Data center approvals in Texas halted until audits completed, Gov. Greg Abbott says

This article was originally published by Texas Tribune.

Amid growing public backlash to the rapid buildout of data centers across Texas, Gov. Greg Abbott on Monday announced a moratorium on the approval of data centers until regulatory agencies can audit proposed data centers seeking connection to the state’s electric grid. 

It is unclear how long the audit will take, but the effort is Abbott’s strongest effort yet to slow the development of these data centers statewide and underscores how little information members of the public, including state leaders, know about the facilities. 

Abbott is asking the Public Utility Commission of Texas and the Electric Reliability Council of Texas to ensure data center developers provide information on tax breaks they will receive; power use and generation; water use and cooling operations; efforts to reduce impacts on local communities; and ownership of the facility. Any projects that fail Abbott’s ordered “comprehensive verification and audit” should be denied connection to the grid, the governor said.

“Our top priority is to protect Texans’ safety and quality of life,” Abbott wrote in a statement. “Any project that fails to comply with the requirements set forth by the PUCT and ERCOT, and by state law, must be denied connection to the Texas grid. Simply put, Texans must come first.”

Abbott’s letter to the PUCT and ERCOT directs them to conduct the audit on all data centers advancing through ERCOT’s interconnection queue, or the line for energy intensive projects seeking connection to the electric grid. ERCOT is currently tracking more than 1,800 projects in the queue, representing over 474 gigawatts of electricity, or more than five times the grid’s record for peak demand, according to ERCOT. Approximately 90% of the new power requests are data centers, Abbott said. 

ERCOT and the PUCT are already conducting a review of some of the projects in the queue through a process known as “batch zero.” It is unclear if Abbott wants agencies to audit those projects or all those currently in the queue. Following Abbott’s directive, ERCOT said Monday they are putting the batch zero review on pause.

There is no state or federal government database of the facilities, but the Texas Tribune has identified at least 335 data centers operating in Texas. The state is currently the second largest market for the facilities in the country, behind Virginia, and is poised to take the top spot. The Tribune has identified at least 248 planned data centers coming to the state, although hundreds more in lesser development phases have lined up in the power queue.

While Abbott’s directive pauses the approval of new data centers seeking connection to the ERCOT grid, some data centers are building on-site power generation that allows them to bypass traditional connection to the grid. The ERCOT region also does not include the entirety of the state, like El Paso, which has seen the development of several large data centers. 

The Data Center Coalition, a trade group that represents some of the nation’s largest tech companies, said it was hopeful Abbott’s directive could separate responsible developers from irresponsible ones and urged regulators to quickly conduct the audits. 

“Done correctly, this review can showcase the good actors in the data center industry rather than delaying them unnecessarily, ensuring Texas will continue to be the national leader in economic development,” the organization’s spokesman Dan Diorio wrote in a statement Monday.

Lack of Transparency

Lawmakers have spent much of this year seeking clarity about the facilities’ electricity use, water use and access to tax incentives as the Legislature considers tighter regulation of the industry. 

Abbott cited the failure of some data centers to comply with a recent PUCT’s survey measuring water and power usage as the reason the audit was needed because it hinders the agencies’ ability to make informed decisions.

Developed by the PUCT in collaboration with the Texas Water Development Board, the survey collects information about a data center’s water consumption, cooling systems, water sources, electricity demand and whether facilities are connected to the state’s electric grid or have their own on-site power source such as a gas-fired power plant. The responses are meant to inform long-term state water planning.

State law requires the PUCT to share the data with the water development board and state environmental regulators and to submit a report to the governor and the Legislative Budget Board by the end of the year.

Rep. Brad Buckley, R-Salado, a member of the House Natural Resources Committee called survey participation “pretty pathetic” during a June hearing. Of the 377 companies PUCT staff said it notified when the survey was launched, 28 submitted responses.

Also in June, Abbott directed the PUCT and ERCOT to require data centers fully fund the costs of electric infrastructure needed to serve them and take other measures to reduce electricity costs to residents. 

On July 17, PUCT Chair Thomas Gleeson responded to Abbott with his own letter outlining efforts the agencies have already taken and calling on the Legislature to grant them more authority to regulate the industry.

The PUCT did not respond to questions about the scope of the audit, saying the agency would work with ERCOT to ensure Abbott’s new directives are carried out.

Abbott’s proposal may disrupt ERCOT’s ongoing rework of its approval process for projects in the interconnection queue, requiring large-load projects to provide more detailed information before they can advance. The new rules for the first set of projects under consideration, known as “batch zero,” were approved by the PUCT in June. The agencies are currently working to develop a more permanent set of rules for projects still in the queue. 

An ERCOT spokesperson said the grid manager is reviewing Abbott’s order and will postpone the batch zero transmission planning study that is currently underway. 

Calls for a Full Moratorium 

City and county governments in the state have tried to slow data center development amid grassroots resistance to the facilities’ construction. Hood County rejected two attempts to pass a countywide moratorium in February after state Sen. Paul Bettencourt, R-Houston, warned the commissioners court it lacked the legal authority to do so. In May, Hill County approved the state’s first moratorium on the development of data centers but rescinded the measure a month later after a developer sued for $100 million in damages. And in June, San Marcos became the first Texas city to issue such a moratorium.

Nationally, New York Gov. Kathy Hochul, a Democrat, faced criticism from President Donald Trump after she last month issued a year-long pause on the construction of the largest data centers.  

Opponents of the data center industry say Abbott’s Monday directive to regulators comes up short of a true moratorium. 

Texas Department of Agriculture Commissioner Sid Miller called Abbott’s directive vague and said it was not a substitute for legislative action, although he applauded the additional scrutiny. 

“Without legislative action, this directive is all hat and no cattle — empty political rhetoric wrapped in meaningless fluff,” Miller wrote. “Texans need laws with teeth, not another press release designed to make it look like something is being done while hyperscale projects continue moving forward.”

Miller, along with many other opponents of data center development, has been calling on Abbott to order a special session that would allow legislators to pass laws regulating the industry. 

“AI has real promise, but it shouldn't come at the cost of our water, our air, and our neighborhoods," said Luke Metzger, executive director of Environment Texas, in a written statement about the need for a data center-focused special session. "Now that the state is asking the right questions, it needs to use the answers to develop safeguards that protect Texans."

State Rep. Gina Hinojosa, an Austin Democrat running against Abbott, said his directives do not go far enough. 

“So nice to see another strongly worded letter from Abbott after he proudly made Texas the wild west of data centers,” Hinojosa wrote 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.”

Alejandra Martinez contributed to this report.