Governor Greg Abbott has recently changed his stance on aggressively recruiting data companies to build in the state as counties and cities attempt to block construction.
Up until this election year, the governor courted the data industry with generous tax incentives and touted massive AI projects but is now actively proposing bans on rural data center development and directing state regulators to impose strict financial requirements on the facilities.
Recent polls showi 56% of Texans oppose AI data centers in their communities, with many cities and counties seeking ways to ban construction of the facilities and facing expensive lawsuits to fight the data industry. Opposition was strongest in rural areas, where the poll found 62% oppose the construction of a local data center.
Facing mounting pressure from Texas residents, Abbott’s administration has pivoted to protect local resources. His updated regulatory and legislative agenda for the upcoming session focuses on shifting the burden entirely onto the data centers, though no effort is being made to allow bans in communities that don’t want the facilities.
“What the data underlines is how much of a problem the business stakeholders who are heavily in favor of [data center development] have on their hands,” said James Henson, co-director of the poll and head of the Texas Politics Project. “I think the pushback on the issue emerged more quickly and is more widespread than the conventional response to economic development in Texas has historically. The economic concerns combined with negative feelings about data centers could weigh on the November’s general election. I’m not saying this is the undoing of the Republican Party, but it is a challenge for them, and that’s why you’re seeing Gov. Abbott and others take a proactive stance on this now. “ Abbott recently instructed the Public Utility Commission of Texas and ERCOT to implement rules that ensure everyday Texans and residential ratepayers do not foot the bill for data center expansion. His stipulations for data companies include fully funding their own grid interconnection and electric infrastructure, bringing their own power generation and not burdening the existing power grid, reusing water and employ efficient 'closed loop' cooling technology, as well as proposing to eliminate lucrative sales tax exemptions currently enjoyed by the data center Texas data centers cost the state over $1 billion annually in lost sales tax revenue. Projections indicate that the exemption will reduce state sales tax revenue by $3.1 billion to $3.2 billion over a two-year period, driven by tax breaks on facility construction, maintenance and electricity. The state's sales tax exemption program, which was originally designed for smaller data centers, now benefits over 121 active data centers and is poised to cost nearly $8 billion in revenue from 2026 to 2030.
Texas is poised to be the No. 1 market for data centers in the U.S., with the most planned projects of any state. A Texas Tribune analysis of data center construction in the state found a majority of the 248 planned data centers are in red, rural counties where land is more plentiful and local governments have less regulatory oversight.
The rise of AI and cloud computing is driving massive energy demands, with the Department of Energy forecasting data centers could consume 12% of U.S. electricity by 2030. Utilities are building new power plants, poles and wires to support these massive facilities, frequently spreading the multibillion- dollar costs across all ratepayers. Operators are forced to buy extra power at peak market rates, driving up overall energy procurement bills.
Abbott received at least $1.6 million to $2 million from tech executives and companies associated with the artificial intelligence and data center industries. Campaign finance records available through early 2026 show tech giants, including Google and Amazon, flowing cash to Texas lawmakers and Abbott as the state debates data center regulations