(FORTUNE Magazine) – You wouldn't expect an Information Age company like Intel to get on the wrong side of environmentalists, but the company's recent $2 billion expansion at Rio Rancho, New Mexico, dunked the world's largest semiconductor maker into an age-old Western problem: water rights. Chip plants consume millions of gallons of water a day, mainly to wash microscopic dirt from the surface of chips. That's a problem in the dry West, where, as Twain remarked, whiskey is for drinking, water is for fighting about.

During construction of the new 1.3 million-square-foot chipmaking plant, which starts production this month, residents and activists complained that the company's expanding thirst would be too great a drain on local supplies. After weeks of public hearings, the state of New Mexico last year grant ed Intel 72% of the water it requested.

The strife at Rio Rancho is the most intense the industry has faced. "I think it sensitized us," says Howard High, spokesman for Intel. "We have a lot of efforts under way to try and minimize the amount of water we use." Current conservation efforts may not work for an industry that in North America is expected to double in size to $75 billion in sales in the next three years.

The trend is to reuse treated wastewater from chip cleaning in places such as cooling towers and air-conditioning systems. Motorola employs such methods in Phoenix and Austin. Recycling water for chip cleaning is the most logical approach. But the technology to make ultrapure water for such a closed-loop system is still too costly.

New technologies could eventually take the water out of chip cleaning. One company, Radiance Services, a six-person start up based in Bethesda, Maryland, holds patents for a new "dry cleaning" method. Using laser light and inert gas to lift impurities from surfaces of a chip, Radiance claims its process can clean as effectively as the current water-based methods.

- John Labate