By Mark Guthrie
Assistant Criminal District Attorney in Kaufman County
I am your humble guide to all things potentially interesting in the civil (and sometimes not so civil) world of Texas county law. Being a member of the civil team at the Kaufman County DA’s office provides exposure to a wide variety of issues, both urban and rural. This article involves both, and it is on everyone’s current favorite topic: datacenters. Some counties want them, and some counties don’t. Whatever your county’s preference, this article should provide a solid starting point when talking to your elected officials about datacenters.
We will start with a quick overview of the technology that is driving the surge in datacenter development before looking into the regulatory framework currently in place. We will wrap up with a look at some of the proposals that are floating around the political sphere.
Datacenters and LLMs
Datacenters themselves are not new phenomena. Companies have used them to run software or to back up important data for years. What is new is the demand for new datacenter capacity. That demand is largely driven by the development and commercialization of what are called large language models (LLMs). These models power generative AI (artificial intelligence) tools such as Claude, ChatGPT, Gemini, and Copilot. LLMs can vary in size, but the most well-known models are large enough to require specialized equipment to develop and run them.
LLMs require graphics processing units (GPUs) that have extremely large amounts of high bandwidth memory and can process large quantities of data. These GPUs consume a lot of power and generate enormous amounts of heat as a byproduct. Anyone with a consumer GPU in their computer can tell you how a single GPU can raise the temperature of a room several degrees when it is running at full capacity. Now imagine you have a building with not one but hundreds or even thousands of these GPUs running at full tilt—cooling is paramount.
As a result of the power and cooling requirements, datacenters are generally designed to minimize the costs of these two factors.
So power is a primary factor for datacenters, because without electricity the GPUs and other equipment are expensive paperweights. Datacenter developers have approached this factor in several ways. The first is locating their facilities close to a high-power transmission line. Such lines draw directly from the grid and can lead to rising electricity rates in surrounding areas. The Electricity Reliability Council of Texas (ERCOT) has a registration process for these “Interconnecting Large Load Entities,” which includes approval prior to connection to the grid.
The other approach is to build power generation on-site. The types of power generation vary, including (but not limited to) solar, gas, and even nuclear. (Although nuclear power is not up and running in Texas yet, plans are underway in at least two counties.) The amount of power these facilities require covers a huge range from 75 megawatts (MW) up to 7,500 MW. Whatever way the facility is powered after it is built, connection is a huge factor in development so you will see sites that are located near existing power substations or internet backbones. Note also that these different power sources—either from the existing grid or purpose-built for these facilities—can lead to other considerations for counties, such as land usage, air pollution, or waste product storage.
The second factor for datacenter design—cooling—leads to great water usage, because water is a coolant. There are many different types of datacenter designs, from those that use evaporative cooling technologies to those with a closed-loop cooling system (a sealed recirculation network where a coolant, such as water or other refrigerant, flows through equipment to absorb heat, travels to a heat exchanger or chiller to reduce that thermal energy, and cycles back without being exposed to the outside air). Water usage can vary significantly as a result. If a datacenter is being proposed in your county, asking the developer about the expected water use over a month, quarter, and year will provide you and your elected officials with valuable information.
Aside from water and power, counties and their residents must also consider traffic, construction and operational noise, and damage to roads. Many datacenters are being built in unincorporated areas of counties. Depending on the size of the facility, hundreds or thousands of workers would need accommodation on the road to and from the site each day. This can significantly affect traffic patterns for areas that are not used to that many vehicles. Such an increase in traffic can lead to additional stress on roads from builders’ vehicles, trucks, and heavy machinery being brought to the site. Noise during and after construction can be an issue for residents in close proximity to these developments.
Regulatory framework
For purposes of regulating development, counties can regulate only what the state has provided for under Texas law. Most county regulatory authority comes from Chapters 232 and 233 of the Local Government Code. These chapters provide counties with the ability to regulate subdivisions, housing, and businesses in unincorporated parts of the county. Counties should also enforce their authority over county road conditions under Transportation Code Chapter 251. In situations where regulation under one of these chapters may not be available, a county may still be able to use a tax abatement agreement under Chapter 312 of the Tax Code (the Property Redevelopment and Tax Abatement Act) to get a developer to willingly comply with requests your county may not have the statutory authority to require.
Chapter 232 of the Local Government Code (County Regulation of Subdivisions) requires a plat to be filed and approved by a county for subdivisions of land. While each development is different, the datacenter developments I have seen all occupy sites larger than 10 acres. This size would allow the developer to avoid the plat requirement.[1] If, however, the site of development does require a plat in your county, the county can apply any available requirements under Chapter 232.[2] If your county has a development services
team, check with members of that team to see what local development regulations include. While Chapter 232 is used widely to regulate new housing developments on county land, it is not likely to be useful for dealing with datacenter development.
Chapter 233 of the Local Government Code (County Regulation of Housing and Other Structures) is where counties are likely to be able to regulate datacenters most effectively. County commissioners can pass an order to require setbacks for new development and can enforce that order through injunction or abatement actions brought by the district or county attorney (that’s us!).[3] Additionally, some counties may adopt a fire code and rules to enforce that code.[4] The county’s fire marshal can and should rigorously enforce whatever fire code is applicable in your county.
Counties have general authority over all roads, highways, and bridges in the county and may recover damages from parties that negligently damage those roads.[5] Road damage can be mitigated either through subsequent actions to recover the costs of repairing the roads to prior condition or through road use agreements. Road use agreements, while optional, can be a great way for counties to reduce traffic to specific roads and to get buy-in from developers by potentially putting a maximum cap on liability for damages.
