89% of New Power Requests Are Datacenters. Abbott Wants Guardrails.

Governor Greg Abbott wants AI datacenters banned from rural Texas neighborhoods, stripped of tax incentives, and forced to self-fund all power and water infrastructure without shifting costs to ratepayers. That's a sharp turn from November 2025, when he called Texas the "epicenter of AI development." He's directed the Public Utility Commission of Texas and ERCOT to make sure datacenter interconnections don't raise residential power costs or strain local water.

The reversal reprices the whole Texas siting calculus. Developers who already locked anchor tenants, secured power purchase agreements, and identified water-neutral sites can satisfy a governance framework. Those chasing generic rural permits on spec now compete for a shrinking footprint against Abbott's explicit preferences.

Abbott's cost-protection directive lands alongside real grid muscle. The Department of Energy finalized a $3.26 billion loan to AEP's Texas subsidiary covering roughly 100 projects across 2,800 miles of transmission, expected to double the state's power-carrying capacity. It's needed: ERCOT reported in June that datacenter projects account for 89% of new power requests statewide, and Texas Tribune analysis counts at least 248 planned projects on top of 335 existing facilities.

But transmission isn't interconnection. The AEP loan finances lines, not queue capacity, and developers still face wait times measured in years. Oregon just showed where the politics go when costs land on residents: the Oregon PUC unanimously approved a 29.7% rate hike on users above 20 MW while cutting residential rates 1.3% under the POWER Act. ERCOT holds no such cost-shift authority today, but the developer who preempts rate-impact arguments through local generation commitments moves faster than the one who waits for a moratorium fight.

A new report from ITIF's Center for Clean Energy Innovation makes the case plainly: $130 billion in projects got delayed or scrapped in Q1, driven mostly by trust deficits, not actual scarcity. Research director Robin Gaster names the fix as state-led governance with standardized metrics, and singles out that Arizona, Pennsylvania, Georgia, and Virginia face different water realities. Lawrence Berkeley National Laboratory pegs direct datacenter consumption at 17.4 billion gallons in 2023, under 1% of U.S. water use.

The physics won't disappear. E&E News lays out the bind: cool with water and deplete aquifers, or cool with air and spike power draw. Microsoft and QTS bet on zero-water cooling; Google and Amazon pivot by region. In Haskell County, three Google-linked campuses (the $800M Journey projects, the 440 MW Thelma campus, and an Ascendant-developed site) are stacking gigawatt-scale load into constrained northwest Texas supply. No single tax abatement resolves cumulative water stress. Developers who document watershed impact and lock offsets before permitting will clear faster than those treating water as a permitting surprise.

Fort Worth's zoning commission rejected the city's first datacenter ordinance 7-4, sending it back to Council with a request for stricter rules. The draft would restrict datacenters to industrial zones and require 250-foot setbacks from residences, up from the current 20-foot standard. Council reviews it August 4 with a final vote scheduled August 11, and public feedback runs through July 15. Assistant City Manager Jesica McEachern flagged that Texas could enact statewide rules in the 2027 legislative session.

Meanwhile the Tribune exposed how Stargate's Abilene campus scaled from minor air permits to 10 gas turbines and 62 backup generators, with filings to add 41 more turbines. Former EPA enforcement chief Bruce Buckheit said the permits should've been one filing. Expect Texas regulators to tighten permit sequencing and expand comment periods. San Marcos already became the first Texas city to ban datacenters, 4-3. The Michigan Citizens Research Council adds the discipline: job promises are overstated and tax breaks rarely spark downstream growth, but direct tax revenue and community benefits are real and negotiable. Developers who show up during the comment window write the baseline; the ones who don't inherit it.