Daily Digest — August 25, 2026
Texas AG Paxton Unveils Four-Point Data Center Plan Amid Heated Political Season
Texas Attorney General Ken Paxton has introduced a four-point plan to regulate the state's data center industry, according to the Dallas Express. The proposal includes federal-level measures — advocating for legislation to bar Chinese technology from U.S. data centers, imposing criminal liability on companies whose AI platforms harm children, and co-sponsoring the DATA Act to enable qualifying data centers to generate their own electricity with streamlined permitting.
At the state level, Paxton supports repealing Texas's sales-tax exemption for data centers and endorses Governor Greg Abbott's audit standards, which require developers to disclose electricity consumption, water use, public incentives, and community impacts before interconnecting with the ERCOT grid. Companies including Google, Rowan, and CleanSpark have committed to the standards, while Diode Ventures withdrew an East Texas project after failing to meet them, per the Dallas Express.
The plan is part of a broader political landscape in which data centers have become a defining campaign issue. As CBS News reports, Democratic gubernatorial candidate Gina Hinojosa is calling for a moratorium on new construction and urging Abbott to convene a special legislative session. In the U.S. Senate race, Democrat James Talarico has proposed his own "Hold Data Centers Accountable Plan," which includes ending state sales tax incentives, establishing federal minimum requirements for grid protection and environmental safeguards, and requiring closed-loop water systems for new facilities.
Governor Abbott has placed a pause on new data center permits pending comprehensive audits by ERCOT and the Public Utility Commission. Abbott stated at a Fort Worth news conference that data centers cannot deplete community water, strain the power grid, or be built in rural neighborhoods under his guardrails. State sales tax incentives approved in 2013 are projected to cost over $3 billion in the next two years, with bipartisan support emerging to eliminate them.
Abbott's Data Center Pause Rattles Markets; Governor Says Industry "Dug Their Own Grave"
Governor Abbott's temporary pause on new data center project approvals contributed to a decline in the S&P 500 and Nasdaq, according to the Jefferson City News Tribune. Wells Fargo chief equity strategist Ohsung Kwon identified heightened political scrutiny of AI and data centers as a major risk factor, particularly with midterm elections approaching.
In a separate interview on ABC's "This Week" covered by the New York Post, Abbott stated that data center companies have "dug their own grave" by failing to secure community support. He has directed state regulators to require data centers to bear the full cost of electrical infrastructure and announced plans to phase out tax incentives. Abbott also noted that fewer than 10% of data center companies responded to a state request for information on future power demand.
The New York Post report places Texas in a national context:
- Pennsylvania Governor Josh Shapiro has implemented what he calls the "strictest guardrails in the nation" for data centers.
- New York Governor Kathy Hochul imposed a one-year moratorium on "hyper-scale" data centers last month.
- A June/July Annenberg Public Policy Center survey found six in ten Americans oppose new data center construction in their communities.
- Over 500 U.S. jurisdictions have halted data center projects.
The Senate GOP campaign arm has privately warned AI companies that negative public perception could harm the party's prospects in Ohio races, per the New York Post.
Texas AG Delays Legal Opinion on Counties' Authority to Halt Data Center Construction
Texas Attorney General Ken Paxton has delayed issuing a legal opinion requested by Hood and Somervell counties on whether they have authority to halt local data center construction, according to the Houston Chronicle. Despite a state law requiring a response within 180 days, Paxton's office informed Hood County Attorney Matt Mills that it needs additional time. Mills predicted the delay would extend past the November election.
The delay comes as Paxton campaigns for a U.S. Senate seat and has separately released campaign proposals on data center regulation. His Democratic opponent, State Rep. James Talarico, has criticized the delay and alleged campaign donations from the data center industry. The underlying question — whether Texas counties have zoning authority to restrict data centers — remains unresolved under current state law.
As reported by CBS News, Hood County's Commissioners Court ultimately voted against implementing a data center moratorium.
