Top Texas leaders, including Republican Gov. Greg Abbott, want to slap more restrictions on data centers.
But because the Texas Legislature isn’t expected to meet again until early next year, the state likely can’t do much to set limits on a new surge of data centers that’s expected to come online by late 2032.
The issue is one of procedure — and timing.
Next April, regulators at the Electric Reliability Council of Texas, or ERCOT, are expected to approve plans to allow a new wave of data centers — known collectively as “Batch Zero” — to connect to the Texas grid.
Many of the data centers in Batch Zero have been in the works for years; some already are being built. State officials expect them to use a lot of energy.
All told, ERCOT estimates projects that meet Batch Zero requirements could request a combined 100 gigawatts of power, equal to the juice needed to power 25 million homes. To put that in perspective, there were 12.6 million homes in Texas as of 2024, according to the census.
Not all Batch Zero projects will receive the full amount of power they’re requesting when they first come online. Some experts believe the actual power usage of Batch Zero projects will be closer to 20 to 50 GW.
Still, it’s a lot of power. And these projects were set in motion at a time when there were few rules governing their construction and operation. That means that unless Texas legislators convene soon for a special session — or pass laws that apply retroactively, which carries its own risk — there’s little they can do to impose building requirements on these new data centers.
That includes requiring setbacks or mandating water-efficient cooling techniques, said Chris Kirby, a partner at the Balch & Bingham law firm, who represents data center clients.
Without a special session, Kirby said, April or May 2027 is probably the earliest a new data center guardrail bill could go into effect — and that would require a two-thirds vote in both statehouse chambers to expedite the law.
“Even in that case, the Batch Zero studies would be finished,” Kirby said. “I would be surprised if [bills passed in 2027] applied to the Batch Zero projects.”
Other types of laws, like those that would require data centers to report their water and power usage, would be more likely to affect Batch Zero, Kirby said.
That said, some legislative efforts — especially those that would require building updates — likely would face stiff resistance from the data center industry.
Texas is poised to eclipse Virginia as the data center capital of the world, with developers citing the state’s business-friendly ethos, independent electric grid and relative ease of permitting.
Cameron Poursoltan, the Data Center Coalition’s director of energy policy for Texas, said in a statement that changing the rules for Batch Zero and projects already under development would send the wrong message.
“Subjecting these projects to new requirements once again would create precisely the kind of uncertainty and unpredictability that harms investment — along with the jobs, tax revenue, and power generation build out that comes with it,” Poursoltan said.
The mismatched timing with Batch Zero and the regular 2027 legislative session comes as Abbott is facing pressure to either call a special session or institute a temporary moratorium on data center development.
Abbott, who last year called Texas the “epicenter” of AI development — and has previously worked to court data centers — has changed his tone in recent weeks.
In a letter to ERCOT CEO Pablo Vegas and Public Utility Commission of Texas Chair Thomas Gleeson, Abbott directed the agencies to send him a memo on actions and recommendations by July 17 to “ensure everyday Texans are not burdened with the costs of infrastructure driven by data center expansion.”
Abbott laid out several legislative proposals in the letter, including instituting mandatory water-use reporting, requiring new data centers be built with “water-efficient technologies,” repealing sales tax exemptions for data centers and establishing standards for setback requirements.
He ordered the PUC to “initiate action” to reduce residential ratepayer transmission costs by July 31.
Texas residential electricity prices have risen by 30 percent from 2020 through 2025, according to a study by the Texas Energy Poverty Research Institute, a trend mostly driven by the cost of building out power poles and wires.
Unlike other states, those increasing costs have been largely chalked up to state-mandated upgrades to better protect power systems from severe weather.
And last week, Abbott called for banning new data centers in rural areas.
“We must prohibit them from building AI data centers in rural Texas neighborhoods,” he said during a campaign stop in East Texas.
Abbott though has stopped short of calling for a special session. And it’s unclear whether legislative leaders would support one — or have enough consensus to pass any substantial data center legislation if they did meet.