Tax abatements are, at this time, the best method for enforcing compliance on a datacenter developer who may be reluctant to consider a county’s wishes. Counties can execute a tax abatement on all or a portion of the real property, tangible personal property, or both.[6] These agreements allow a county to contract for items that may not be in its normal regulatory authority but may be important to the county’s constituents. If a datacenter is being proposed around a residential neighborhood, for example, the county could ask for sound dampening equipment or screening to be placed and maintained around the facility. Or if constituents are concerned about water usage from a local aquifer, the agreement could limit groundwater usage or require a closed-loop system (or something similar) to limit water usage. One specific concession that I have been advised is useful (especially for smaller counties) is to have the developer or operator of the facility make an in-county representative available to take calls and meetings with residents so that the company, and not county staff, can answer questions about the development. Counties do have limits to what they can agree to and for how long, but in my conversations with officials in counties with these agreements, the universal feedback is that the operators are very receptive to such conditions in exchange for tax abatements.
One note of caution: The public has been very negatively inclined to abatements for these facilities in the last few months, so make sure you and your elected officials have a good feel for the public interest barometer in your county.
Moratoria
At this time, there is no general authority for counties to pass a moratorium on datacenter development. While I have found no information directly related to datacenters, it is similar to certain county opinions on solar farms. The Attorney General (AG) provided an opinion to Franklin County regarding a moratorium on solar farm construction passed by the commissioners in that county.[7] In that opinion, the AG’s office took the position that while the commissioners may have some regulatory authority over solar farms, it is unlikely that the commissioners could pass and enforce a moratorium on their development.
Despite this authority, some counties have continued to pass moratoria of their own. Hill County passed a one-year moratorium in its jurisdiction in May 2026, and the county was subsequently sued by a developer in federal court.[8] Hill County subsequently provided a waiver to the developer to exempt it from the moratorium and agreed to pay $100,000 in attorney fees and revise its development policies.[9] While not an admission that the moratorium was unsupported by law, the litigation is not helpful for future regulation.
At the time of this writing, Governor Greg Abbott has announced that he is directing the Public Utility Commission of Texas (PUCT) and ERCOT to conduct a “comprehensive verification and audit of all datacenters” intending to connect to the public grid.[10] The goal appears to be a delay in allowing future datacenters to connect to the grid. While not expressly laid out as a moratorium, if the delay in approval is extended, it will constructively function as one. The language of the request from the governor does not appear to affect developments that are building on-site power generation or specify if PUCT and ERCOT are to consider on-site power generation. It is unclear at this time if this action will be challenged in courts. Even if the review survives court scrutiny, the effect on datacenter construction remains to be seen, especially in light of the largest planned datacenters being powered mainly, if not exclusively, from on-site power generation.
Proposals and next steps
With great interest in datacenters generally and this being an election year, lots of local, state, and federal politicians have begun introducing proposals for regulating datacenter construction. Most seem to allow for limiting construction, primarily in rural areas.[11] Others include limiting the use of tax abatement agreements by local governments.[12] On the national level, politicians have begun proposing a national moratorium on datacenter construction.[13]
If your county is looking for maximum regulatory authority over development, you should evaluate, update, or (if your county does not have them) pass development regulations in your county. For a set of industrial development guidelines that could prove useful, look to the revised proposed guidelines in the agenda of Hill County Commissioners Court posted in Footnote 9.
Regardless of whether your county wants to avoid or attract development, it is important to be aware of changes that may be coming to a Local Government Code near you.
[1] Tex. Loc. Gov’t Code §232.0015 (no plat of the subdivision required if all lots are more than 10 acres).
[2] Primarily looking at §232.003 of the Local Government Code allowing right of ways, drainage, and setbacks as potentially allowable requirements.
[3] Tex. Loc. Gov’t Code §233.032.
[4] Tex. Loc. Gov’t Code §233.061 (applies to counties with a population of more than 250,000 or counties adjacent to a county with a population of more than 250,000).
[5] Tex. Trans. Code §251.016; Tex. Trans. Code §251.160.
[6] Tex. Tax Code §312.402.
[7] Op. Tex. Att’y Gen. AC-0003 (August 16, 2023).
[8] RCM Hill, LLC. v. Hill County, et al., No. 6:26-cv-00340-CRW-DTG (W.D. Tex. May 27, 2026), dism’d with prej. (July 9, 2026).
[9] Hill County Commissioners Court Agenda, June 4, 2026, www.co.hill.tx.us/upload/template/28749/ docs/CC%202026/ccagenda_06042026.pdf.
[10] Governor Abbott Directs Comprehensive Data Center Audit, https://gov.texas.gov/news/post/governor-abbott-directs-comprehensive-data-center-audit (last visited Aug. 5, 2026).
[11] Governor Abbott discussed a ban on datacenter development in rural neighborhoods at a campaign stop, www.texastribune.org/2026/06/30/texas-abbott-data-center-development-ban-rural-communities/ (last visited on Aug. 5, 2026).
[12] Senate Finance Committee hears info on tax exemptions for datacenters, www.nbcdfw.com/news/ local/texas-news/texas-data-center-tax-exemption-hearing/4053952/ (last visited Aug. 5, 2026).
[13] Ocasio-Cortez introduces House version of the AI datacenter moratorium act, https://ocasio-cortez.house .gov/media/press-releases/ocasio-cortez-introduces-house-version-ai-data-center-moratorium-act (last visited Aug. 6, 2026); Artificial Intelligence Data Center Moratorium Act, www.govtrack.us/congress/bills/ 119/s4214 (last visited Aug. 6, 2026).