Texas Data Center Policy & Government Affairs
Specialized guidance for data center developers navigating Texas government
Texas has become the fastest-growing data center market in the United States, driven by abundant land, competitive electricity costs, no state income tax, and proximity to major population centers. JD Key Consulting is a government affairs firm in Texas with a strong focus on data center policy. We're known for expertise in energy interconnection, tax incentives, and local government relations for developers and operators navigating the Texas political landscape.
Data center policy in Texas spans multiple domains: energy and grid interconnection, economic development incentives, environmental permitting, local government relations, and increasingly, questions about AI and technology governance. Effective government affairs for data center clients requires understanding all these dimensions and coordinating strategy across them.
The most pressing policy issue for data centers is grid interconnection. As facilities scale to hundreds of megawatts, ERCOT and PUC are developing new frameworks for large load interconnection, backup generation requirements, and demand response obligations. The 89th Legislature considered multiple bills affecting data center energy use, and we expect continued attention in future sessions.
Tax policy remains important for project economics. With Chapter 313 expired, data center developers now focus on Chapter 312 tax abatement agreements and other local incentive structures. These negotiations involve school districts, counties, and cities—each with different priorities and approval processes. Our experience in local government relations helps data center clients structure incentive packages that gain community support.
Key Capabilities
Energy Policy Navigation
Working with ERCOT, PUC, and the Legislature on large load interconnection, backup generation rules, and demand response requirements.
Incentive Structuring
Negotiating Chapter 312 abatements and local incentive packages with counties, cities, and school districts.
Permitting Coordination
Coordinating state and local permits including TCEQ air permits for backup generators and local development approvals.
Community Relations
Building local support for data center development and addressing community concerns proactively.
Who We Help
Texas Data Center Policy: Siting, Power, and Incentives
How Texas communities and counties are responding
The pace of data center development has outrun the comfort level of some Texas communities. A number of counties and cities have moved to pause, study, or restrict new projects, and several have weighed formal moratoriums while they assess power, water, and land use impacts. Where local sentiment now shapes project timelines as much as any state permit, early and transparent engagement is often decisive. Our tracking of Texas county data center moratoriums shows where resistance is hardening and where projects still find a welcome.
Power and water demand — and the agencies that decide
Large-load power and water use have become the defining questions of Texas data center policy. Grid interconnection and curtailment run through ERCOT and the Public Utility Commission, while backup-generator air permits and water questions fall to the Texas Commission on Environmental Quality and local water districts. These issues are also under active legislative study; our review of the interim charges on data centers, the grid, and water previews what the next session is likely to take up.
State and local incentive programs
With Chapter 313 school district agreements expired, project economics now hinge on local Chapter 312 abatements and state and local incentive programs such as the Texas Jobs, Energy, Technology, and Innovation (JETI) Act — each with its own eligibility rules and approval bodies. These programs can create friction with the taxing jurisdictions that host a project, particularly school districts. Our analysis of a JETI data center agreement in a small school district shows how these deals come together and where they can stall.
Engaging while the rules are still being written
Texas data center policy is being shaped right now — in the Legislature, at the agencies, and in county commissioners’ courts. The political environment is shifting too, as captured in our look at how Texas Republicans are approaching data centers in the party platform. Developers who engage now, rather than after the rules harden, keep a seat at the table. We monitor relevant measures across technology-industry legislation and energy-industry legislation so clients can act while the policy is still being formed.
Frequently Asked Questions
What is Texas SB6 and how does it affect data center interconnection?
SB6, passed by the Texas 89th Legislature, fundamentally changed how large electrical loads connect to ERCOT. Data centers over 75 MW must now pay substantial upfront fees ($100k+ for screening studies), post security deposits, and install remote disconnection equipment allowing ERCOT to curtail loads during grid emergencies. The law ended speculative queue positions by requiring financial commitment before securing interconnection rights. These requirements took effect September 1, 2025. JD Key Consulting helps data centers navigate this new regulatory framework.
What is Chapter 312 and how do Texas data centers use it?
