Texas Pauses Data Centre Permits
Abbott directed TCEQ to stop issuing permits sought by data centre projects until the state’s ongoing audits are completed. The governor also instructed state agencies not to proceed with regulatory approvals related to data centre development until the required information has been collected. The review will examine electricity consumption, water use, grid reliability and the effect of projects on local communities. Regulators are also seeking information about data centre ownership and the tax incentives associated with projects. TCEQ has been asked to provide the governor’s office with an update on its compliance with the directive by October 19, 2026.
The order does not establish a permanent ban on new facilities. Instead, permitting is tied to the completion of the state reviews and the information regulators need to make future decisions.
Power Demand Becomes a Central Issue
The move comes as Texas faces a sharp increase in electricity demand from large data centres, particularly those supporting artificial intelligence and cloud computing. Interconnection requests in Texas have reached about 474 gigawatts, according to Reuters and ERCOT, more than five times the state's record peak electricity demand. The size of the queue has raised questions about how much proposed demand will ultimately materialise and what infrastructure would be required to serve it.
This is not the state's first move against the industry. Abbott wrote to the Public Utility Commission of Texas and ERCOT in August 2026, telling them to verify and audit every data centre project waiting for a grid connection, including what power each one plans to use and generate on site. That earlier order only touched the grid. The September directive closes the other door, blocking projects from getting environmental sign-off from TCEQ even if they never needed ERCOT's approval in the first place.
Water Use Adds Another Constraint
Electricity is only one part of the review. Water consumption has also become a significant issue as Texas expands its data centre capacity. Abbott previously directed the Texas Water Development Board to enforce state water-use reporting requirements for data centres and work with ERCOT to gather additional information. The board’s data will form part of the broader assessment of whether planned facilities could place pressure on water resources used by Texas communities. The issue is particularly relevant because cooling systems can make water demand an important operating consideration for large computing facilities.
Developers Face Greater Regulatory Uncertainty
The permitting halt introduces another variable for companies planning large-scale data centre investments in Texas. Abbott has also said data centres should cover the full cost of electrical infrastructure required to serve them and should not shift those costs onto residential customers.
Two Deadlines, No Guarantee
TCEQ's October 19 deadline only confirms it followed Abbott's order. ERCOT's December 10 target covers roughly 300 Batch Zero projects, and even ERCOT's general counsel, Chad Seely, has said the agency doesn't yet know how a delay there affects the separate interconnection study those projects are still waiting on. With a 474-gigawatt queue on the line, that's the date to watch.