East Texas Data Center Project Withdrawn – Failed To Meet State Standards

A proposed data center project in East Texas has been scrapped after Governor Greg Abbott said it failed to meet the state's expectations for protecting local communities, natural resources, and the Texas power grid.

According to the Governor's Office, Diode has withdrawn its plans to build a data center near Cedar Creek Lake in Henderson County after determining that the project did not meet the state's standards. See the letter here.

Governor Abbott Says Communities Must Come First

Governor Abbott said companies looking to build data centers in Texas must demonstrate that their projects benefit residents rather than create new burdens.

"Data centers that want to do business in Texas must meet a clear standard. This project did not," Abbott said. "Texas requires companies to put communities first, protect our natural resources and power grid, and respect the quality of life of our residents."

Abbott also praised Diode's decision to withdraw the proposal, saying he expects other companies to do the same if they cannot meet the state's expectations.

State Sets New Expectations for Data Centers

The Governor's Office said the standards were outlined in a June directive to the Public Utility Commission of Texas (PUC) and the Electric Reliability Council of Texas (ERCOT).

Brandon Bell, Getty Images

Among the state's expectations are that new data centers:

• Help reduce residential electricity costs.
• Pay for their own electric infrastructure without shifting costs to homeowners.
• Add new electric generation capacity instead of only increasing demand.
• Use water-efficient cooling systems to reduce strain on local water supplies.
• Minimize impacts on nearby neighborhoods through noise reduction, setbacks, and other community-friendly measures.

More Rules Could Be On The Way

Governor Abbott also said he plans to seek legislation requiring large data centers to report their annual electricity and water usage to the PUC. He also wants lawmakers to eliminate certain sales tax exemptions and other incentives currently available to data center projects.

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The Governor said Texas will continue encouraging data center development, but only if projects protect residents, infrastructure, and rural communities rather than placing additional demands on them.

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