Texas lawmakers are taking a closer look at the rapidly expanding data center industry as questions mount over how the facilities could affect the state’s already strained water resources.
The Texas Senate Committee on Water, Agriculture, and Rural Affairs heard hours of testimony Tuesday on data center water use, transparency and the role state and local governments should play as new projects spread across Texas.
The issue has also emerged as a flashpoint ahead of the November midterm election and the 90th Texas Legislature, which convenes in January.
“I think every [Texas Legislature] member’s district has had an impact from a data center conversation,” committee Chairman Charles Perry, R-Lubbock, said at the beginning of the hearing.
Perry said he has met with numerous data center developers, operators and customers and believes many companies are acting responsibly. But he made clear that lawmakers are also encountering companies that have been less willing to communicate.
Perry specifically criticized Beacon Data Centers, which is developing the Westline Energy Infrastructure Campus in his district. He accused the company of failing to return calls or communicate with local officials.
“They choose to operate in secrecy,” Perry said. “And for that, and that alone, as of today, whatever I need to do to keep them from implementing wherever they’re going — I don't believe they’re actually a data center.”
Perry said data centers have become “way too much of a political football,” while arguing that the industry grew at a speed that state and local governments could not reasonably have anticipated.
“What this is is an industry that hit this state on a velocity that no one should have [seen] or could have [seen] coming,” Perry said.
Lawmakers push back on criticism over data center incentives
Data centers have become an election-year issue in part because of criticism directed at state lawmakers over tax incentives available to the industry.
Perry pushed back against claims that the Legislature recently created incentives specifically to attract artificial intelligence data centers. He pointed to Senate Bill 2023, saying the legislation was passed in 2013.
“So, for the political rhetoric that we as a Legislature decided to incentivize AI data centers, the last two sessions, to come in here and do what they're doing is just factually not accurate,” Perry said.
Instead, he said data center companies discovered an existing incentive for which they qualified and took advantage of it.
Perry described himself as neutral on the industry and said data centers can provide significant benefits to Texas. But he warned that irresponsible operators could face a much different reception from lawmakers.
State surveys seek answers on water use
A major focus of Tuesday’s hearing was determining how much water Texas data centers are using — and could use in the future.
Temple McKinnon, director of the Water Supply Planning Division at the Texas Water Development Board, told lawmakers that the agency sent its 2025 water-use survey to 341 facilities initially identified as data centers.
That number was later reduced to 324 after the agency identified duplicate surveys and facilities that were not yet operational.
As of Aug. 26, McKinnon said the agency had received responses from about 30% of the facilities.
The Texas Water Development Board also began coordinating with the Public Utility Commission of Texas in October 2025 to gather information that could help the state better understand current and future direct and indirect water consumption.
McKinnon said the PUC survey represented a “one-time ask of projected power use by data centers in the state upon which my agency will work to associate estimated future water use.”
PUC Executive Director Connie Corona said her agency conducted two rounds of a voluntary survey of certain industrial facilities, running from April 2 through May 28 and again from July 1 through July 10.
“We had a fairly straightforward goal for that survey: we wanted to collect information about both energy use and water use from the facilities,” Corona said.
The PUC received responses from 57 companies representing 168 facilities. Of those facilities, 144 were data centers.
State Sen. Lois Kolkhorst, R-Brenham, said the results provide lawmakers with a “pretty good sample of the good actors and the bad actors.”
She also criticized companies that did not provide the requested information, saying the survey request has been legally required for two years.
State Sen. Cesar Blanco, D-El Paso, said understanding water consumption is essential as the state's population and industrial base continue to expand.
“As Texas continues to grow and new industries come online, we must have a clear understanding of our water use for long-term planning and to protect our resources,” Blanco wrote Tuesday on X.
Could oilfield wastewater help cool data centers?
Lawmakers also heard about potential alternatives to using freshwater to cool the massive computing facilities.
Dr. Vaibhav Bahadur, an associate professor of mechanical engineering at the University of Texas at Austin, pointed to produced water as one possible option.
Produced water is wastewater that comes to the surface during oil and natural gas production. Although the water can have extremely high salinity, Bahadur said some of it can be treated using technology already available.
He acknowledged desalinating the water can be expensive but argued produced water should still be seriously considered as “a meaningful solution to the water issues of data centers.”
Data center operators defend their practices
Representatives from Lancium Technologies, Quality Technology Services and Google also testified before the committee about their companies’ water and electricity use.
QTS Senior Vice President of Facility Operations Ryan Kuithe said his company pays for the infrastructure needed to supply its facilities with electricity.
“We pay for all of the energy that we consume,” Kuithe said.
He added that QTS does not expect Texas residents or utility ratepayers to subsidize the company's growth or the broader industry's expansion.
Google's head of infrastructure and sustainability, Ben Townsend, told lawmakers that the company's planned Texas data centers in Haskell, Willbarger and Armstrong counties are being designed with local water constraints in mind.
The facilities “are conscientious of limited community water resources and are designed with advanced closed-loop air cooling systems that will help us eliminate freshwater consumption for cooling,” Townsend said.
Townsend also said Google became the first major cloud provider in 2023 to begin publicly reporting site-level water use annually through its environmental report.
Perry warned operators that communication with lawmakers and communities will be crucial as the Legislature considers its next steps.
If companies are unwilling to communicate, he said, “the outcome's not gonna be good in the Legislature.”
Questions extend beyond water and electricity
Tuesday’s discussion went beyond the resources needed to operate data centers.
Kolkhorst argued that many Texans still do not understand what is driving the enormous buildout of computing infrastructure across the state.
“No one has ever defined it as explaining the applications and what is requiring this massive build-out,” she said.
Kolkhorst questioned whether the demand is being driven by consumer AI, medical research, autonomous weapons, financial markets, national defense, digital identity, government surveillance or a combination of those uses.
State Sen. Roland Gutierrez, D-San Antonio, similarly raised privacy and surveillance concerns.
“I wanna know who the hell's looking inside my house, and my computer, and figuring out what the hell I'm gonna buy next,” Gutierrez said. “And what question I wanna ask next. People have a legitimate concern about that.”
Local officials say projects can arrive with little warning
City and county officials also told lawmakers that they sometimes do not learn about a proposed data center until after a company has purchased private property and started discussions with utility providers.
Caldwell County Judge Hoppy Haden said that has happened with every data center project in his county.
In each case, Haden said the companies had already purchased land and communicated with the utility company before approaching his office.
Perry acknowledged the difficulty of giving local governments more information while protecting private property and contract rights.
He said data center development generally begins with private landowners, meaning county commissioners and other local officials are not necessarily aware of negotiations — “nor should they” be.
Lawmakers need to be “really clear and really careful how we start meddling in the contract laws between private seller and private buyer,” Perry said.
Still, Perry suggested companies seeking state approval could eventually face consequences if they refuse to engage with local communities.
He asked Rick Thompson of the County Judges and Commissioners Association of Texas to compile a list of county judges dealing with data centers that have failed to communicate with local officials.
“If they're not willing to engage the community and help commissioners and city officials to get over the hump, then they're not people that should be awarded state permitting,” Perry said.
Perry stopped short of detailing what legislation could emerge from the hearing but indicated lawmakers have options for putting pressure on companies with projects still moving through the approval process.
While much of Tuesday's hearing focused on the challenges created by data centers, local officials also emphasized the potential economic opportunities — particularly for rural communities struggling to retain residents.
“For counties in rural Texas, this is an opportunity for a livelihood,” one county representative told lawmakers. “Folks aren't moving to rural Texas. They're leaving rural Texas. The kids are leaving. There's nothing for them in many places.”
