Texas Republicans are opposing data centers, and both Senate candidates are in agreement on the water regulations.

      For a decade, Texas has welcomed data centre developers. Now, however, the state's Republicans are vying to see who can impose the toughest regulations, prompting Big Tech to take notice in a state that hosts more data centres than any other. This shift is becoming a significant issue in governor and U.S. Senate races, with data centres transitioning from being viewed primarily as an economic boon to being seen as a political challenge.

      Ken Paxton, the attorney general running for the Senate, unveiled a four-point Texas First Data Center Plan last month. The plan includes advocating for a federal DATA Act, implementing closed-loop water systems, banning Chinese technology in data centres, and imposing criminal liability for AI safety infringements. His opponent, James Talarico, has introduced a similar stance with his Hold Data Centers Accountable Plan, which seeks to eliminate sales tax incentives that attracted the industry, establish federal minimum standards, grant local communities more control over projects, and require closed-loop water systems.

      The similarities between the candidates' proposals are telling. Politicians from both parties have independently arrived at an agreement on water policy, indicating that the issue has moved past ideological lines and is being shaped by concerns over utility bills.

      Governor Greg Abbott is promoting the measures he's already put in place, stating, “What I have done is working. The guidelines and guardrails I’ve established are now universally adopted across the state of Texas.” He emphasized requirements for data centres to refrain from using water that communities need and to avoid putting excessive strain on the power grid. This stance has emerged more recently than it may appear, as Abbott called for a pause on new grid connections for an audit in August, following his earlier support for a $40 billion Google investment in the state just nine months before.

      The statistics clarify the shift: Texas received 474 GW of interconnection requests, about 90% from data centres, exceeding the state's record peak demand more than five times, with no reliable method to ascertain which projects would actually proceed.

      The industry has not made regulation easier. When Texas sought information about water and electricity usage, only 28 out of 377 companies responded, a poor response rate that likely diminishes trust among regulators.

      Abbott’s Democratic challenger, Gina Hinojosa, argues that existing guidelines are inadequate. She is calling for a moratorium and a special legislative session, claiming that developers have “descended into our communities, into our neighborhoods, and there are no rules.” Abbott has dismissed the notion of a special session, stating that the grid operator's data is incomplete and that lawmakers can tackle the issue when they reconvene in January, making the audit the main constraint until the election.

      Abbott has also addressed the cost concerns by directing the Public Utility Commission and ERCOT to safeguard residential ratepayers from the infrastructure costs associated with data centres, effectively acknowledging one of his opponents' key arguments: that households have been shouldering part of the financial burden from this expansion.

      This shift in public sentiment is mirrored nationally within the Republican Party. Opposition to local data centre construction has risen to 61% among Americans, up from 49% in March. The Republican senatorial committee has warned AI companies that local backlash could jeopardize a Senate seat in Ohio.

      In contrast, Trump has argued that communities rejecting data centres are making a mistake, while Abbott has indicated that the companies “dug their own grave,” showcasing an unusual disagreement between the president and the governor of the same party.

      The industry has taken note of this transformation. Its response thus far has included a charm offensive featuring community funds and promises of local hiring, addressing an issue that has progressed from planning meetings to election campaigns.

      The decisions made in Texas will have implications beyond its borders. With one of the country's most flexible power markets and the largest concentration of data centre projects, if Texas tightens regulations, it could set a precedent for other states to follow suit.