Texas Freezes All Data Center Environmental Permits Until ERCOT Audit Completion

Texas Gov. Greg Abbott on Monday ordered the state's environmental regulator to halt all data center-related permits until the Electric Reliability Council of Texas completes an audit of the existing waitlist for data centers looking to connect to the state's grid.

The audits were originally ordered by the governor's office in August, alongside a moratorium on new data center grid approvals. Monday's directive expands this freeze to environmental approvals administered by the Texas Commission on Environmental Quality.

Texas was on track to surpass Virginia as the state with the largest data center market in the world by the end of the decade, according to a February report from JLL, but Abbott's move may slow that progress.

Last month, analysts at BloombergNEF found that "almost 20% of the U.S.'s 253-GW data center pipeline" would be at risk with Texas's pause—nearly 50 gigawatts in proposed data center capacity. This could result in upwards of $8 billion in data center revenue losses by Q1 2027.

A report from advocacy group Data Center Watch claimed $68 billion in new data center development was delayed or cancelled last quarter due to local pushback—a risk bleeding into financial markets.

Anthropic's much-anticipated IPO is poised to include negative public opinion toward AI and data centers as a risk factor in its forthcoming prospectus.

The data center buildout has been a breakout issue in the 2026 midterm election, with a recent NBC News poll finding 64% of Americans would be less likely to vote for a candidate who "supports building local data centers."

Abbott, running a tight race for his fourth term against state Rep. Gina Hinojosa, has been caught in the middle of the firestorm. He has had to reverse his 2025 claim that Texas, due to its sales tax exemptions for qualifying data centers and high-profile projects like OpenAI's Stargate, would be the "epicenter of AI development."

"Next session, Governor Abbott will work with the Legislature to eliminate any financial incentives for data centers," the press release for the moratorium said.

The TCEQ is expected to provide an update to the governor's office on its compliance with this directive by Oct. 19.