Texas Halts Data Center Permits Until Grid and Water Audits Are Completed

Texas Governor Greg Abbott on Sep. 21 directed the Texas Commission on Environmental Quality to pause all permitting decisions for data center projects until the Electric Reliability Council of Texas (ERCOT) completes its audit of data centers advancing through its interconnection process, tightening oversight as the state reassesses the rapid expansion of large power users.

The directive requires the environmental regulator to withhold approvals while the Texas Public Utility Commission, the Electric Reliability Council of Texas, and the Texas Water Development Board gather information needed to evaluate how proposed projects could affect grid reliability, system security, and community water supplies. The agencies are conducting an audit of data centers seeking to connect to the state’s electric system, building on earlier actions announced in August and September.

The review follows Governor Abbott’s Sep. 14 instruction for the water board to enforce existing water-use reporting requirements for data centers, pursue legal consequences for noncompliance, and coordinate with ERCOT to collect additional information on water consumption. The review is intended to provide regulators with a clearer picture of the electricity demand and water needs associated with proposed facilities before additional projects advance.

The governor also established several conditions that future developments must meet before moving forward. Projects will be expected to pay for the electrical infrastructure required to support their operations, demonstrate that they contribute to lower residential electricity costs, complete the grid operator’s audit, comply with electricity and water reporting requirements, avoid using water needed by local communities, and meet setback standards designed to protect nearby residents.

The commission must align future permitting decisions with the findings from the ongoing reviews and provide a compliance update to the governor’s office by Oct. 19, 2026.

Looking ahead, Governor Abbott plans to work with state lawmakers during the next legislative session to eliminate financial incentives for data centers, signaling that future projects could face stricter regulatory scrutiny as policymakers weigh economic development against grid reliability and water security.