Texas Governor Expands Regulatory Pressure On Data Center Development

Texas Gov. Greg Abbott's latest directive signals increased regulatory pressure on data center development in the Lone Star State. On September 14, 2026, Gov. Abbott directed the Texas Water Development Board (TWDB) to "use its statutory authority to compel major water users to comply with water use reporting requirements and to impose legal consequences for past and future failure to comply with state law."

In the September 14 letter to the agency's chairwoman and its executive administrator, Abbott stated the agency's statutory duty to develop statewide water planning and that large-volume water users are legally obligated to respond to the TWDB survey with "complete and accurate information." Abbott then explicitly stated that failure by large water users such as data centers to provide complete responses may result in legal consequences, including civil penalties, ineligibility to obtain permits and even criminal charges.

Abbott further directed the TWDB to coordinate with the Electric Reliability Council of Texas (ERCOT) on its ongoing audit of data centers. The audit is expected to include a study of proposed projects' water use and efficiency, although ERCOT's regulatory purview has historically been limited to electrical power. Finally, Abbott restated his August 3, 2026, directive that failure by a large-volume water user to respond to the TWDB survey should result in denial of interconnection to the ERCOT grid.

As Holland & Knight has previously reported, Abbott's response comes as the dramatic increase in data center development in rural Texas impacts nearby residents, an important constituency in a midterm election cycle. The Texas Legislature has largely followed the governor's lead, with a number of Texas House and Senate committees studying the issue and signaling major changes ahead in the coming legislative session in January 2027.

Considerations for Industry Stakeholders

Recognizing the rapidly shifting political and regulatory environment facing the industry, Holland & Knight's Austin-based Texas Government Advocacy Team has established the Texas Data Center Association, a trade association dedicated to effectively representing the industry before Texas policymakers and helping ensure that data center companies have a coordinated voice in the debates already underway.