Texas Gov. Greg Abbott Halts Data Center Permits in Defiance of Trump as Public Backlash Grows

Texas Gov. Greg Abbott has halted new permits for data centers amid growing public backlash against the projects, as he seeks reelection to a fourth term in November.

Abbott, a Republican, directed the Texas Commission on Environmental Quality to stop processing data center permits until the state finishes an audit over their impact on the state's power grid. It's the latest in a string of moves in Texas, the most prolific state for data center development, to slow the rapid pace of construction.

The move comes in defiance of President Donald Trump, who continues to tout the potential benefits of data centers to local communities. That's despite widespread public opposition to data center development. Americans are worried about how the large developments affect water, electric, and air quality around them.

“Simply put, Texans must come first,” Abbott said in a statement. “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.”

Abbott didn't say when permits would resume. Commercial real estate services company JLL estimates Texas is the nation's top market for data center construction, far surpassing Virginia. The two states have about the same capacity of data centers operating now.

Since June, the Electric Reliability Council of Texas has been auditing data center projects undergoing interconnection, to study how they'll affect the power grid. This month, Abbott also ordered developers to report water use to the Texas Water Development Board. Texas threatened legal action for failure to comply.

Abbott further said he would aim to phase out any economic incentives for data center projects. He'll have to work with the Texas Legislature to make that happen.

Meanwhile, Trump continued to tout artificial intelligence in a speech at the United Nations on Tuesday, telling world leaders he would not cooperate with international efforts to constrain the development of AI, which he called "super-intelligence."

"I'm not going to stifle growth of something that will be bigger than the industrial revolution," he said. He added, "we will only encourage super-intelligence. We're going to encourage it, not rein it in."

Nationwide brake check

Data centers have rocketed into the spotlight as a major political issue this year. That's brought a wave of development constraints on the projects.

In the past few days, Virginia Gov. Abigail Spanberger established a "rapid-response task force" to react to the continued development in the state, part of a larger campaign to regulate Virginia data centers. California Gov. Gavin Newsom mandated stronger reporting requirements for their water and electric use. Illinois Gov. JB Pritzker established a Cabinet to provide advice on the advancement of AI.

Those three governors, all Democrats, say the federal government hasn't done enough to regulate data centers. It's emerged as an attack line against Trump and Republicans ahead of the midterms, and as public support wanes for large developments.

"This industry has been rapidly expanding in the last few years without a clear or coordinated plan to address the impacts on Virginians—on their electric bills, their water, their land, their air, or their quality of life," Spanberger said in remarks on Friday.

The U.S. House of Representatives passed a bill last week that would encourage states and utilities to shield ratepayers from data center power costs. That means putting developers on the hook for the energy upgrades their products create.

But the bill has had a rocky start in the Senate, where lawmakers worry it doesn't do enough, Freedom Smith, a partner in environmental law at Ice Miller LLP, tells Realtor.com®. The Senate has put forth its own set of stricter data center regulations. That could set up the two chambers to clash further over how to regulate development.

"The House bill is more amending the existing framework to add another consideration to what the regulators would consider," Smith said. "The Senate bill doesn't do that. I think it's a lot more punitive to the data centers."

Data center debate

Still, these clampdowns spell continued trouble for the data center development business. Virginia, Texas, and California are the top three regions for data center development, according to research by the National Association of Realtors®. Those states plus Oregon and Ohio, which have their own data center restrictions, account for over half of the current facilities in the U.S.

Recent Realtor.com research on data centers found they're moving into rural areas. While they do affect property taxes, how they affect the average homeowner's tax burden is complicated. And while it found no impact on property values, that data tracks only large facilities in the two years after they open.

The NAR, in its own study, found 61% of NAR members said their clients were concerned that data centers would raise energy costs and 56% reported concerns about water usage.

McKinsey estimates the industry will pour $7 trillion into infrastructure by 2030, fueling economic growth that supporters tout. Goldman Sachs estimated that data center power demand will more than double from 2025 to 2027. But only about 50% to 60% of data center capacity will come online due to delays and cancellations, it said.