Texas Data Center Construction May Pause Under New Governor

Governor-Elect Gina Hinojosa has called for a temporary halt to new data center construction in Texas until the state Legislature meets next year. This move aims to give local communities more control over how and where these facilities are built. The proposal introduces uncertainty for a sector that has been rapidly expanding in North Texas.

Hinojosa made the call for a moratorium during her campaign. She wants the Texas Legislature to pass laws that grant local authorities greater oversight of data center projects. The timing of this policy shift coincides with the transition from the Abbott administration to the new leadership.

Michael Webber, an energy policy researcher at the University of Texas at Austin, noted that the threat of a pause is enough to make developers consider other states. "I think that a moratorium or the threat of a moratorium is enough to get the developers to consider other states," Webber said. "They are in a race and they want speed to power and one of the reasons why they like Texas is because they can move quickly here."

Webber warned that a prolonged halt could impact the nation's ability to compete with China in artificial intelligence development. He stated that Texas is slated to be the top state for future data center construction. However, he also suggested that a short pause could allow communities, companies, and lawmakers to reach a common ground.

"That's the concern I have. And that's why I think it's important not to just have a moratorium, but instead to have a conversation and a negotiation," Webber added. He expects the market to slow in the short term as new rules are considered before accelerating again.

Webber remains confident that Texas will maintain its position as the largest data center market in the country. "So I think we'll still become number one, we tend to do that," he said. "We're number on in wind, we're number in batteries, we're in solar, we'll probably be number one in data centers. These things all go hand in hand."

Mohammed Islam, a researcher at UT Arlington and advisor to the City of Fort Worth's Data Center Commission, believes operators will want to work closely with regulators. He told NBC 5 Investigates that companies are eager to collaborate to ensure projects stay on track. "I believe if everyone works together, we'll be able to clarify these things, really understand what are the impacts," Islam said.

Jess Heck, Texas Director of Government Affairs for the Data Center Coalition, said the industry looks forward to working with state and local officials. The coalition represents the data center industry in the state. "DCC looks forward to working with state leadership along with local officials, stakeholders, and Texas communities to continue building trust and supporting responsible data center growth," Heck said in a statement.

Before Tuesday's election, Governor Greg Abbott paused state permits for new data centers. This pause was intended to allow state agencies to audit projects in the pipeline and analyze impacts on the electric grid. Many analysts expected the permitting process to resume once that review was completed in December.

With the new governor taking office a month after the election, questions remain about what will happen in January. The industry faces a new layer of regulation as it prepares for the next phase of growth in the North Texas market.