Memphis Power Outages Spotlight Data Center Energy Equity Concerns
A severe storm left over 35,000 Memphis residents without power while Elon Musk's xAI data center continued operating on its private microgrid, according to Emerald Book. The xAI facility uses a behind-the-meter power system including direct high-voltage lines, an on-site substation, mobile gas turbines, and Tesla Megapacks, insulating it from local grid failures. The NAACP has filed a lawsuit over environmental impacts from the facility's gas turbines, which are located near historically marginalized communities.
Memphis City Council members are debating a temporary moratorium on new data centers to evaluate their impact on local resources and community equity, per Emerald Book.
FOX13 Memphis reported on xAI's utility costs, with MLGW bills obtained through Protect Our Aquifer showing:
- March 2026: Over $182,000 in electricity charges (~$11,000/day)
- July 2026: Nearly $633,000 in electricity charges (~$22,000/day)
State Rep. Justin J. Pearson has linked the data centers' power consumption to grid strain, a point echoed in Capital B News reporting that Memphis is home to one of the country's largest clusters of data centers drawing from the same aging grid. Capital B News also reported that Gary, Indiana — a city that is 76% Black — has experienced outages lasting nearly two weeks, with eight data centers contributing to grid strain there.
Separately, WREG and WREG reported that the Tennessee Valley Authority has implemented a new rate structure for data centers, which the Memphis mayor has called "a very good thing" for the city.
SpaceXAI Data Center Operates Amid Memphis Power Outages, Sparking Equity Concerns
Emerald Book
FOX13 Investigates: Data center power usage in Shelby County
FOX13 Memphis
From Memphis to Gary, Black Communities Are Being Left in the Dark
Capital B News
How the electric rate change for data centers will benefit Memphis
WREG.com
TVA’s rate change for data centers ‘a very good thing,’ Memphis mayor says
WREG.com
New Mexico Supreme Court Pauses Project Jupiter Permits; Legislators Call for Statewide Moratorium
The New Mexico Supreme Court has unanimously ordered a temporary stay on air quality and water use permits for Oracle's Project Jupiter data center, according to KRWG Public Media. The stay follows petitions from New Energy Economy, which alleged due process violations regarding the air permit, and the Center for Biological Diversity, which challenged an emergency well-drilling authorization. The Center stated that over 103 million gallons of water have already been pumped for the project.
As reported by KSFR, the ruling came just two days after residents rallied against the project outside New Mexico Environment Department offices in Santa Fe. KSFR noted that the NMED had moved up a scheduled hearing after Oracle met with Governor Michelle Lujan Grisham, and that numerous fraudulent public comments favoring the permit led to an overhaul of the NMED's comment portal. Project Jupiter's estimated greenhouse gas emissions would exceed the combined totals of Albuquerque, Las Cruces, and Santa Fe, per KSFR.
KOB 4 Albuquerque reported that the hearing officer involved in the air permit case has also recused themselves, adding a further procedural setback. The permits remain paused indefinitely until further court order, as confirmed by nm.news.
Separately, New Mexico state representatives Micaela Lara Cadeña and Angelika Rubio are urging a statewide moratorium on new data center construction, as reported by KRWG Public Media. Their call cites concerns over minimal job creation, strain on water and electricity resources, and alleged misstatements by project proponents. The article references Meta's Los Lunas data center — a $2.5 billion investment employing 300 full-time workers — as an example of the cost-benefit tradeoffs under debate.
NM Supreme Court pauses Project Jupiter permits
KRWG Public Media
Project Jupiter air quality permit process paused
KSFR
State Supreme Court delivers two blows to Oracle data center in southern New Mexico
KOB 4 Albuquerque
New Mexico Supreme Court puts Project Jupiter air proceeding, emergency well authorization on hold
nm.news
New Mexico Legislators Urge Statewide Data Center Moratorium
KRWG Public Media