Texas Attorney General and Republican U.S. Senate nominee Ken Paxton has unveiled a four-part proposal intended to limit the costs and risks associated with Texas’ rapidly expanding data center industry while preserving the infrastructure needed for artificial intelligence development.
The plan combines proposed federal legislation, support for independent power generation, repeal of Texas’ sales-tax exemption for qualifying data centers, and support for Gov. Greg Abbott’s new data center standards. Most provisions would require action by Congress or the Texas Legislature and would not take effect through Paxton’s announcement alone.
Paxton’s Four Points
Paxton’s first three proposals concern actions he says he would pursue in the U.S. Senate.
1. Keep Chinese technology out of data centers. Paxton proposes legislation preventing technology linked to China from powering American data centers or being installed in other critical infrastructure. The measure would require Congress to determine which companies, products, and foreign connections are prohibited.
2. Penalize companies when AI platforms endanger children. Paxton proposes criminal liability for data center companies when their facilities power artificial intelligence chatbots that harm children. Details concerning the conduct that would trigger liability, the responsible parties, and applicable penalties have not yet been released.
3. Help data centers generate their own electricity. Paxton said he would co-sponsor Sen. Tom Cotton’s DATA Act, which would establish a federal regulatory category allowing qualifying data centers to generate electricity independently from existing utility grids.
That approach broadly tracks President Donald Trump’s national AI legislative framework, which calls for streamlined permitting so data centers can generate power on-site without shifting costs to residential ratepayers.
4. Repeal Texas’ data center tax exemption and support Abbott’s standards. At the state level, Paxton supports eliminating Texas’ sales-tax exemption for qualifying data centers and backing Abbott’s review process governing electricity consumption, on-site generation, water use, public incentives, project ownership, and effects on neighboring communities.
Paxton voted for the exemption while serving in the Texas Senate in 2013. The official Senate Journal lists him among the 23 senators who voted to pass House Bill 1223. Under the Texas Comptroller’s current certification Paxton and Abbott Largely Align
Paxton’s proposal largely aligns with Abbott’s current position.
On August 3, Abbott directed the Public Utility Commission of Texas and the Electric Reliability Council of Texas to verify and audit data centers advancing through ERCOT’s interconnection process before approving additional projects to move forward.
Under the governor’s audit requirements, developers must disclose:
- State and local tax incentives, grants, and abatements;
- Expected electricity consumption and plans for on-site generation;
- Water requirements, sources, and cooling systems;
- Noise, traffic, lighting, setbacks, and emergency-response plans; and
- The project’s owners and controlling interests.
Data center companies that fail to comply with ERCOT’s audit process must be denied permission to interconnect with the Texas grid, reported by The Dallas Express.
Several companies have subsequently agreed to follow Abbott’s standards. Google, Rowan, and CleanSpark were among the developers that recently committed to compliance, as previously reported by The Dallas Express. Diode Ventures withdrew its proposed East Texas project after determining that it did not meet Abbott’s directives or community expectations, Where Trump Differs
Paxton and Trump agree that data centers should pay for the electricity and infrastructure they require. Trump’s voluntary Ratepayer Protection Pledge calls on participating hyperscalers, artificial intelligence companies, utilities, and data center developers to build, bring, or purchase the electricity needed by the facilities and cover the associated generation, delivery, and grid-upgrade costs. However, Trump has warned Texas against broadly discouraging data center investment. As The Dallas Express reported on August 8, Trump called Texas resistance to the industry a “mistake” and said data centers could become economically larger than oil. The Trump administration has also moved to accelerate construction. A July 2025 executive order directed federal agencies to streamline permitting and environmental reviews for qualifying data center and energy projects. The distinction is primarily one of emphasis: Trump is seeking rapid domestic construction paired with ratepayer protections, while Abbott has emphasized project screening, community impacts, rural siting restrictions, and removal of Texas incentives. Paxton’s proposal adopts several of Abbott’s positions while adding proposed federal provisions concerning Chinese technology and child safety. The debate centers on electricity consumption, water use, taxpayer incentives, noise, local control, and transparency. The scale of the proposed development pipeline has intensified concerns about grid capacity. ERCOT reported in June that it was tracking more than 438,000 megawatts of large-load interconnection requests, with nearly 89% associated with data centers. A subsequent ERCOT presentation using June 2026 data placed the total at approximately 474,000 megawatts, about 90% of it from data centers. Those figures represent requested capacity—not facilities certain to be built or electricity certain to be consumed. Communities have also questioned whether developers should receive public incentives while requiring new transmission lines, generating equipment, and water infrastructure. Abbott previously ordered regulators to ensure that residential customers do not absorb data centers’ infrastructure expenses. Local opposition has surfaced in North Texas. In Westlake, a judge recently issued a temporary restraining order blocking action on a resolution involving the proposed Circle T Data Center after plaintiffs alleged inadequate public notice, as reported by The Dallas Express. The order did not decide whether the plaintiffs’ allegations were correct. For now, data centers seeking access to the ERCOT grid must undergo more extensive disclosure, verification, and review. Projects that satisfy the requirements may advance, while those that fail ERCOT’s audit process must be denied grid interconnection. Other proposals may be delayed, redesigned, relocated, or voluntarily withdrawn. Paxton’s federal proposals would require him to win the Senate race and then secure congressional passage. Repealing Texas’ tax exemption would require legislative action. His criminal-liability proposal would also need specific statutory language defining prohibited conduct and establishing how responsibility would be assigned. The immediate changes facing Texans come from Abbott’s audit and administrative directives—not from Paxton’s campaign proposal. Paxton’s federal proposals would require congressional approval, while repealing the Texas sales-tax exemption would require action by the Texas Legislature. Longer-term rules will depend on Congress, state lawmakers, regulators, and the outcome of pending local disputes.
Why Data Centers Became Controversial
What Texans Can Expect
Provided by Dallas Express
