Texas Attorney General and Republican U.S. Senate nominee Ken Paxton has unveiled a four-part proposal intended to limit the costs and risks associated with Texas\u2019 rapidly expanding data center industry while preserving the infrastructure needed for artificial intelligence development.<\/p>\n
The plan<\/a> combines proposed federal legislation, support for independent power generation, repeal of Texas\u2019 sales-tax exemption for qualifying data centers, and support for Gov. Greg Abbott\u2019s new data center standards. Most provisions would require action by Congress or the Texas Legislature and would not take effect through Paxton\u2019s announcement alone.<\/p>\n Paxton\u2019s Four Points<\/p>\n Paxton\u2019s first three proposals concern actions<\/a> he says he would pursue in the U.S. Senate.<\/p>\n 1. Keep Chinese technology out of data centers. Paxton proposes legislation preventing technology linked to China from powering American data centers or being installed in other critical infrastructure. The measure would require Congress to determine which companies, products, and foreign connections are prohibited.<\/p>\n 2. Penalize companies when AI platforms endanger children. Paxton proposes criminal liability for data center companies when their facilities power artificial intelligence chatbots that harm children. Details concerning the conduct that would trigger liability, the responsible parties, and applicable penalties have not yet been released.<\/p>\n 3. Help data centers generate their own electricity. Paxton said he would co-sponsor Sen. Tom Cotton\u2019s DATA Act, which would establish a federal regulatory category allowing qualifying data centers to generate electricity independently from existing utility grids.<\/p>\n That approach broadly tracks<\/a> President Donald Trump\u2019s national AI legislative framework, which calls for streamlined permitting so data centers can generate power on-site without shifting costs to residential ratepayers.<\/p>\n 4. Repeal Texas\u2019 data center tax exemption and support Abbott\u2019s standards. At the state level, Paxton supports eliminating Texas\u2019 sales-tax exemption for qualifying data centers and backing Abbott\u2019s review process governing electricity consumption, on-site generation, water use, public incentives, project ownership, and effects on neighboring communities.<\/p>\n Paxton voted for the exemption while serving in the Texas Senate in 2013. The official Senate Journal lists<\/a> him among the 23 senators who voted to pass House Bill 1223. Under the Texas Comptroller\u2019s current certification requirements<\/a>, a qualifying data center must commit to investing at least $200 million over five years and creating at least 20 qualifying jobs in the county where it is located.<\/p>\n Paxton and Abbott Largely Align<\/p>\n Paxton\u2019s proposal largely aligns with Abbott\u2019s current position.<\/p>\n On August 3, Abbott directed<\/a> the Public Utility Commission of Texas and the Electric Reliability Council of Texas to verify and audit data centers advancing through ERCOT\u2019s interconnection process before approving additional projects to move forward.<\/p>\n Under the governor\u2019s audit requirements<\/a>, developers must disclose:<\/p>\n State and local tax incentives, grants, and abatements; Data center companies that fail to comply with ERCOT\u2019s audit process must be denied permission to interconnect with the Texas grid, according<\/a> to the Office of the Governor. Abbott has also called for eliminating data center tax incentives and prohibiting new facilities in rural Texas neighborhoods, as previously reported<\/a> by The Dallas Express.<\/p>\n Several companies have subsequently agreed to follow Abbott\u2019s standards. Google, Rowan, and CleanSpark were among the developers that recently committed<\/a> to compliance, as previously reported by The Dallas Express. Diode Ventures withdrew its proposed East Texas project after determining that it did not meet Abbott\u2019s directives or community expectations, according<\/a> to the Office of the Governor.<\/p>\n Where Trump Differs<\/p>\n Paxton and Trump agree that data centers should pay for the electricity and infrastructure they require. Trump\u2019s voluntary Ratepayer Protection Pledge<\/a> calls on participating hyperscalers, artificial intelligence companies, utilities, and data center developers to build, bring, or purchase the electricity needed by the facilities and cover the associated generation, delivery, and grid-upgrade costs.<\/p>\n However, Trump has warned Texas against broadly discouraging data center investment. As The Dallas Express reported<\/a> on August 8, Trump called Texas resistance to the industry a \u201cmistake\u201d and said data centers could become economically larger than oil.<\/p>\n The Trump administration has also moved to accelerate construction. A July 2025 executive order<\/a> directed federal agencies to streamline permitting and environmental reviews for qualifying data center and energy projects.<\/p>\n The distinction is primarily one of emphasis: Trump is seeking rapid domestic construction paired with ratepayer protections, while Abbott has emphasized project screening, community impacts, rural siting restrictions, and removal of Texas incentives. Paxton\u2019s proposal adopts several of Abbott\u2019s positions while adding proposed federal provisions concerning Chinese technology and child safety.<\/p>\n Why Data Centers Became Controversial<\/p>\n The debate centers on electricity consumption, water use, taxpayer incentives, noise, local control, and transparency.<\/p>\n The scale of the proposed development pipeline has intensified concerns about grid capacity. ERCOT reported<\/a> in June that it was tracking more than 438,000 megawatts of large-load interconnection requests, with nearly 89% associated with data centers. A subsequent ERCOT presentation<\/a> using June 2026 data placed the total at approximately 474,000 megawatts, about 90% of it from data centers. Those figures represent requested capacity\u2014not facilities certain to be built or electricity certain to be consumed.<\/p>\n Communities have also questioned whether developers should receive public incentives while requiring new transmission lines, generating equipment, and water infrastructure. Abbott previously ordered<\/a> regulators to ensure that residential customers do not absorb data centers\u2019 infrastructure expenses.<\/p>\n
\nExpected electricity consumption and plans for on-site generation;
\nWater requirements, sources, and cooling systems;
\nNoise, traffic, lighting, setbacks, and emergency-response plans; and
\nThe project\u2019s owners and controlling interests.<\/p>\n