Estimated Time to Read: 14 minutes
In Part 7 of our 8-part series covering the 89th Texas Legislature, we turn to water and energy policy. As Texas continues to experience rapid population growth, mounting electricity demand, and increasingly severe weather events, lawmakers face growing pressure to strengthen the state’s infrastructure. While the Legislature passed several high-profile measures aimed at expanding funding and encouraging investment, critics argue the session fell short of delivering deeper reforms to improve long-term resilience, reduce taxpayer exposure, or ease regulatory burdens.
This policy brief outlines what passed, what didn’t, and the political trends shaping the future of water and energy policy in Texas.
Bills That Made It
Lawmakers approved a wide range of bills aimed at improving grid reliability and expanding Texas’s water and energy infrastructure. Much of the focus was on creating new state-backed programs, grant funds, and planning entities to address long-term challenges such as drought, population growth, natural disasters, and rising energy demand. The Legislature again leaned heavily on bureaucratic coordination and grant-driven models instead of market reforms or deregulation.
Constitutional Water Funding Dedication – House Joint Resolution 7 (HJR 7)
House Joint Resolution 7, authored by State Rep. Cody Harris (R-Palestine), proposes a constitutional amendment to create a dedicated, long-term revenue stream for the Texas Water Fund. Starting in fiscal year 2028, it would direct the first $1 billion in annual sales tax revenue that exceeds $46.5 billion into the fund, with deposits continuing through 2047. The money could support infrastructure, conservation, and new water supply development, but not the transport of fresh groundwater unless it comes from brackish recovery through aquifer storage and recovery (ASR) projects.
At least 25 percent of the funds must go to the New Water Supply for Texas Fund, and the Legislature cannot change this requirement for the first 10 years. The amendment allows for temporary diversion of funds during a declared disaster if they are expected to be repaid. If voters approve it in November 2025, the amendment will take effect on September 1, 2027.
Supporters say the measure is necessary to meet growing water demands. Critics argue that setting aside this revenue outside the usual budget process sets a troubling precedent, especially considering the scale of the commitment.
Omnibus Water Infrastructure Reform – Senate Bill 7 (SB 7)
Senate Bill 7, authored by State Sen. Charles Perry (R-Lubbock), creates the framework to implement HJR 7. It expands eligible project types to include water reuse, out-of-state water acquisition, desalination, and reservoir development. It also allows regional conveyance infrastructure to be funded under the New Water Supply for Texas Fund.
The bill reorganizes the SWIFT Advisory Committee into the broader Texas Water Fund Advisory Committee and requires the Texas Water Development Board (TWDB) to maintain a public dashboard to show project progress. A one-time deposit of $2.5 billion from the supplemental budget will start the fund.
After debate, lawmakers settled on a 50/50 spending split: half for conservation, reuse, and repair; half for new supply like desalination. Perry called the bill a good starting point.
Supporters see SB 7 as a down payment toward the $154 billion the state is estimated to need for water infrastructure by 2050. Critics worry about expanded agency power, limited oversight, and the crowding out of private investment.
Large Load Grid Planning – Senate Bill 6 (SB 6)
Senate Bill 6, authored by State Sen. Phil King (R–Weatherford), responds to the rapid growth in electricity demand from industries like data centers and crypto mining. It sets new requirements for large-scale electricity users, including financial commitments, grid interconnection studies, and planning to manage demand during emergencies.
ERCOT gains the authority to require large users to reduce power use during emergencies. The Public Utility Commission (PUC) must create rules to protect ratepayers from covering the costs of grid upgrades for these users.
Supporters view the bill as essential to grid reliability. Critics say it adds regulatory burdens, shifts infrastructure costs to private businesses, and could discourage innovation.
Electric Grid Resilience – Senate Bill 75 (SB 75)
Senate Bill 75, authored by State Sen. Bob Hall (R-Edgewood), creates the Texas Grid Security Commission within the Division of Emergency Management. The commission will include representatives from state agencies, utilities, and infrastructure providers. It must produce an “all-hazards” resilience plan by December 2026 and report annually on emerging threats.
An amendment from State Rep. Shelby Slawson (R-Stephenville) requires law enforcement to participate in emergency preparedness exercises. The bill passed with overwhelming bipartisan support. While it does not add new regulatory powers, it improves planning and coordination.
Advanced Nuclear Energy Development – House Bill 14 (HB 14)
House Bill 14, also by State Rep. Cody Harris (R–Palestine), creates the Texas Advanced Nuclear Energy Office (TANEO) under the Office of the Governor. The office will guide nuclear energy development, coordinate stakeholders, and manage a grant fund that reimburses project costs for early-stage development, construction, and grid connection.
The office will sunset in 2035 unless renewed. It is also tasked with reviewing the possibility of Texas taking on some regulatory authority from the federal government. The estimated cost for the first two years is $5.3 million.
