In recent years, communities across Central Texas have been tasked with evaluating the potential positive and negative impacts of proposed data center projects. The Greater Edwards Aquifer Alliance, or GEAA, released a news report summarizing the operations, growth and impacts of data centers.
The overview
The GEAA’s report, titled “Data Centers in Texas: A Review and Call for Innovation and Regulation,” reviews data center response efforts on both national and international levels and provides recommendations for how the developments should be handled in Texas.
Facilities built for AI purposes and cryptocurrency mining are leading the growth of data centers in the region, according to the report. Central Texas saw a significant increase in these developments between 2023 and 2025.
Since 2019, $14 billion in venture capital has been invested in data centers from 1,376 deals in Texas, contributing to the southern region’s AI and semiconductor boom, according to an American Edge Project, or AEP, report.
Without action from the state Legislature and municipalities to regulate and address the increase in data center development, the industry’s impact on crucial resources could worsen, according to the GEAA report, including:
- Strain on the electrical grid
- Depletion of limited water
- Increases in costs to Texans
- Harm to public health
- Overwhelmed local governments and utilities
Regulations and planning systems in Texas are not equipped to address the scale at which large data centers consume energy and water, according to the report. The facilities could use approximately 494,091 acre-feet of water by 2030 and cause a 70% increase in electricity demand across the state by 2031.
Large data centers can have major impacts on local and state economies, generating significant tax revenues, according to the AEP report. Additionally, data center sustainability is being advanced through the use of recycled water, cleaner energy and closed-loop water cooling systems.
“Data centers are proving to be one of the smartest public–private investments states can make,” according to the AEP report. “While some worry about their energy or water use, the fiscal returns tell a different story.”
According to the GEAA, data center tax exemptions are projected to cost Texas a minimum of $9 billion between 2025 and 2030, not accounting for local government exemptions.
Diving deeper
Cities and counties in Central Texas are working to address data center developments in the area. San Marcos is in the process of updating its Land Development Code and Design Manual, in part to address the industry.
The City Council approved an amendment that makes data centers a unique line item in the LDC, restricting them to High Industrial-zoned areas and requiring proposed projects to receive council approval.
In March, District 45 state Rep. Erin Zwiener announced a Hays County working group designed to address concerns surrounding data centers, water use and local authority.
Looking forward
The GEAA report recommends that Texas governmental bodies adopt policies outlining guardrails to reduce the negative impacts of data centers. Policy elements recommended by the organization include:
- Improve data gathering and government planning
- Fair cost allocation
- Expand and improve local governments’ regulatory authority
- Limit incompatible land uses
- Increase transparency
- Limit significant water and energy use
- Limit increased pollution and impacts on public health
Data center operators should impose measures to limit potable water use and reduce the demand on water supplies, according to the report.
