Paxton Launches Texas Data Center Water Investigation

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Texas Attorney General Ken Paxton (R) has launched a statewide investigation into hundreds of Texas data center developments over compliance with existing water-use reporting requirements, extending the state's growing scrutiny of an industry already facing new reviews involving electricity, water, permitting, and development.

The Office of the Attorney General announced Thursday that it is investigating data center developments that have not responded to the Texas Water Development Board's (TWDB) Water Use Survey. According to the Attorney General's Office, the investigation initially reaches projects across at least 18 Texas counties: Harris, Montgomery, Travis, Dallas, Tarrant, Smith, Bexar, Tom Green, Potter, Randall, Lubbock, Midland, Ector, Wichita, Victoria, Brazos, Nueces, and El Paso counties.

The investigation raises two distinct policy questions. Texas has an existing water-use reporting law that applies beyond data centers, and entities subject to that law should comply with it. At the same time, the state's increasingly industry-specific approach toward data centers raises questions about whether generally applicable laws are being enforced neutrally or becoming another tool for targeting a particular industry.

Texas Data Centers Face Water-Use Investigation

Under the Texas Water Code, TWDB may survey entities using groundwater or surface water for municipal, industrial, power generation, and mining purposes as part of the state's long-term water planning.

Recipients are required to complete and return the survey. Failure to comply in a timely manner can make an entity ineligible for TWDB financial assistance and certain Texas Commission on Environmental Quality (TCEQ) water permits, amendments, or renewals. Failure to complete and return the survey is also a Class C misdemeanor.

The requirement is not unique to data centers.

TWDB says it surveys approximately 8,000 water systems and industrial facilities annually, including roughly 4,700 municipal entities and 3,300 industrial users. Manufacturing, mining, steam-electric generation, and data centers are among the industrial users required to respond when surveyed.

That broader context matters. If a data center receives a legally required Water Use Survey, compliance should not be optional. Accurate information about water consumption also feeds directly into regional and statewide water planning.

"My office is currently investigating hundreds of data center developments to ensure that they are transparent about their water usage and fully compliant with the law," Paxton said.

The office also described the effort as an ongoing investigation into all data center developments in Texas, framing its scope around a single industry rather than around every entity that failed to return a required survey.

Texas Data Center Scrutiny Continues to Expand

The Attorney General's investigation does not occur in isolation.

On September 14, Gov. Greg Abbott (R) directed TWDB to enforce existing water-use reporting requirements against major water users, including data centers, and instructed the agency to coordinate with the Electric Reliability Council of Texas (ERCOT) as part of the state's broader data center audit.

One week later, Abbott directed TCEQ to halt permits sought by data centers until those projects complete the ERCOT and TWDB audits. That followed a June 10 directive requiring data centers to fully fund the electric infrastructure needed to serve them and an August 3 directive barring data centers from advancing through ERCOT's interconnection process until audited.

The Attorney General's Office has also separately opened an investigation into a proposed AI data center development in Taylor, examining whether land conveyed more than 25 years ago for future parkland can lawfully be used for the project.

Taken together, Texas data centers are now receiving concentrated scrutiny from the Governor's Office, ERCOT, the Public Utility Commission (PUC), TWDB, TCEQ, and the Attorney General's Office.

That makes the distinction between enforcing existing law and imposing industry-specific government controls increasingly important.

Enforcing Existing Law or Targeting an Industry?

September's data center actions do not all rest on the same legal footing.

Enforces existing law

• Sept. 14Governor to TWDBEnforce Water Use Survey requirements already in the Water Code.
• Sept. 24Attorney GeneralInvestigate data centers that have not returned the survey.

Legitimate, if non-reporting manufacturers, mines, and utilities face the same scrutiny.

Adds restrictions without legislation

• Sept. 21Governor to TCEQIssue no permits sought by data centers until audits finish.

Applies to the whole industry, violation or not.

The test: does action turn on what an entity did, or on what industry it is in?

Data centers should receive neither special favors nor special penalties.

Sources: Office of the Texas Governor directives of Sept. 14 and Sept. 21, 2026; Office of the Attorney General; Texas Water Code. Texas Policy Research

Texas Water Reporting Laws Should Be Applied Neutrally

There is a legitimate state interest in enforcing existing water-use reporting requirements. Texas cannot accurately plan for future water needs if entities legally required to report their consumption simply refuse to provide the information. But enforcement of generally applicable law should itself be generally applicable.

Data centers have given regulators reason for concern. TWDB told a Senate committee in August that it had sent water-use surveys to 341 facilities identified as data centers and had received responses from only about 30 percent of them. Pursuing those non-respondents is enforcement of existing law, not a new restriction, and it rests on firmer legal footing than Abbott's industry-wide TCEQ permit freeze.

The neutrality question is therefore not whether data centers are being pursued, but whether non-responding manufacturers, mining operations, power generators, and municipal systems face the same pursuit. If they do, the investigation is ordinary law enforcement. If they do not, a generally applicable law is being enforced selectively against one industry.

The same principle should apply in both directions. Texas should not provide data centers with special subsidies or exemptions unavailable to other businesses, nor should state government subject them to unique regulatory treatment simply because their rapid growth has generated political controversy.

Neutral rules provide businesses, communities, and taxpayers with predictable expectations. Industry-specific intervention risks replacing those rules with a system in which government determines which sectors receive favorable treatment and which receive heightened scrutiny.

Texas Data Center Policy Belongs in the Legislature

The rapid expansion of data centers presents legitimate questions involving electricity infrastructure, water availability, development costs, tax incentives, and the effects large industrial loads may have on surrounding communities.

Those questions deserve public debate. Where existing law already establishes requirements, state officials should enforce those requirements within the authority granted to them. Where policymakers believe existing law is inadequate, the Texas Legislature provides the proper venue to debate whether new requirements should be imposed and whether those requirements should apply broadly or specifically to data centers.

The coming legislative debate could include water-use reporting, cooling technologies, electric infrastructure costs, tax incentives, and other issues associated with large-load development. Abbott has already indicated that he intends to pursue additional data center legislation during the next legislative session.

Whatever policies lawmakers ultimately consider, Texas should begin from a straightforward principle: similarly situated businesses should operate under predictable and neutral rules.

Data centers should comply with Texas law. But compliance with existing law and targeted regulation of a politically prominent industry are not the same thing. As state scrutiny continues to expand, maintaining that distinction will become increasingly important.

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