Texas Businesses

Texas Is Developing More AI Data Centers, But Who Gets to Say No?

What's Happening Across Texas

As of August 2026, Texas is currently in a standoff with regulators regarding the development of AI data center projects. Some of the new 248+ planned AI data center projects were placed on hold on August 3, 2026, via a moratorium issued by Governor Greg Abbott. The reason comes down to ERCOT's concern about the impact it would have on the state's power grid. From their latest findings, ERCOT has found 474 gigawatts in connection requests, which is more than 5 times the state's peak demand, which usually occur during the summer and winter seasons.

However, Texans statewide may not be seeing the bigger fight unfolding in two regions: Cameron County in the Rio Grande Valley and Hays County just outside of Austin.

Texas' AI data center conflict is not just about electricity, but also about water availability. In Cameron County and Hays County, concerns over the issue are colliding with doubts over how much authority cities and counties actually have to either delay or reject the development of data centers. As a result, it has led to heated discussions on infrastructure expansion, local resources, and state law.

The Rio Grande Valley Fight

Deep in South Texas, Cameron County is facing a battle of its own regarding the development of AI data centers. However, it's not about the power grid; it's about the Rio Grande Valley's supply of water, which comes from the Rio Grande itself. Eneus, a Scottish-based digital infrastructure and site development company, holds an option to purchase 1,775 acres of land near Valley International Airport in Harlingen through its subsidiary, RGV Property Group. Their proposed data center campus, if successful, would draw up to 2 gigawatts of capacity. However, they haven't filed a proposal with local authorities. Regardless, actions are being taken by the Brownsville City Commission, who are scheduling public hearings on a 90-day moratorium it is planning to issue to halt the approvals of new data centers until further notice. Their primary concern is the Rio Grande.

To provide a brief history, the Rio Grande has been a staple of the region for more than a century dating back to the early 1900s, as people would often depend on it for survival. However, due to its tendency to swing between long droughts and severe floods, it has become a headache for residents utilizing it, from irrigation to canals, with the 1960s collapse of the citrus industry being a prime example. This has become especially relevant in today's situation with the AI data centers.

Due to the uncertainty of how data centers will affect the Rio Grande, State Sen. Juan "Chuy" Hinojosa has stated that the Senate Finance Committee will hold hearings to discuss the issue, aiming to ground the state's response in research rather than, in his own words, "rumors". Simultaneously, the senator was also indirectly referencing a problem that is impacting not just Cameron County, but other counties across Texas as well. In other words, he was pointing to a problem with zoning authority in several counties across the state. That meant that if a project like Eneus's data centers were to move forward despite residents and city officials pushing back, who officially has the power to completely shut it down?

The Austin Fight

In Hays County, a similar fight about water like Cameron County's is taking place. Torrie Martin, whose family ranch sits next to a proposed data center site within the San Marcos area, has told commissioners that nearby projects have already affected not just her water supply, but also her livestock. Martin isn't alone in expressing this sentiment, as the San Marcos City Council rejected a proposed $1.5 billion data center in February 2026, following a public hearing that ran until 2 AM. Four months later, in June 2026, the council followed by banning new data center development within city limits. Hays County carried out a similar move, pausing approvals for water-intensive development through the end of 2026, with their reason being that data centers were putting a strain on the Edwards Aquifer during an active drought. Nevertheless, the dispute is ongoing despite these measures being taken. The reason: cities and counties may not have the legal power to enforce similar bans. A state senator has already warned the Texas Attorney General that counties do not have the authority to impose moratoriums focusing on development projects, and one county has already been sued for more than $100 million after doing just that. Hays County, on the other hand, has stalled on making its moratorium permanent, citing the legal threats that have been circling around the issue. It's the same question Cameron County is quietly running into: who actually has the power to say no?

Comparison

When looking at the bigger picture, we realize that both the Rio Grande Valley and the Austin area turn out to be fighting the same issue, but at different stages. Both regions are facing the issue of water scarcity, not grid capacity, despite the narrative stating that the issue is mostly attributed to the Texas power grid. Cameron County depends on a river, the Rio Grande, that unfortunately has a long history of failing to deliver not just for its people, but for the agricultural sector due to the region being prone to drought and the up and down cycle that comes with it. Hays County, on the other hand, had already taken measures, with San Marcos banning the development of data centers at the city level, and the county separately pausing approvals through 2026. Currently, Cameron County hasn't taken the extensive measures that Hays County has already taken, since the City of Brownsville still has to decide when its first hearing on data centers will take place, which is expected to be in September 2026. And even with these measures in place, the same question has been asked: does the power belong to the local government, or the state government? So far, that question has not been answered.

Conclusion

Whether the impact is happening on the Rio Grande in Cameron County or on the Edwards Aquifer in Hays County, the AI data center boom happening in Texas keeps running into the same hurdle: water, not power, and a legal dilemma that multiple jurisdictions are facing on who actually gets to approve, pause, or deny data center development projects. As a Rio Grande Valley resident myself building AI and software, I am watching all of these events play out closer to home than most. The question isn't whether Texas will continue to develop data centers, but rather, whether the places and the individuals that will unfortunately receive the impact on their water bill get any say in it.

Regardless of the answer to the legal dilemma facing the counties experiencing these fights and the state itself, it's something that the Texas Legislature in Austin won't be able to decide alone. The community has an important role to play here, and that in turn, would lead to a better, informed decision on the long-term structure of addressing data center projects within the state.