Supporters say the bill helps diversify Texas’s energy mix and supports clean, dispatchable power. Critics warn that it expands government influence in energy markets by backing industrial development with taxpayer funds.
Renewable Decommissioning – House Bill 3228 (HB 3228)
House Bill 3228, authored by State Rep. Stan Lambert (R-Abilene), requires future lease agreements for wind and solar projects to include plans for decommissioning and recycling. Developers must provide financial assurance for equipment removal. The bill is designed to prevent landowners from being left with abandoned infrastructure.
Water Loss Accountability – House Bill 29 (HB 29)
House Bill 29, by State Rep. Stan Gerdes (R–Smithville), requires large municipal utilities to validate water loss audits and submit long-term mitigation plans. Utilities must update plans every 10 years and report on progress. Noncompliance can result in fines.
Dual-Use Water Projects – Senate Bill 1967 (SB 1967)
Senate Bill 1967, by State Sen. Chuy Hinojosa (D–McAllen), allows the Flood Infrastructure Fund to support projects that reuse stormwater, agricultural runoff, and treated wastewater. Supporters say it helps address flood and drought challenges together. Critics worry the bill could blur the fund’s original purpose and expand the state’s role in local water planning.
Lawn Fine Protections During Drought – House Bill 517 (HB 517)
House Bill 517, by State Rep. Caroline Harris Davila (R–Round Rock), prohibits homeowners’ associations from fining residents for brown lawns during drought restrictions. Residents are given a 60-day grace period to restore their landscaping after restrictions end.
Devils River Discharge Ban – House Bill 3333 (HB 3333)
House Bill 3333, authored by State Rep. Eddie Morales Jr. (D–Eagle Pass), bans new wastewater discharge permits into the Devils River and its tributaries. Supporters see it as protecting one of Texas’s most pristine waterways. Critics argue the bill removes case-by-case evaluation and places one-size-fits-all restrictions on private land use.
Closing Loopholes in Discharge Permitting – Senate Bill 1302 (SB 1302)
Senate Bill 1302, authored by State Sen. Lois Kolkhorst (R-Brenham), requires that any wastewater permit reissued after denial or suspension be approved manually by the TCEQ executive director. Automated reauthorization systems may no longer be used. Supporters say it closes a loophole, while critics worry about the lack of clear decision timelines.
Oil Field Theft Protection – House Bill 48 (HB 48), Senate Bills 494 (SB 494) and 1806 (SB 1806)
A surge in organized oil field thefts, often coordinated and cartel-linked, prompted lawmakers to pass a trio of bills authored by State Rep. Drew Darby (R–San Angelo) and State Sen. Kevin Sparks (R–Midland), aimed at protecting energy infrastructure and curbing billion-dollar losses in the Permian Basin and beyond.
House Bill 48 creates a dedicated Oil Field Theft Prevention Unit within the Department of Public Safety (DPS), charged with investigating thefts of petroleum products and equipment, coordinating with law enforcement, and conducting public awareness campaigns. The unit is also required to report biennially to the Legislature. Local sheriffs and industry leaders, particularly in West Texas, supported the measure, citing limited resources and rising theft levels across rural oil-producing counties.
Senate Bill 494 directs the Railroad Commission to establish an interagency task force—including representatives from the oil and gas industry and law enforcement—to study theft patterns, assess sales tax losses to local governments, and recommend enforcement strategies. The task force must report findings to the Legislature every two years through 2030. Senate Bill 1806 authorizes DPS to seize and sell stolen petroleum products, inspect cargo tanks, and use forensic sampling to verify theft. The bill also dramatically raises penalties: transporting petroleum waste without authorization becomes a felony with a minimum $100,000 fine, while unlawful purchases and storage carry penalties up to $10,000.
Together, the bills represent a comprehensive crackdown on oil field theft, reinforcing enforcement tools, raising penalties, and creating formal coordination channels between the state, industry, and local law enforcement. The total projected cost to taxpayers is nearly $5 million, reflecting the state’s view that protecting oil infrastructure is a matter of both economic security and public safety.
Bills That Did Not Make It
While the 89th Legislature advanced several major water and energy bills, a number of significant proposals did not make it through. Some were vetoed after passage, others stalled in committee, and a few never received a hearing. Despite covering a range of topics, each reflected continued interest in long-term planning, regulatory boundaries, and the evolving role of the state in water and energy development.
Water Conservation Fee Credits & Groundwater Authority – Senate Bill 1253 (SB 1253)
Senate Bill 1253, authored by State Sen. Charles Perry (R–Lubbock), would have required cities and local governments to offer credits against impact and production fees for developers that install conservation infrastructure. It also gave the Hays Trinity Groundwater Conservation District authority to impose a production fee, with certain exemptions repealed.
Although the bill passed both chambers, Gov. Abbott vetoed it, citing concerns about new burdens on landowners and government overreach. Supporters saw it as a market-based incentive, but critics said the final version went too far, including concerns about property access without consent and escalating fees.
