A proposed data center near Cedar Creek Lake is officially off the table after Gov. Greg Abbott said the project failed to meet Texas' expectations for protecting nearby communities, natural resources and the state's electric grid.
Abbott announced Thursday that Diode Ventures has withdrawn its plans for the Henderson County project after concluding it did not satisfy the standards the governor laid out for large-scale data center developments.
"Data centers that want to do business in Texas must meet a clear standard. This project did not," Abbott said.
"Texas requires companies to put communities first, protect our natural resources and power grid, and respect the quality of life of our residents. Diode did the right thing by withdrawing their project. If other data center developments refuse to meet these standards, I expect them to do the same."
The announcement ends months of uncertainty over a project that had drawn criticism from residents concerned about its location near Cedar Creek Lake. Opponents questioned how the facility could affect water resources, electricity demand and the area's rural character.
Rather than continue pushing forward, Diode Ventures decided to walk away.
In a letter to Henderson County Judge Wade McKinney and county commissioners, company co-presidents Rachel Attebery and Josh Johnson said conversations with state officials, local leaders and residents made it clear the site wasn't the right fit.
"The perspectives shared by residents, local leaders and stakeholders led us to conclude that the site under evaluation, in particular its close proximity to the rural residential community of Cedar Creek Lake, does not meet the higher standard we believe should guide data center development," the letter states.
The company said it "will not pursue land development at this location" and instead will focus on future projects that better align with responsible development practices.
Diode also said it remains committed to using water-efficient cooling systems, including closed-loop and air-cooled technology, and pledged to involve local communities earlier when evaluating future sites.
The withdrawal comes as Texas leaders are taking a harder look at how the state's booming data center industry should grow.
On June 10, Abbott directed the Public Utility Commission of Texas and the Electric Reliability Council of Texas to develop new expectations for large-scale data centers as demand for artificial intelligence and cloud computing continues to surge.
Under those guidelines, future projects should reduce — not increase — residential electricity costs through their grid connections. Developers should also pay the full cost of any electric infrastructure needed to serve their facilities instead of passing those costs on to homeowners and other customers.
Abbott has also called on data center operators to add new generating capacity to the Texas grid instead of simply increasing demand. Water conservation is another priority, with developers encouraged to use cooling systems that place less strain on local water supplies.
The governor also wants future facilities designed with nearby residents in mind, including larger setbacks from neighborhoods and technology to reduce operational noise.
Those expectations could eventually be backed by state law.
Abbott said he plans to pursue legislation requiring large data centers to report their annual electricity and water use to the Public Utility Commission. He also wants lawmakers to eliminate sales tax exemptions and other incentives he believes are outdated or no longer necessary.
The debate reflects a growing challenge for Texas.
The state has become one of the country's biggest destinations for data center construction as companies race to build the infrastructure needed to support artificial intelligence and cloud computing. Those projects bring billions of dollars in investment and new jobs, but they also consume enormous amounts of electricity and, in some cases, water.
That has left many communities asking the same question: How do you welcome economic development without sacrificing the resources and quality of life that attracted people there in the first place?
For residents around Cedar Creek Lake, that question won't have to be answered—at least not with this project.
Abbott made clear Thursday that Texas still wants data center investment, but only from companies willing to meet higher standards.
