Texas Gov. Greg Abbott directed the state’s environmental agency to stop approving permits for data centers until an audit of projects seeking to connect to the electric grid is finished. It’s another step toward slowing data center development as nationwide backlash to the tech facilities reaches new heights just ahead of the midterm elections.
In a letter sent on Monday to the Texas Commission on Environmental Quality (TCEQ), Abbott told the state agency to “halt all permits sought by data centers.”
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As the advent of artificial intelligence transforms data centers from an under-the-radar industry powering the internet to a frequent target of bipartisan concern, state governments are taking action. New York was the first state to pass a one-year moratorium on data center construction. Ohio and Illinois are among the states to strip tax incentives from the industry. And Texas is where the scale of data center development is the largest, and the speed of policy shifts is perhaps the fastest.
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In August, Abbott ordered the state’s utility regulatory agency and main power grid operator to pause projects at the final step: Grid interconnection. But every other part of the construction process was allowed to move forward unencumbered. Now, that could change with a move that builds on the audit by pausing new permits required for data center developers to start construction.
The pause aims to ensure that data center companies paid for all the electricity and energy infrastructure upgrades needed and did not drive up residential electric costs. Abbott also emphasized the need to safeguard Texas’ water resources and prevent data centers from disrupting communities’ quality of life.
What is the environmental agency’s role?
The state’s power grid operator, the Electric Reliability Council of Texas (ERCOT), and the Public Utilities Commission of Texas have authority over how the power grid is run. When it comes to data centers, they determine if and how quickly a facility can connect to the grid.
But TCEQ has significant authority over other aspects of data center construction. TCEQ issues construction permits and permits for backup and behind-the-meter power sources. The behind-the-meter power had been one way for developers to go around Abbott’s audit by bringing their own electricity generation and not connecting directly to the wider grid.
Most permits issued to data centers are air permits for power generation units, according to Kathryn Guerra, director of the TCEQ Watchdog Campaign at the nonprofit Public Citizen.
Data center projects over one acre in size must obtain a stormwater construction permit; many facilities also need permits for fuel storage, hazardous waste and wastewater, Guerra told Straight Arrow.
READ MORE: How data centers became America’s favorite new villain — online and IRL
It’s unclear exactly how many permits related to data centers are currently pending before TCEQ. There are currently about 400 new air permits pending at the agency among all facility types, but that does not include “minor source” permits — those needed for smaller-scale power generators — often used at data centers.
What effect will a permitting pause have?
Abbott’s letter directs TCEQ to provide a report by Oct. 19, detailing how the agency is complying with the order. The pause in permitting is only set to last as long as ERCOT and the utility commission take to complete the audit.
ERCOT will spend October and November gathering information for the audit, including site inspections, verifying financial information and contracts. The grid operator is then expected to submit a report on Dec. 10, according to slides from an August meeting.
If that report marks the end of the audit process, it’s possible the permitting pause will end in December, but some experts expressed skepticism that the pause alone will have much of an effect.
“It’s doubtful that TCEQ can legally pause permitting without legislative action,” said Guerra, whose job is to monitor the environmental agency, in a Monday press release. “Unless Abbott puts his signature to real protections passed by the Texas Legislature, today’s letter is just more words.”
Environmental groups also pointed to changes they want to see at TCEQ beyond a temporary permitting pause.
“Loopholes currently let massive data centers divide their gas plants and diesel generators into separate ‘minor’ sources, allowing developers to avoid public scrutiny and proper pollution controls,” said Luke Metzger, executive director of Environment Texas, in a press release.
For example, a federal lawsuit filed Monday argues that a data center near San Antonio is seeking approval to build diesel generators capable of producing 405 megawatts of power — enough for about 240,000 homes — using only the less rigorous “minor source” permit process.
“We need to hit the brakes on big data centers to make sure that we get this right,” Metzger said.
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