Why developers come here
Texas has more announced gigawatt-scale campuses than any other state, and the reasons stack up. Land in West Texas, the Panhandle, and the counties ringing Dallas-Fort Worth and Austin is flat, large-parcel, and cheap relative to Virginia or Arizona. Much of it sits near gas supply and existing or planned transmission. Average industrial electricity cost 6.12 cents per kWh in 2024 (EIA), about a quarter below the national average, and 6.65 cents per kWh year-to-date through June 2026.
The state exempts qualifying data centers from the 6.25 percent state sales tax on servers, cooling, generators, and, with a use study, electricity, for 10 to 20 years. And ERCOT, the grid operator for most of the state, is not under federal interconnection jurisdiction, which historically let developers move faster than in PJM or MISO. That speed advantage is now qualified: an interconnection queue of roughly 474 GW, about 90 percent of it data centers, triggered a statewide pause and audit in August 2026.
Incentives
- State sales and use tax exemption, Tax Code Section 151.359. A “qualifying data center” needs at least 100,000 square feet in a single building, a commitment to invest $200 million within five years, and at least 20 full-time jobs paying 120 percent of the county average weekly wage. The exemption runs 10 years if investment lands between $200 million and $250 million and 15 years if it reaches $250 million. A separate “qualifying large data center project” category (250,000 square feet, $500 million, 40 jobs, a contract for at least 20 MW of transmission capacity) receives a fixed 20-year exemption. Only the state 6.25 percent tax is exempt; local sales tax still applies. The Comptroller audits each certified center at its five-year anniversary. The statute has no stated sunset.
- Local property tax abatements, Tax Code Chapter 312. Cities and counties can abate up to 100 percent of the increase in value for up to 10 years. School districts cannot participate, so the school levy, usually the largest, is not abated. Data centers are excluded from the JETI program (Government Code Chapter 403, Subchapter T) that replaced Chapter 313 school tax limitations.
- 2025 change: Senate Bill 6 (signed June 20, 2025) did not touch the tax exemption but added obligations for loads of 75 MW or more: interconnection standards, disclosure of tax incentives received, remote-disconnect capability, participation in emergency curtailment, and PUCT approval for certain co-location arrangements with existing generators.
- 2026 change: Governor Abbott’s August 3, 2026 directive requires the PUCT and ERCOT to verify and audit every data center in the interconnection process before any new one advances. The audit covers tax incentives received, power and water use, cooling methods, and ownership.
Power
ERCOT covers roughly 90 percent of Texas load. The Panhandle and parts of the South Plains sit in SPP (Xcel Energy’s Southwestern Public Service), and El Paso is served by El Paso Electric in the Western Interconnection. Tracked projects in Amarillo, Pampa, and Abernathy are SPP-side; Meta El Paso is on El Paso Electric.
Inside ERCOT, large-load interconnection runs through a transmission utility (Oncor, CenterPoint, AEP Texas, TNMP) and ERCOT’s large-load process. Under SB 6 the PUCT published draft rule 16 TAC 25.194 in March 2026 for loads of 75 MW or more. As drafted it would require study fees of $100,000 (75 to 250 MW) or $300,000 (over 250 MW), financial security of $50,000 per MW, a non-refundable interconnection fee of $50,000 per MW after study, proof of site control, disclosure of parallel requests in other states, and quarterly progress reports. If a project withdraws, the utility keeps 80 percent of the security. A final rule is expected by December 31, 2026.
ERCOT’s “Batch Zero” study was meant to process the queue in one pass; the August 2026 audit pushed its first-batch completion target to about April 2027, with 250 to 300 projects to be reviewed. Developers with their own gas generation (Fermi America, CyrusOne Fairfield, Comanche Circle) are partly insulated, but SB 6 also gives ERCOT curtailment authority over co-located loads in emergencies. Water is now a legislative issue: the Senate Water, Agriculture and Rural Affairs Committee held an interim hearing on September 1, 2026 on data center water sourcing and whether brackish or produced water should be treated differently.
Where the projects are
Four corridors: the Abilene-Sweetwater-Colorado City stretch along I-20 (Stargate Abilene, IREN Sweetwater, Barber Lake, Stargate Frontier in Shackelford County); the Panhandle and South Plains (Fermi America near Amarillo, Meitner Energy Center near Pampa, Project Caprock at Abernathy, Google in Armstrong and Haskell counties, Crusoe/Lancium at Childress, QTS/Lancium in Hall County); Central Texas east of Austin and the Brazos valley (Stargate Milam County, CyrusOne Fairfield, CloudBurst San Marcos); and the Permian and far west (Microsoft Pecos, Project Horizon in Pecos County, Meta El Paso). Hood County, southwest of Fort Worth, has eight proposals including Comanche Circle.
Local politics
Resistance clusters where projects land in unincorporated areas, because Texas counties have no zoning authority. In Hood County, commissioners twice failed to pass a moratorium, then tightened development rules and revoked one approval, drawing developer lawsuits. At an August 19, 2026 legislative hearing at the Capitol that filled two overflow rooms, residents from Williamson, Leon, and other counties cited noise, lights, water, and electric bills; a Leon County commissioner said the core problem is “a lack of county regulatory authority over unincorporated areas.” The Office of Public Utility Counsel told lawmakers a gigawatt-scale data center should pay 100 percent of the new infrastructure it causes.
Projects have generally been welcomed in West Texas and Panhandle counties where the tax base is thin and the land is ranch or dryland farm, and where developers bring their own generation. The 2027 legislative session is expected to take up county authority, water disclosure, and cost allocation.
What a landowner should know
Developers typically seek 500 to 2,000 acres or more, contiguous, with an existing 138 kV or 345 kV line crossing or adjacent, or a substation within a few miles. Gas pipeline access matters for behind-the-meter projects. Option agreements of one to three years are the norm, often with confidentiality clauses; the Hood County fight shows how that secrecy plays locally.
Because counties cannot zone, the main local lever is the Chapter 312 abatement negotiation, which is also where conditions on water and noise get attached. Ask whether the project is in ERCOT’s Batch Zero and whether it has passed the 2026 audit. The state contact is the Texas Economic Development and Tourism Office in the Governor’s office; the sales tax certification runs through the Comptroller.