lived in the area, and water inflows to the Colorado River, chiefly from snowfall, were much higher than they are now. By increasing temperatures and drying out land, experts have said climate change is making it even harder to manage the river's flows.

Compounding the existing stresses on the Colorado River, which provides water to sustain over 40 million people in the seven states, some of those states have significantly exceeded their allocations for a number of years.

The USBR is responsible for producing hydroelectric power from two federal dams, Hoover and Glen Canyon, which created lakes Mead and Powell, respectively, in the Southwest. Water levels are at historic lows in both lakes, threatening the bureau's ability to generate power. Observers have said the Colorado River is on the brink of collapse, a victim of the competing demands of hydropower, domestic water use and agriculture.

Key Takeaways

• The State of Nevada and the Southern Nevada Water Authority sued for U.S. Bureau of Reclamation in federal district court in Nevada August 24 over the bureau's decision to impose mandatory cuts in Colorado River allocations of water to Nevada.
• The bureau's cuts would reduce Nevada's allocation of water from that river about 71%, or approximately 213,550 acre-feet of water per year.
• Las Vegas, the state's economic hub, would lose an estimated 90% of its water if those cuts are not changed.
• About 238 proposed industrial projects scheduled to be built in Nevada between January 2027 and December 2028, valued at roughly US$134 billion, could be affected by the water cuts.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).