AI's massive appetite for power, water ignites fight in high-stakes Texas Senate race

Texas Senate Candidates Outline Competing Proposals on Data Center Regulation

Texas Attorney General Ken Paxton and state Sen. James Talarico have each released plans addressing data center development in the state ahead of the Senate election. The proposals focus on electricity demand, water use, tax incentives, and oversight of facilities that support artificial intelligence operations.

Paxton presented a four-point plan obtained by Fox News Digital. It includes federal legislation to bar Chinese technology from powering data centers or U.S. infrastructure and to establish criminal liability for companies whose facilities enable AI systems that harm children. Paxton also stated he would co-sponsor the DATA Act, introduced by Sen. Tom Cotton of Arkansas, which would create a federal category allowing data centers to generate their own power separate from existing grids.

At the state level, Paxton’s plan calls for ending sales tax exemptions for data centers and supporting a directive issued earlier this month by Gov. Greg Abbott. Abbott’s order requires data centers to report power consumption, plans for independent power generation, water use, financial incentives received, measures to reduce effects on local communities, and ownership details. Abbott stated on X that the guidelines have halted roughly 1,800 proposed projects. Paxton said the plan prioritizes Texas residents while maintaining U.S. competitiveness in artificial intelligence.

Talarico has held bipartisan roundtables on the issue and criticized Paxton for accepting nearly $500,000 in contributions from political action committees linked to data center companies. Talarico campaign spokesperson JT Ennis said Paxton received the funds and did not intervene in a data center proposal in Hood County after local residents requested assistance. Ennis stated that Talarico seeks to hold companies accountable and that Texans cannot afford a senator influenced by such donors.

Talarico’s Lone Star Rising PAC has received approximately $10 million from Reid Hoffman, co-founder of LinkedIn, who has supported data center expansion in the context of competition with China. Paxton noted that Talarico’s operation has accepted funds from data center-affiliated sources and said his own plan places Texas residents first.

Talarico’s proposal would repeal state tax exemptions for data centers, require companies to pay 100 percent of grid connection costs, mandate closed-loop water recycling systems, and grant local governments veto authority over projects. Paxton’s plan also seeks to end the sales tax exemptions. In 2013, while serving as a state senator, Paxton voted for legislation granting 100 percent sales tax exemptions to data centers that met a $200 million investment threshold and employment requirements. The measure passed the Texas Senate on a near-unanimous vote and contributed to subsequent growth in the sector.

Both candidates have addressed the expansion of data centers, which has increased electricity and water demand in parts of Texas. Paxton’s plan includes provisions aimed at preventing data centers from supporting AI platforms that could affect children. Talarico’s measures emphasize cost allocation to operators and local control.

Abbott’s directive applies uniformly across the state and requires disclosure of power and water usage as well as ownership information. The order does not impose new statutory limits but establishes reporting standards for proposed facilities.

The contest between Paxton, the Republican nominee, and Talarico, the Democratic nominee, centers on differing approaches to regulation, taxation, and infrastructure requirements for the industry. Paxton has emphasized federal restrictions on foreign technology and state-level alignment with Abbott’s guidelines. Talarico has focused on repealing tax benefits and shifting infrastructure costs to operators.

The election will determine the successor to retiring Sen. John Cornyn. Both candidates continue to present their records and proposals on data center policy in the final weeks of the campaign.