Greg Abbott seeks new limits on Texas data centers with efficiency rules and tax repeal

Texas Governor Greg Abbott just told data centers to start paying their own way. On June 10, the Republican governor directed the Texas Public Utility Commission (PUCT) and the Electric Reliability Council of Texas (ERCOT) to “take immediate steps” to protect residential ratepayers from absorbing the infrastructure costs of rapidly expanding data center operations.

The directive mandates that data centers must cover the full costs of their electric infrastructure, with regulators expected to deliver recommendations by July 17, 2026. The PUCT has until July 31 to implement measures for reducing transmission costs.

What Abbott is proposing

The immediate directive targets how data centers connect to and burden the ERCOT grid, particularly in rural areas where new facilities have been popping up at a pace that local infrastructure was never designed to handle.

Abbott has outlined legislative priorities for the 2027 session that would introduce water efficiency mandates, require annual reporting on electricity and water usage, and establish community impact measures addressing noise and physical setbacks from data center facilities.

Perhaps the sharpest proposal: repealing sales tax exemptions for data center operations that could cost the state roughly $3.3 billion over two years. Those tax incentives have previously exceeded $1 billion annually, making Texas one of the most financially attractive destinations for large-scale compute operations in the country.

Why crypto miners should be paying attention

Texas has been the undisputed king of US Bitcoin mining for years, largely because of its deregulated energy market, cheap power, and those generous tax incentives. Miners flocked to the state, setting up massive operations in rural communities where land was cheap and grid connections were available.

ERCOT has flagged voltage ride-through issues with some data centers and mining operations, a technical way of saying these facilities don’t always play nicely with the grid during stress events.

The directive’s requirement that data centers fund their own infrastructure costs could significantly raise the barrier to entry for new mining operations. It could also increase ongoing costs for existing ones.

The political context

Abbott’s move is notable precisely because of who’s making it. This is Abbott’s first major action to limit data center growth incentives in a state that has been largely welcoming to tech infrastructure.

Rural communities that initially welcomed data centers for the jobs and investment are now dealing with noise complaints, strained water resources, and electricity costs that seem disconnected from the promises that accompanied the facilities.

What this means for investors

For publicly traded Bitcoin miners with significant Texas operations, this directive introduces a new cost variable. Companies like Riot Platforms and Marathon Digital, which have built substantial Texas footprints, will need to assess how higher infrastructure costs and potential tax changes affect their operating margins.

The compliance timeline is aggressive. Regulators have barely five weeks to produce recommendations, and cost reduction measures are expected by the end of July.

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