Push to regulate Texas data centers crimped by calendar
Texas Governor Greg Abbott and other state leaders are pushing for new regulations on data centers, including water and energy usage limits, and a potential moratorium. However, the legislative calendar and concerns about retroactive laws may prevent these rules from affecting a significant wave of data center projects already in development.
Texas Governor Greg Abbott and other state leaders are advocating for increased restrictions on data centers, including mandatory water-use reporting, requirements for water-efficient technologies, the repeal of sales tax exemptions, and the establishment of setback standards. Governor Abbott has also called for a ban on new AI data centers in rural areas. These proposals come amidst concerns over the significant energy and water demands of data centers, with ERCOT estimating that a new wave of projects, dubbed "Batch Zero," could request up to 100 gigawatts of power.
However, implementing these new rules faces procedural and timing challenges as the Texas Legislature is not scheduled to reconvene until early 2027. This delay means that many "Batch Zero" projects, some already under construction, are likely to receive approval to connect to the Texas grid before any new legislation can take effect. While some experts suggest that retroactive laws, similar to those passed after Winter Storm Uri, could be a possibility, legal professionals warn that such measures could be challenged in court and deter future investment. The Data Center Coalition argues that changing rules mid-development would create harmful uncertainty for investors.
Public sentiment in Texas indicates strong opposition to data center construction, particularly in rural communities. Despite the growing pressure, it remains unclear whether Governor Abbott will call a special session or if there is enough consensus among lawmakers, who are divided on the issue, to pass substantial data center legislation. Even if new laws are passed in 2027, their applicability to the already advanced Batch Zero projects is uncertain, leaving a significant portion of upcoming data center development potentially outside the scope of new regulations.