Chapter 312 of the Texas Tax Code authorizes local governments to grant property tax abatements to encourage economic development. With Chapter 313 (school district incentives) expired, Chapter 312 is now the primary tax incentive mechanism for data centers. Counties and cities can abate their portion of property taxes for up to 10 years. Terms are negotiated individually with each taxing jurisdiction. JD Key Consulting helps data center developers identify receptive locations and negotiate abatement agreements.
How does ERCOT manage data center power demand?
ERCOT (Electric Reliability Council of Texas) operates the Texas grid and manages interconnection for new loads. Large data centers must go through screening studies, system impact studies, and facilities studies before connecting. Under SB6, ERCOT now has authority to curtail large loads during grid emergencies via mandatory remote disconnection equipment. The PUC also reviews certain co-location arrangements with behind-the-meter generation. JD Key Consulting represents data centers in ERCOT and PUC proceedings.
What backup power requirements apply to Texas data centers?
Texas data centers face evolving backup power requirements. SB6 requires large loads to have remote disconnection capability, effectively mandating backup systems to maintain operations during grid curtailment. The PUC is developing rules for behind-the-meter generation review. Some data centers are exploring on-site nuclear (SMRs) as a long-term reliability solution. JD Key Consulting tracks these policy developments and helps clients plan for changing requirements.
What local government approvals do Texas data centers need?
Data centers typically need land use approvals (zoning, conditional use permits), building permits, utility connection agreements, and often tax incentive agreements from counties, cities, and sometimes school districts. Community relations can also affect project timelines—water usage and noise concerns are common issues. JD Key Consulting coordinates local government engagement alongside land use counsel.
How do you site and permit a data center in Texas?
Siting a Texas data center means balancing power availability, water access, land costs, and the local incentive climate, then clearing a layered permitting path. That path usually includes local zoning and building approvals, utility interconnection coordinated through ERCOT and the transmission provider, and state environmental permits from the TCEQ for backup generators and related equipment. Community acceptance increasingly shapes timelines as much as any single permit. JD Key Consulting helps developers sequence these siting and permitting decisions and engage the state agencies and local jurisdictions that control each approval.
What state and local incentive programs are available for Texas data centers?
With Chapter 313 school district agreements expired, developers now rely primarily on local Chapter 312 property tax abatements negotiated with counties and cities, alongside state and local incentive programs such as the Texas Jobs, Energy, Technology, and Innovation (JETI) Act. Each program carries its own eligibility standards, application windows, and approval bodies, and terms are negotiated jurisdiction by jurisdiction rather than granted automatically. JD Key Consulting helps data center developers identify which programs fit a given project and structure incentive packages that can actually win local and state approval.
How are Texas communities and counties responding to data center growth?
Rapid data center expansion has prompted some Texas counties and cities to pause, study, or restrict new projects, and a handful have weighed moratoriums while they assess power, water, and land use impacts. Local sentiment now affects project timelines as much as state policy does. Early, transparent engagement—addressing water use, noise, and grid concerns before they harden into organized opposition—is often decisive. JD Key Consulting helps developers read the local landscape, anticipate where resistance is building, and earn community support before formal approvals are sought.
Which Texas agencies regulate data center power and water use?
Data center power runs through ERCOT, which manages grid interconnection and, under SB6, can curtail large loads during emergencies, and the Public Utility Commission, which oversees utilities and reviews certain co-location arrangements with behind-the-meter generation. Water and air matters—including permits for backup generators—fall to the Texas Commission on Environmental Quality along with local water providers and groundwater conservation districts. JD Key Consulting represents data centers before these agencies and coordinates strategy across the power, water, and environmental questions a large project inevitably raises.
Do data centers need government affairs representation in Texas?
Not every project does, but developers facing large interconnection requests, contested incentive negotiations, or organized community opposition benefit from experienced representation. Texas data center policy is actively being written across the Legislature, ERCOT, the Public Utility Commission, and local governments, and decisions made now will shape project economics for years. Principal-led government affairs helps developers engage while the rules are still being shaped rather than reacting after they harden. At JD Key Consulting, that work is handled directly by founder James Dickey, former Chairman of the Republican Party of Texas (2017-2020).
Ready to discuss your needs?
Schedule a confidential conversation with James Dickey.
Call 512.543.4971