Greg Abbott proposes sweeping regulations for Texas data centers amid water and energy concerns

Texas Governor Seeks New Limits on Data Centers

Gov. Greg Abbott is urging tighter controls and a repeal of financial incentives for data centers, which have drawn complaints in rural Republican areas of Texas. Gov. Greg Abbott of Texas proposed new regulations for the state's booming data center industry on Wednesday, including repealing some tax incentives and requiring water-efficient technologies, as Republican leaders grapple with balancing economic growth and local opposition. Mr. Abbott, a Republican seeking re-election a fourth term, sent the recommendations to state regulators and directed them to take immediate steps to ensure certain costs associated with data centers were not passed along to local consumers. He also pledged to work with state lawmakers to roll back sales tax exemptions and other costly incentives for data center developers. Data center companies, particularly those supporting the artificial intelligence industry, have flocked to Texas, lured in part by the state's promise of minimal regulation. With hundreds operational and more on the way, Texas is poised to become the country's leading data center market within three years, according to a recent report from Bloom Energy. But local communities targeted by these developers, many of which are in rural and largely Republican areas, have pushed back because of concerns about water use, noise pollution and utility costs. With his announcement on Wednesday, Mr. Abbott appeared eager to act on those concerns from potential Republican voters in an election year, while putting off many of the final decisions. The full extent of any new regulations won't be clear until the State Legislature meets next year. Mr. Abbott is taking action now, he said in a letter to regulators, as the industry's expansion requires massive infrastructure and resource investments. Data centers could use up to 9 percent of the state's water by 2040, according to a recent study by the University of Texas at Austin. The state has also received requests for new data centers that far outstrip the current supply of electricity. "The rapid scale of data center development requires oversight to ensure everyday Texans are not burdened with the costs of infrastructure driven by data center expansion," Mr. Abbott wrote in the letter, to the state's Public Utility Commission and the Electric Reliability Council of Texas, the state's grid operator. He directed them to "prevent data centers from shifting development risks and costs onto Texans." While Mr. Abbott has encouraged companies to invest in the state, calling Texas the "epicenter of A.I. development," he has also warned that the industry's expansion has to be controlled. He recently signed into law new transparency requirements for companies using A.I. The governor has also banned certain A.I. technologies on state devices that he said could be exploited by "hostile foreign actors." Some local leaders have complained that they lack the power to block data center construction or expansion. The state A.I. law pre-empts any A.I. regulations at the local level. The governor's proposals did not suggest giving local communities more authority over data centers or A.I. technologies. Instead, he said, state lawmakers must pass new laws requiring companies "to reduce impacts" on their neighbors through noise-reduction technology and other means. State Representative Gina Hinojosa, the Democrat challenging Mr. Abbott for governor, accused him of "backtracking" from an anti-regulation stance now that incentives for data centers have become unpopular. "Greg Abbott has zero credibility here," she said in a statement. "No one believes that the arsonist is going to put out the fire." Dan Diorio, the vice president of state policy for the Data Center Coalition, said the national industry group would work collaboratively with the state but warned against cookie cutter regulations. In a statement, he said many data center developers have already done much of what Mr. Abbott wants, including shouldering the full cost of the infrastructure, like transformers and breakers, needed to support their power and energy needs. "There is no one-size-fits-all solution when it comes to facility design, cooling technology, or regulation," Mr. Diorio said. Some environmentalists in Texas quickly embraced Mr. Abbott's proposals. Luke Metzger, with Environment Texas, a group that has pushed for data center regulations, applauded the recommendations and said lawmakers should also regulate air pollution coming from these facilities. "Lawmakers should take steps to minimize these emissions and encourage cleaner alternatives," Mr. Metzger said in a statement.

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Abbott Proposes Regulations On Texas' Booming Data Center Industry Texas Gov. Greg Abbott (R) on Wednesday proposed new regulations aimed at protecting residents from the rising energy costs and environmental damage caused by the construction of data centers in the state. "Data centers must operate in ways that reduce costs for residential electricity customers, do not drain water needed for our communities, and take into consideration the needs of our neighborhoods," Abbott said in a statement. There's been a surge in artificial intelligence data centers constructed in Texas, which Abbott has pushed to make "the epicenter of AI development" despite concerns from residents impacted by the energy-intensive facilities. In a letter to the Public Utility Commission of Texas and the Electric Reliability Council of Texas, Abbott directed that data centers must fully fund the costs of electric infrastructure and cannot pass them onto residents. He also directed them to take action to reduce residential ratepayers' transmission costs by July 31. In his letter, Abbott also asked that the two organizations submit a memorandum to his office by July 17 identifying additional ways they can safeguard residential and small business ratepayers. The governor said he plans to work with the state's lawmakers to pass legislation that impose the regulations, including requiring data centers to use water-efficient cooling systems.