Texas Halts Electric Permits for Data Centers One Week After Water-Use Directive

KEY POINTS  

• Gov. Greg Abbott directed the state environmental commission to halt all data-center permits until grid operator ERCOT completes its audit.

• The move follows Abbott’s Sept. 14 directive to TWDB to enforce water-use reporting requirements.

• Data-center projects must cover electric infrastructure costs, protect community water supplies and report electricity and water usage.

Texas Gov. Greg Abbott directed the Texas Commission on Environmental Quality (TCEQ) on Sept. 21 to halt the issuance of all permits related to data-center projects getting new grid connections until the Electric Reliability Council of Texas, or ERCOT, completes its audit of the industry.

The permit halt issued Monday follows Abbott’s Sept. 14 directive to the Texas water regulator to compel major water users, including data centers, to comply with water-use reporting requirements. 

ERCOT, the independent grid operator for the region, manages the flow of electric power to more than 27 million Texas customers. The electric grid it represents covers about 90% of the state’s electric load, and schedules power connecting more than 55,000 miles of transmission lines, according to its website. 

Permitting Halt and Agency Timeline

The directive, issued in a Sept. 21 letter to TCEQ Executive Director Kelly Keel, says state agencies should not move forward with regulatory approvals tied to data-center development until the Public Utility Commission of Texas, ERCOT and the Texas Water Development Board obtain necessary information.

The Governor's letter specified that specific information would be needed to evaluate the projects’ impact in three areas:

• Electric-grid reliability

• Grid security

• Local water resources

“Simply put, Texans must come first,” Abbott said in a statement issued by his office. “Data centers must pay their own way, protect our grid and water, and complete the ERCOT and TWDB audits. Until they do, TCEQ will issue no permits sought by data center projects.”

Under the directive, the environmental quality agency must align its permitting decisions with the information produced by the electric and water regulators' audits. The agency must report to the Office of the Governor on its compliance by Monday, Oct. 19, 2026.

Grid and Infrastructure Costs in Focus

The action follows Abbott’s earlier direction to the public utility commission and ERCOT to audit all data centers moving through ERCOT’s interconnection process.

The governor’s office said the audit is intended to ensure that data-center development does not compromise the reliability of the Texas electric grid or shift infrastructure costs to residential ratepayers.

In a June 10 release, Abbott directed the PUCT to require data centers to fully fund the electric infrastructure needed to serve their operations.

He also directed the PUCT and ERCOT to identify additional protections for residential and small-business ratepayers. The Texas governor added that he would work with the Legislature on measures intended to ensure data centers add to Texas electric capacity, rather than only increasing demand.

The Sept. 21 directive says data-center projects must cover all electrical infrastructure costs, result in lower residential electric bills and complete both the ERCOT and TWDB audits.

An image of an electrical substation and power infrastructure for the Hutto, Tx data center campus. A behind-the-meter power solution may help developers bring power to a data center quicker than requesting grid connections. Image: Shutterstock

Water-Use Reporting and Enforcement

Abbott also directed the TWDB on Sept. 14 to compel major water users, including data centers, to comply with water-use reporting requirements and to impose legal consequences for past and future failures to comply with state law.

The governor’s office said the Texas Water Code requires a complete and accurate water-use survey. It said a data center that fails to complete and return the survey commits an offense punishable as a crime and is ineligible for TCEQ permits, amendments or renewals under Chapter 11 of the Water Code.

TWDB was directed to use its enforcement authority, including referrals to the appropriate county or district attorney and notice to TCEQ when warranted, the Sept. 14 statement said.

Audit to Gather More Information on Water Use

The TWDB was also directed to to partner with ERCOT on the audit to gather additional information about data-center water consumption, water sources and the use of water-efficient technologies.

The Sept. 21 letter says data centers must not use water needed by local communities, must report electricity and water usage, and must comply with setback requirements intended to protect surrounding communities.

Abbott said he will work with the Texas Legislature during its next session to eliminate financial incentives for data centers. The governor’s office said TCEQ will play a role once any additional safeguards are enacted.

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