Groundwater is increasingly exploited for energy production in arid areas globally, which will inevitably disrupt the natural equilibrium of groundwater and the ecological environment. A groundwater flow model for Subei Lake basin, Ordos energy base, was developed and calibrated to predict groundwater levels' variation and the impact of heavy groundwater pumping on the ecological environment for the period 2010–2039 under two different pumping scenarios. Results showed that rainfall infiltration and groundwater evapotranspiration were the major source/sink terms for the groundwater system. The obvious groundwater depression cone will be formed in the production field at the end of 30 years and the maximum drawdown will be 11.70 m if the waterworks maintains the present situation. However, recovery of groundwater level will be obvious and the groundwater depression cone will disappear as a result of the implementation of the water diversion project. The increased volume of groundwater pumping between the two scenarios was derived from storage depletion, the activated lateral inflow, the captured groundwater evapotranspiration, lateral outflow and discharge into Subei Lake. Groundwater pumping from Haolebaoji waterworks has caused the decline of the Subei Lake and the noticeable degradation of phreatophyte.