Governor Greg Abbott has directed state agencies to prevent new electrical infrastructure costs from being passed onto ratepayers and has called for legislative priorities targeting data centers in Texas. His proposals for the next legislative session include repealing their sales tax exemptions, instituting heightened requirements, and barring their construction in rural areas. The Legislature is set to convene next January.
Abbott's directives followed a “Data Center Week of Action” that saw activists gather at the Capitol on Monday. Organized by Alliance for a Clean Texas and Public Citizen's Texas Office, the events demanded Governor Abbott call a special session to address concerns about data centers' impact on natural resources like water and electricity. Speakers from across the political spectrum addressed attendees, including outgoing Republican Agriculture Commissioner Sid Miller and Democratic nominee for Agriculture Commissioner Clayton Tucker. Country musician Willie Nelson also expressed support for the activists and opposition to the centers on social media.
While Governor Abbott declined to call a special session, the powerful Senate Finance committee heard testimony on Tuesday about the sales tax exemption that benefits data centers. A representative from the Comptroller of Public Accounts office noted that what was once a small industry has significantly grown, and the exemption has cost the state up to $3.2 billion in revenue. The sales tax exemption was initially passed in 2013 and later bolstered in 2015 to attract these centers to Texas.
Dan Diorio, vice president of state policy for the Data Center Coalition, an industry organization, presented arguments supporting the industry. He stated that data centers provide meaningful, permanent jobs, consistently invest in new environmentally friendly technology, and contribute to lowering property taxes. Diorio also noted that the industry needs to improve its community outreach efforts, a point on which some senators agreed.
However, the hearing also featured strong opposition to the data centers. Donna Howard, who leads Matagorda County Against Data Centers, was among 30 people who spoke. She advocated for a pause, citing a lack of communication with neighbors and insufficient understanding of rural communities by the industry. When committee chair Senator Joan Huffman, a Republican from Houston, sought to confirm if Diorio was listening to these concerns, she found he had departed after an hour of questioning. “I think he got up and left after his testimony,” Senator Huffman remarked, expressing disappointment that he was “not listening to a person who was handpicked by the chair.” Senator Lois Kolkhorst, a Republican from Brenham, concurred, calling the departure “unimpressive.”
The Legislature will address these proposed changes and the future of data center regulation when it convenes next January.
