Produced Water, AI Data Centers and The Legislature - Part I
Maybe someday, people using AI will find cures for cancers, Alzheimer’s and other diseases, safely remove plaque from arteries, solve the world water crisis, and discover a clean, cheap, unlimited source of energy. There is, at least currently, a downside to AI: data centers. As we have all heard, AI data centers use huge quantities of water for cooling and electricity for power.
Texas attracts AI data centers because it has relatively cheap land, water resources (aquifers), business infrastructure and demand, and because the Texas Legislature gives big tax breaks (sales taxes exemptions) to data centers. The state also prohibits local governments (cities and counties) from imposing any restrictions and regulations on them.
People fear that data centers will make electricity and water less available and more expensive and hurt the environment. Fayette County seems a logical place to locate data centers and large commercial projects since it is near Houston, Austin and San Antonio.
County Commissioners Courts
The Fayette County Record (6-2-26) reported that the Commissioners Court discussed the ability of the County to adopt commercial development regulations at its May 28 meeting. The Commissioners asked the County Attorney’s Office and Flood Plain Management Office “to research any available options for regulating largescale developments” and report back at a future meeting.
Texas Tribune ( https:// www.texastribune.org) reported on June 5 that the Hill County Commissioners Court (Hillsboro) adopted a moratorium on data centers in May but rescinded it at a special meeting on June 4th and replaced it with a “checklist” ( https://www. co.hill.tx.us/page/hill.public. notices) for data centers. Hill County was sued in federal court for $100 million on May 27 by RCM Hill, LLC, which had bought rights to purchase 800 acres to build a data center and claimed the moratorium made its contract worthless. It is questionable if even a mandatory “checklist” for data centers would be legal under current Texas law.
Groundwater Conservation Districts In Texas, water use can be regulated by river authorities (like the LCRA) and by groundwater conservation districts (special governmental units with directors elected by the public). Not every Texas county has a groundwater conservation district (GCD). Fortunately, Fayette County does. A small portion of your property taxes go to the Fayette GCD ( www.fayettecountygroundwater. com). The Texas Water Development Board ( www. twdb.texas.gov) says there are 98 GCDs that cover 70% of the state. Sixty are single-county GCDs. GCDs are established by the Legislature or the Texas Commission on Environmental Quality (TCEQ). The Fayette County GCD was established in 2001 by the Legislature. David Van Dresar has been its General Manager since 2006.
Van Dresar briefed the County Judge and Commissioners at a meeting in February this year and told them that AI data center companies would probably not be interested in locating in Fayette County presently because the County’s underground water supply (aquifer) is not sufficient for their purposes. (FCR 3-31-26) On May 28, Van Dresar again briefed the Commissioners, telling them that FCGCD had adopted a new rule for large scale groundwater pumping projects that would apply to commercial well fields producing over 5,000 acre-feet of groundwater (1.629 billion gallons) a year and that if a developer or urban municipal water supply company wanted to operate a large well field, the operator would have to install monitoring wells around the field perimeter. Van Dresar said the County does not now have any large well fields and does not expect any “in the near future.” (FCR 6-5-26) This is very good news for County residents. The FCGCD should be commended for the work it does, as should be the Commissioners for asking for these briefings at its public meetings and the FCR for reporting on it.
Tech Companies – Data Centers
Van Dresar also informed the Commissioners in February that new technologies are being developed to lessen water needed by AI data centers. (FCR 3-31-26) Texas Tribune has reported these technologies include “evaporative cooling” and “closed loop systems” that need a lot of water in the beginning but reuse it. ( www.texastribune. org 6-8-26) The State does not now require use of any water saving technology by AI data centers. Datacentermap. com currently lists 468 data centers in Texas. See map at https://www.datacentermap. com/usa/texas/ austin/ Texas Tribune reported on June 8 that there are at least 248 more data centers planned in Texas: 86 in North Texas, 56 in Central Texas and 45 in West Texas. ( www.texastribune.org 6-8-26) AI data centers vary in size, but they all use a lot of water. A mid-sized data center uses as much water as a small city. Larger ones can use up to 5 million gallons of water every day – enough for a city of 50,000 people. (Lincoln Institute of Land Policy www.lincolninst. edu 10-17-25) The EPA says the average person uses about 82 gallons of water per day. A city of 5,000 people uses about 410,000 gallons per day.
Big tech companies will likely find ways to reuse and reduce the amount of water they need or find water sources other than freshwater wells and surface water for data centers. New technologies that require less water will enable data centers to locate even where large water resources do not exist or are denied to them.
Oil Companies – Produced Water
Like big tech companies, big oil companies are always busy trying to figure out how to make more money – including from wastewater that is produced from drilling oil and gas wells. Texas oil and gas wells generate more than 12 billion barrels of wastewater annually. (A barrel is 42 gallons. You can do the math.) (The Hill https:// thehill.com/ 3-15-25) “Produced water” is defined under Section 122.001(2) of the Texas Natural Resource Code as “fluid oil and gas waste.” This stuff is awful – full of salt, heavy metals, naturally occurring radioactive material and who knows what. You would probably not want to get closer than about 25 yards to a barrel of it.
Produced water has always been a problem for oil companies because of the volume and the toxicity. Most of the produced water is put in deep disposal wells – wells that have quit producing oil and gas. Some of it is used later for fracking new wells – pumped into the ground under pressure to crack rock strata to release oil and gas. Oil companies must get permits for disposal wells from the Texas Railroad Commission. www.rrc.texas.gov/ about-us/faqs
Oil companies now have come up with the idea that if they could somehow treat produced water to make it less dangerous, they could maybe sell it. American Oil & Gas Reporter, Feb. 2026 https://www. aogr.com/magazine. The U. S. Bureau of Land Management has directed field offices to help oil and gas companies identify new uses for “produced water” instead of underground injection and the U.S. Environmental Protection Agency is developing regulations to make it easier for companies to treat and reuse produced water. Shumaker Advisors www. shumaker.com/insight 3-13-26 The Texas Commission on Environmental Quality (TCEQ) is working on a permit process for commercial-scale produced water treatment and discharge. Davis-Graham https://davisgraham. com/news-events/
3-27-26
Use of Produced Water About 55% of the produced water from the Permian Basin (a huge part of West Texas) is recycled for fracking use, which is the simplest and cheapest form of reuse. The rest is pumped into deep underground formations. Doing this over decades has “raised formation pressures, triggered seismicity concerns, and prompted regulatory restrictions that increasingly limit disposal capacity in core producing areas.” Treating produced water for fracking reuse costs $0.75 to $1.25 per barrel. Treatment to agricultural quality would cost $2 to $4 per barrel. https://davisgraham.com/ news-events/u-s-produced-water- the-emerging-value-chainreshaping- energy-water-andcritical- minerals/ Who else would use treated produced water? Currently, treating it enough to use for agriculture is not practical (too toxic/too expensive) but it could be used for industrial purposes – specifically, possibly for cooling in data centers. How would you get produced water from the oil field disposal wells to treatment plants and then to data center locations? Lots of trucks. Or pipelines. Probably pipelines using big diameter, high volume pipes buried a few feet underground, running all over the state and crossing rivers, creeks, drainage ditches, flood plains and farmland. What would treatment plants for produced water look like and where would they be located? Would produce water operations get tax breaks from the State?
The Texas Legislature started looking at what to do with and about produced water in 2021 and regulating data centers in 2025.
...TO BE CONTINUED