Seawater Desalination Feasibility Study – House Bill 1501 (HB 1501)
House Bill 1501, authored by State Rep. Tony Tinderholt (R-Arlington), would have directed Texas State University’s Meadows Center to study the feasibility of seawater desalination along the Texas Gulf Coast. It also proposed exploring the use of brine concentrate in nuclear energy production.
The report would have been due in 2027, but the bill never received a hearing. Despite growing interest in desalination as a water supply solution, the bill’s failure highlights lawmakers’ hesitance to invest in long-term research without near-term project outcomes.
Estuarine Salinity Standards – House Bill 3728 (HB 3728)
House Bill 3728, authored by State Rep. Penny Morales Shaw (D–Houston), would have required the Texas Commission on Environmental Quality to establish salinity standards for bays and estuaries. It also called for a statewide report on estuarine salinity impacts due to desalination, wastewater discharge, and changing rainfall patterns.
The bill received a hearing but was left pending. Concerns over potential permitting implications and compliance costs led to its quiet demise, even as interest in protecting coastal ecosystems grows.
Siting Standards for Renewable Energy Projects – Senate Bill 819 (SB 819)
Senate Bill 819, authored by State Sen. Lois Kolkhorst (R–Brenham), would have required large wind and solar projects to get a “public interest” determination from the Public Utility Commission before connecting to the grid. The application process included setback requirements, public hearings, wildlife impact studies, and fees to fund environmental mitigation.
Supporters argued the bill protected rural communities from industrial sprawl and brought consistency to renewable siting. Critics warned it imposed broad new requirements for private energy development while exempting oil and gas projects. Despite passing the Senate, it was never heard in the House.
Dispatchable Generation Target & Credit Trading Program – Senate Bill 388 (SB 388)
Senate Bill 388, authored by State Sen. Phil King (R-Weatherford), would have required that 50 percent of all new generation added to the ERCOT grid come from dispatchable sources. It created a tradable credit system to enforce this target and offered bonus credits for nuclear.
While supporters framed it as a tool for grid reliability, opponents viewed it as a market distortion that penalized renewables. The bill passed the Senate but never received a hearing in the House.
Political Takeaways/Trends
The 89th Legislative Session marked a defining moment for Texas water and energy policy. It delivered record investments and meaningful policy changes, but also revealed clear divisions over how far the state should go in shaping markets and regulating infrastructure.
On water, lawmakers advanced the largest investment in state history through HJR 7 and SB 7, creating the Texas Water Fund and laying the groundwork for long-term project funding. Paired with targeted bills like HB 29 and HB 517, the session reflected a bipartisan understanding that Texas’s water infrastructure is under growing strain.
But the state avoided addressing the foundational challenge of groundwater management. Lawmakers steered clear of reforms to the rule of capture, which allows unrestricted groundwater pumping, despite growing concern over the Ogallala Aquifer’s decline. Even modest planning efforts like HB 1501 and HB 3728 failed to advance.
In energy, the Legislature passed measures aimed at strengthening grid reliability and supporting dispatchable generation, including SB 6 and HB 14. Yet high-profile efforts to impose new limits on renewables, including SB 819 and SB 388, collapsed amid industry opposition and concerns over private land rights.
These defeats suggest that while some lawmakers want more state control over energy development, a coalition of property rights advocates, free-market organizations, and industry stakeholders pushed back successfully. Several proposals ran counter to Texas’s traditional principles of free markets, limited government, and private property rights.
Meanwhile, bills like SB 819, which sought to impose broad siting restrictions, mandatory environmental reviews, and public hearings on renewable projects, exposed a deeper rift between rural preservation concerns and voluntary private development. Critics argued it placed top-down rules on private land agreements while letting oil and gas operate under a different standard.
Taken together, the session showed a willingness to invest in infrastructure, but a deep divide remains over who should manage that investment: government agencies or private markets.
Conclusion
The 89th Texas Legislature took historic steps to address the state’s growing water and energy challenges. It created the Texas Water Fund, passed key grid reliability measures, and invested billions into infrastructure. These efforts reflect a growing recognition that the state is approaching a breaking point, with aging systems, rising demand, and deepening droughts putting real pressure on both water and energy supply.
Still, the state’s approach was largely focused on spending, not reform. Lawmakers avoided politically sensitive issues like groundwater law and long-term planning. Even efforts to study or regulate brackish desalination (like HB 1501 and HB 3728) failed.
On energy, the session showcased a preference for intervention over market flexibility. Some proposals aimed at curbing renewable development, like SB 819 and SB 388, met resistance and ultimately failed. The session delivered infrastructure investment, but sidestepped tougher debates about property rights, regulatory fairness, and market-based solutions.
Texas now has a funding framework in place. The question is whether that framework will be enough to meet the scale of the state’s 21st-century water and energy crisis.
Can Texas solve a modern resource crisis with old legal rules and political instincts?
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