Data centers have caused a rift in Texas’ Republican party, with some rural Republican lawmakers siding with Democrats in favor of implementing moratoriums and guardrail rules. Republican legislators in more urban and suburban areas, meanwhile, have worked to clamp down on local governments’ authority to regulate data center developments.
But pressure is mounting to do more.
A poll released last month by the nonpartisan Texas Politics Project found 56 percent of Texans opposed data center construction in their communities. That opposition is stronger among rural Texans, with 62 percent opposed and half of those “strongly” opposed.
“You understand why we’re a little frustrated in general with data centers because a few months ago some of us were on the campaign trail,” said state Rep. Trent Ashby, a Republican, said to a state House Natural Resources Committee panel of data center officials. “And at that time, the No. 1 issue was property tax relief. But since [the primaries], all I’ve heard about is data center relief.”
No matter when the Texas Legislature meets next, it likely will result in a “big fight” over data centers, said Josh Rhodes, a research scientist focused on energy at the University of Texas, Austin.
But whatever they agree on, he added, “may be moot for a bulk of the first projects going through.”
Retroactive requirements carry legal risks
Texas lawmakers do have some options for making sure Batch Zero projects are subject to new restrictions.
The state in 2021 passed a law that required new power generators and natural gas pipelines — as well as those already in place — to strengthen their defenses against severe weather. The legislation came on the heels of Winter Storm Uri, which led to power outages across the state and resulted in the deaths of more than 200 people.
Companies spent millions, if not billions of dollars, to comply with rules created by the law. But it offered an example of how the Texas Legislature can pass retroactive laws “in rare and extraordinary circumstances,” said Texas state Sen. Charles Schwertner, a Republican who authored the weatherization law.
Retroactive laws, or any law that impairs “the obligation of contracts,” are illegal under the Texas Constitution, but courts have permitted some that are “necessary to safeguard public safety and welfare.”
Schwertner said if data center debates get “heated enough,” those types of retroactive rules could be passed in the next regular session.
“Things like noise abatement, where facilities would have to be in compliance within a certain amount of time. It could be retroactive where they come into compliance with new regulations the PUC would promulgate,” Schwertner said.
Even so, Kirby, of the Balch & Bingham law firm, said he would be surprised to see retroactive laws passed.
“I think Gov. Abbott’s [letter] he put out on June 10, it doesn’t appear to call for retroactive laws, it calls for prospective laws,” Kirby said.
Plus, introducing retroactive laws could open the door to lawsuits, said Juliana Sersen, an energy regulatory partner at Baker Botts law firm.
To even be eligible for Batch Zero, project developers must show they have control of the land where they plan to build, as well as pay a $50,000-per-megawatt fee. That’s in addition to the billions of dollars that developers have spent or will spend to get their data center projects off the ground.
Adding new rules after-the-fact would cost the developers even more — and may not pass legal muster.
Sersen said retroactive laws that protect the grid likely would be allowed by courts. But for other laws, Sersen said projects would need to be grandfathered in “to avoid all of this potential litigation and struggle.”
Kirby, who represents data centers, said his clients are working in good faith “and they want to keep Texas’ grid safe and don’t want to cause issues with Texas ratepayers.”
“As to whether anybody would sue, you can never say what someone will or won’t sue over,” Kirby said.
Poursoltan with the Data Center Coalition, said retroactively changing regulations for data centers would cause developers to rethink their investments in Texas.
“It is extraordinarily difficult to make long-term capital investments when the rules are unclear or can be rewritten after the ground has already been broken,” Poursoltan said.
He said data centers are committed to engaging with communities where they operate and paying the full cost of service for the power they use.
But there are still skeptics. Luke Metzger, executive director of Environment Texas, said the stakes are too high to allow Batch Zero projects to avoid guardrail requirements.
He pointed to a University of Texas, Austin, study that found data centers could use as much as 9 percent of the state’s water by 2040.
“If these projects go forward,” Metzger said. “It could be really harmful to our rivers and aquifers and drinking water.”
