Texas is preparing to impose stricter regulations on data centers, a sector it has long sought to attract. Governor Greg Abbott has proposed new rules addressing the energy and water consumption of data centers and their impact on local infrastructure.
In a letter sent to state regulators on Wednesday, Abbott emphasized that investments in data centers should not become a burden on the daily bills of Texans. The Republican governor argued that this rapidly growing sector requires oversight mechanisms.
The proposed measures include requiring new data centers to finance their own electrical infrastructure, use water-saving technologies, and removing sales tax exemptions. Abbott also asked regulators to ensure that data center connections are planned in a way that reduces residential electricity bills.
A Shift in Direction for Texas, a Hub of Technology Investments
This move marks a notable change for Texas, home to data centers owned by major tech companies like Tesla, Meta, and Amazon. The state ranks second in the country for the number of data centers, following Virginia.
Opposition to data center expansion is not limited to Texas. Protests have taken place in local communities across the U.S., and at least 12 states have proposed statewide bans on data centers.
"Be Ready to Bring Your Own Electricity" Message
Gabriel Collins, an energy and environmental regulation expert at Rice University, noted that Texas’s approach differs from other states’ attempts to halt development. He described it not as a full stop but as a clear setting of boundaries for companies.
According to Collins, Abbott’s message is that Texas remains open for investment, but companies must take responsibility for their own electricity and contributions to local water infrastructure.
The expert also pointed out that steps regarding data centers have found relatively bipartisan support even in Texas, increasing the likelihood that "reasonable protection limits" will be accepted in the state legislature.
Growing Debate Over Tax Incentives
Texas approved a statewide sales tax exemption for data centers in 2013. According to Texas Tribune, the state provides over $1 billion annually in tax incentives to data centers.
In November, Abbott described Texas as a center for artificial intelligence development during a $40 billion investment announcement with Google. New data centers were highlighted as part of this investment plan.
