Texas Gov. Greg Abbott hasn’t acknowledged the desperate pleas from Democratic lawmakers, the Republican agriculture commissioner or a host of environmental advocates to call a special session on data centers, but he did mandate an audit and a halt to new applications until the report is finished.
Texas has 335 artificial intelligence data centers and is poised to become the hub for such technology nationwide. At least 248 data centers are planned in Texas. The matter has become controversial, however, as a sales tax exemption once used to recruit the facilities and boost the economy is now costing the state at least $1 billion per year.
There’s also the matter of power and water.
Large data centers use enough power to provide electricity for up to 1 million homes. Critics say they also strain the state’s water supply, using up to several million gallons of water per day to cool their systems. The high electricity demand, fossil fuel reliance and on-site generators have prompted concerns about toxic carbon dioxide emissions.
When the sales tax exemption was approved in 2013, the total loss to the state was about $7 million per year. In exchange, Texas got Google, Meta and other big-name tech giants to build large campuses and hire workers.
Abbott, who is running for re-election in November, said last fall that Texas was the “epicenter of AI development” and rolled out the red carpet for Google’s $40 billion investment in cloud and AI infrastructure in Red Oak near Dallas.
He’s been singing a different tune lately, as pressure from Republican voters, particularly those in rural Texas, has mounted. On August 3, the governor directed the Public Utility Commission of Texas and the Electric Reliability Council of Texas to conduct a comprehensive verification and audit of all data centers advancing through ERCOT’s interconnection process.
The PUC and ERCOT must complete the audit before any data center project moves forward, and any project that fails to comply with the requirements set forth by the state agencies will be denied connection to the Texas grid, Abbott said in a statement.
“Our top priority is to protect Texans’ safety and quality of life,” he said. “Simply put, Texans must come first.”
Abbott’s opponent in the governor’s race, Texas Rep. Gina Hinojosa, D-Austin, pointed out when the audit announcement was made that the halt is only temporary — the audit could be complete by the end of this week — and a moratorium should be put in place “until the Legislature meets to put in real protections for Texans and give them a seat at the table to decide if and how data centers move into their communities.”
“So nice to see another strongly worded letter from Abbott after he proudly made Texas the Wild West of data centers,” Hinojosa said in a statement. “Abbott’s call for a ‘pause’ could be for one day – and no one buys it. He’s taken millions from data center CEOs while giving Texans lip service to non-existent restrictions. Let’s be very clear about this: Abbott can take action now to end the data center madness.”
The Texas Senate Democratic Caucus expressed a similar sentiment, calling for an immediate moratorium on new data centers until the Legislature meets in January.
“For years, Republican leaders have eroded local control, leaving cities and counties without the authority they need to manage the impacts of large-scale industrial development,” Caucus members said in an August 4 statement. “The results are predictable: Communities face increased strain on their energy and water supplies, rising costs for residential ratepayers, and little meaningful input into decisions that directly affect their neighborhoods.”
Nancy Sims, a political science lecturer at the University of Houston, said it’s highly unlikely that Abbott will call a special session.
“He’s not going to call a special session with an election less than 100 days away, and none of them want to vote on something that controversial in this time frame,” Sims said. “Why would he call a special session? It needs to be crisis level. Maybe you feel like it’s a crisis if you’ve got one going in next door to you but I’m not sure it’s a statewide emergency.”
She added that it appears that Abbott is trying to reframe the narrative to show that he’s listening to Texans who are questioning whether data centers are safe for communities, the water supply and the electric grid.
“It’s not really a job creator,” Sims said. “Texans will put up with a lot when you’re boosting the economy, but these data centers aren’t really bringing money or jobs to the communities they’re being built in. They’re being built to drive the economy but I think they’re in a gray area in terms of broad usage and understanding of their purpose.”
Abbott said in his press release that ERCOT is currently considering more than 474 gigawatts of requests to connect to the Texas grid, more than five times Texas’ record peak electricity demand. About 90 percent of the new power requests are data centers. “That unprecedented load growth could endanger the reliability and stability of the Texas electric grid,” the governor said.
His call for an audit isn’t a moratorium but it does create more hurdles for new centers that don’t want to supply their own power. The audit is expected to reveal which data centers are relying on financial assistance from the state, which ones are providing their own power and water, and “the extent to which data centers are using measures to reduce impacts on neighboring property owners.”
The Texas Senate Finance Committee met in late July to discuss options for limiting or repealing the 2013 sales tax exemption law. They didn’t reach a conclusion but Republican Senators Joan Huffman and Paul Bettencourt both said they were willing to take a harder look at the issue.
Republican Texas Agriculture Commissioner Sid Miller has called for a moratorium and a special session and said he’s not impressed by Abbott’s latest action.
“Governor Abbott is finally paying attention and listening to the concerns I have raised for months,” Miller said in an August 3 statement. “I’m glad he has begun to act, but let’s not pretend this directive solves the problem. It is vague. It is more of a filter than a brake. It may change how projects are reviewed, but it does not stop them.”
Luke Metzger, executive director of Austin-based Environment Texas, said AI has “real promise, but it shouldn’t come at the cost of our water, our air and our neighborhoods.”
“Now that the state is asking the right questions, it needs to use the answers to develop safeguards that protect Texans,” Metzger said in a statement.
However, another nonprofit research company says data centers aren’t the problem. Amy Cooke, president and board chairman of Colorado-based Always On Energy Research, said in an email to the Houston Press that while data centers are blamed for higher consumer electric bills, the facilities are exposing weaknesses already built into the electric grid, not creating them.
“Today’s electricity affordability problems aren’t the result of data centers; they’re the result of bad policies that stem largely from energy decisions made five to 10 years ago,” Cooke said. “States invested heavily in weather-dependent power sources while still requiring ratepayers to maintain reliable backup generation. Consumers are now paying for both systems.”
Bettencourt has pointed out that “everyone” is using the technology provided by data centers, whether they know it or not, and the service the facilities provide is valuable to Texans. However, there’s a valid question of whether they should be subsidized by taxpayer money.
Sims said she thinks the issue will be a big one for HInojosa and Abbott in the next few months but it will likely die down after the November election. Abbott is leading the race by 6 percentage points and has a 48 percent favorability rating among Texas voters, according to a survey released this week by Texas Southern University.
“I think you’re going to see a lot of patting on the heads of voters: ‘Hey, we are going to look at this. I’ve ordered the PUC to check electricity. I’ve ordered the state water board to check the water supply,’ and then when it gets down to the legislative session in January, there will probably be a little less focus on it,” Sims said.
