Monday, June 1, 2026

Tax Abatements Lose the Room. Power, Water, and Cost Causation Take Over.

El Paso just stopped recruiting hyperscalers, and Meta will still pay $15M because the abatement was never what closed the deal. Across nine states this week, separate rate classes, water disposal verification, and signed private generation are replacing tax incentives as the things that actually decide where capacity lands.

Today's Lead

El Paso just became the cleanest signal yet that the tax-incentive-only playbook is finished. The City Council voted unanimously this week to stop recruiting hyperscale data centers, even as Meta's $10 billion campus is set to become El Paso's largest property taxpayer at roughly $15 million annually once fully operational by 2028. District 8's Chris Canales, who voted yes on Meta in late 2023, publicly reversed.

The reversal isn't a Texas anomaly. It's the leading edge of a national shift where water mechanics, cost causation, and community benefit structures are eating tax abatements for breakfast.

[1]·[2]

Power

Private generation is the new site-selection anchor

Texas just opened applications for $350 million in state-backed nuclear development funding, the largest such program in the country. Last Energy moved its HQ to Austin and is advancing a Texas A&M pilot. Meanwhile Constellation signed a 380 MW deal with CyrusOne adjacent to the Freestone Energy Center in February, with an exclusive option on a second 380 MW phase. GE Vernova's HA gas turbine fleet has crossed 4 million operating hours across 128 units. Marathon Digital is repositioning 1.1 GW of energized power, potentially 2 GW with Long Ridge, as AI lease capacity.

Risk implication: Developers without signed generation, whether nuclear PPA, gas turbine slot, or repurposed crypto-era capacity, will queue behind those who locked supply first. Transmission sequencing is a developer problem now, not a utility one.

[3]·[4]·[5]

Water

Cooling math is the new permitting gate

Microsoft's Wyoming expansion (3,200 acres in Laramie County, plus two Cheyenne site applications) ran into the question developers can't dodge: what happens to cooling water after it picks up chemicals and salts? Microsoft's answer, truck it to a certified out-of-state facility, didn't land with the Cheyenne Area Landowners Coalition. In Utah, Governor Cox's Friday executive order imposes stricter state oversight on future data centers, naming Great Salt Lake protection explicitly. A San Marcos Record op-ed cites Hill County's one-year rural data center pause as Texas precedent and benchmarks against Texas agriculture's $900 billion annual output.

Risk implication: Water disposal plans, offset verification, and rate-impact analysis now belong in the pre-application package, not the public comment response. The developer who walks into county commissioners court with documented offsets wins the room.

[6]·[7]·[2]

Politics

Cost causation is moving from rhetoric to rate class

Ohio lawmakers opened hearings this week on a state that hosts 200+ data centers with 77 more planned by 2030. Data Center Coalition's Dan Diorio testified developers are "fully committed to paying our whole cost." PJM's Asim Haque confirmed some states are creating separate data center customer classes, and PUCO Chair Jennifer French said Ohio regulators are weighing it now. Illinois's POWER Act missed the spring deadline and now targets fall veto session, with Governor Pritzker proposing to pause the $983 million in lifetime tax credits distributed since 2019. Unions blocked similar bills in Colorado, Illinois, and Pennsylvania, but Shapiro and Sherrill packaged guardrails with prevailing wage and 200-job construction floors to keep labor on board.

Risk implication: ERCOT and the Public Utility Commission of Texas haven't taken up separate rate-class mechanics, but the question is coming. Developers who arrive with signed power contracts, documented grid service commitments, and union-track workforce plans will shape that rulemaking. The ones who wait will inherit whatever Ohio writes.

[8]·[9]·[10]

Sources we cited

10 articles across 10 publishers · 117 reviewed today

[1]El Paso Matters
Meta data center expected to become city of El Paso’s largest property taxpayer
May 31, 2026·The artificial intelligence data center that Meta Platforms Inc. is spending $10 billion to develop in Northeast El Paso will be the city’s …
[2]San Marcos Record
Op-Ed: For the Future of Texas, Pause Data Centers
May 31, 2026·Texas has always been a state that builds things. We farm, ranch, and produce the food, fuel, and fiber that power America. We champion grow…
[3]Chronicle Online
Private nuclear can solve data center energy crunch
Jun 1, 2026·For more than a decade, your electricity bill barely moved. Then came artificial intelligence (AI). Residential electricity prices have jump…
[4]Foreign Policy Journal
GE Vernova (NYSE: GEV) Outperforms Constellation Energy (NASDAQ: CEG) As AI Power Demand Reshapes Energy Sector
May 31, 2026·GE Vernova (NYSE: GEV) and Constellation Energy (NASDAQ: CEG) are both emerging as major beneficiaries of the artificial intelligence-driven…
[5]Yahoo Finance
Marathon Digital Bets Its Bitcoin Mining Power Assets Can Fuel AI Data Center Growth
May 30, 2026·Interested in Marathon Digital Holdings, Inc.? Here are five stocks we like better. Marathon Digital is shifting from bitcoin mining toward…
[6]WyomingNews
Microsoft presents data center expansion plans to the public
May 29, 2026·CHEYENNE — After years of hearing about the tech industry’s economic benefits, from tax revenue to job creation, Wyomingites are now asking …
[7]Benzinga
Utah Tightens AI Data Center Rules As Kevin O'Leary Battles Opposition To Massive Stratos Project
May 31, 2026·Kevin O'Leary-backed AI data center plans in Utah are now facing tighter state oversight after Gov. Spencer Cox moved to impose stricter dev…
[8]News and Sentinel
Ohio lawmakers begin hearings on data centers
Jun 1, 2026·The Portsmouth Gaseous Diffusion Plant, a decommissioned uranium enrichment plant, is visible after the U.S. Department of Energy announced …
[9]Shaw Local
POWER Act data center regulation won’t move forward this spring
May 31, 2026·Conversations about the POWER Act, a multifaceted data center regulation bill, are not over yet —but those involved say the bill won’t be re…
[10]E&E News
Unions flex muscle as states weigh data center rules
Jun 1, 2026·As the tech industry battles state lawmakers eager to rein in the explosion of data centers, they’ve found a useful ally — labor unions. Fr…

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