Texas Governor Greg Abbott orders new water-use penalties on data centers amid state water-scarcity concerns.

Governor Greg Abbott has ordered state regulators to penalize data centers that fail to comply with mandatory water-use reporting requirements, marking the latest escalation in Texas's effort to regulate the rapidly expanding data center industry amid growing concerns about its impact on water supplies.

In a September 14 directive to the Texas Water Development Board (TWDB), Abbott stated that major water users, including data centers, have "committed civil and criminal violations" by failing to provide information required under the Texas Water Code. He instructed the agency to take action against past and future noncompliance and to coordinate with the Electric Reliability Council of Texas (ERCOT) on a comprehensive audit of data center water consumption.

"Data centers must share the duty to protect Texas water," Abbott said.

Although data centers currently account for less than 1 percent of statewide water use, researchers at the University of Texas recently warned that they could represent between 3 and 9 percent of Texas water use by 2040, depending on growth rates, cooling technologies, and power generation choices.

**New Penalties**

Under Texas law, data centers and other major water users that receive a water-use survey from the TWDB must report consumption information to the state. Facilities failing to submit required information can face criminal consequences and may become ineligible for permits, permit renewals, or amendments from the Texas Commission on Environmental Quality (TCEQ). Abbott also instructed the TWDB to refer potential violations to county or district attorneys as appropriate.

The order responds to significant reporting gaps in the state's understanding of industrial water demand. Less than 30 percent of data centers responded to a state-mandated water-use survey in recent years, according to the Texas Tribune.

**Why Texas Is Acting**

The TWDB relies on water-use surveys to produce the state's long-term water plan, which guides infrastructure investment and supply planning. Without detailed information from major water users, accurate forecasting becomes impossible. "TWDB cannot perform that task if it is denied the detailed information necessary to assess both existing and anticipated water consumption across Texas," Abbott said.

The order builds on an August directive requiring ERCOT and the Public Utility Commission of Texas (PUCT) to audit data centers seeking grid interconnection. That audit requires operators to disclose their water consumption, water sources, and efficiency technologies. Projects can be denied grid connection for failing to provide this information.

**The Water Debate**

The crackdown reflects broader concerns about the environmental footprint of data centers supporting AI systems. A 2026 report from the Houston Advanced Research Center (HARC) estimated that Texas data centers consumed approximately 25 billion gallons of water in 2025. The organization projected annual demand could rise to between 29 billion and 161 billion gallons by 2030—potentially representing as much as 2.7 percent of statewide water use.

Dr. Margaret Cook, HARC's vice president of water and lead author of the report, said: "Texas' water planning process has a structural blind spot. ERCOT has begun developing processes to manage large load interconnections for energy, but no parallel process exists for water planning."

**Implications for Data Center Operators**

Abbott's directive signals that Texas is adopting a more aggressive stance on policing the resource demands of AI infrastructure, even as it continues to court investment in the technology. For operators, the consequences are now explicit: failure to disclose water usage carries legal, permitting, and operational risks. Data centers seeking to expand or connect to the Texas grid will face increased scrutiny over water consumption, sources, and efficiency measures. As Texas's AI expansion accelerates, state officials appear determined to maintain clear visibility into the industry's impact on one of the state's most critical resources.