Produced Water, Artificial Intelligence Data Centers & The Legislature - PART II
State government (the Legislature, state officials and agencies) in Texas have started, in the last few years, to try to “get a handle on” the impact of new technologies - data centers, produced water, solar and wind projects – and have kept regulatory control and planning at the state, not the local level (counties, cities, special districts.)
- The Texas Legislature
2013 – The Legislature passed House Bill 1223 which significantly reduced or eliminated state sales tax (6.25%) paid by data centers with more than 100,000 square feet of space and have at least a $200 million investment. The law provides a sales tax exemption for electricity consumption and equipment purchases, such as servers, generators, storage devices, software and other systems necessary for data center operations. https:// comptroller.texas.gov/taxes/ data-centers/
2021 - The Legislature passed Senate Bill 601 creating the Texas Produced Water Consortium located at Texas Tech to study whether and how produced water can be safely reused. It includes scientists, engineers, regulators, nonprofits, and industry representatives who are “to evaluate treatment technologies, environmental and health risks, economic feasibility, and appropriate regulatory policy.”
https://www.sierraclub.org/ texas/blog/2026/04/producedwater- texas-use
2023 – The Legislature passed House Bill 2127, entitled the Texas Regulatory Consistency Act (Tex. Loc. Gov’t. Code § 51.002). This law prohibits Texas cities and counties from adopting regulations on commercial activities over which the State has authority. Data centers and wind / solar facilities are subject to PUC and ERCOT rules. Oil company drilling and pipelines are subject to Texas Railroad Commission rules. Surface mining is regulated by TCEQ.
• HB 2127 was authored and filed by Representative Dustin Burrows of Lubbock, who is now the Speaker of the Texas House of Representatives. Senator Lois Kolkhorst voted in favor of the bill. Governor Abbott signed the bill into law on June 14, 2023. It went into effect on September 1, 2023. https://capitol.texas.gov/ billlookup/billnumber.aspx • On August 18, 2023, the Texas Attorney General’s Office issued AG Opinion No. AC-0003 that said Texas law does not allow counties to adopt and enforce moratoriums on solar farms. This opinion would likely apply to regulation / restrictions by counties, cities and GCDs on data centers and oil company pipelines and pipeline company transmission lines for produced water.
2025 - The Legislature passed House Bill 49 which gave immunity from liability for personal injury or property damage to companies that produce, treat, transport or use produced water unless the injury or damage resulted from gross negligence, regulatory non-compliance, or intentional wrongful acts. Governor Abbott signed HB 49 and it went into effect on September 1, 2025. Senator Kolkhorst voted for passage of HB 49.
Senate Bill 6 was passed and enacts regulatory changes for data centers such as new requirements for cost contribution for grid connection, disclosure of development plans, and operational flexibility during high grid usage. (Jackson Walker 6-15-25 www.jw.com/ news/insights-senate-bill-6texas-electric-regulations/) Senate Bill 819 was filed by Senator Lois Kolkhorst to authorize the Public Utility Commission “to put guidelines in place for new wind and solar installations to help balance the need for these structures with the state’s responsibility to protect nature.” It passed in the Texas Senate but not the House. Opponents said SB 819 would undermine private property rights and would only regulate development of wind / solar facilities but not oil and gas operations. (Conservative Energy Network https:// conservativeenergynetwork. org/sb-819-a-direct-threat-totexas- energy-future/) - The Texas Supreme Court In 2012, in a case named Edwards Aquifer Authority vs. Day, the Texas Supreme Court decided that landowners own groundwater under their property but that groundwater conservation districts have authority to control production from underground aquifers. On June 27, 2025, the Texas Supreme Court issued its opinion in the case of Cactus Water Services, LLC vs. COG Operating, LLC (2025). It said that (1) without a written lease provision to the contrary, a “standard” oil and gas lease gives the right to the “produced water” from oil and gas drilling to the oil company and (2) produced water is oiland- gas waste, not “water” belonging to the surface owner.
Almost from the beginning of the State, the law was that a Texas landowner owned everything in the ground under his or her land down to the molten core of the earth and could basically pump all the water that he or she wanted from that land. This is called “the rule of capture.” Oil companies now have the right to take the produced water. Granted, a typical horizontal oil/gas well is maybe 13 to 15 thousand feet deep. Water wells that landowners, cities and businesses use are usually nowhere near that depth. Oil companies say that landowners, cities and businesses would not ever use water that is 13-15 thousand feet deep or be able to get to it and “we produced it, so it should be ours.”
- The 2027 Texas Legislature The 2027 Texas Legislative (90th) regular session begins on January 12, 2027, and ends on May 31. Nov. 9, 2026 is the first day legislators and legislators-elect can file bills to enact new laws or amend the existing ones.
Fayette County is represented in the Texas Senate by Senator Lois Kolkhorst (2000 S. Market St., No. 208, Brenham, TX 77833; Tel.: (512) 463-0118, Email: Lois. Kolkhorst@senate.texas. gov). Senator Kolkhorst is a member of the Senate Water, Agriculture and Rural Affairs Committee.
In the March 3 primary, Dennis Geesaman of Flatonia defeated State Rep. Stan Kitzman for the Texas House district that includes Fayette County, but he will not be the official Representative-elect until he wins in the general election in November. The contact information found online for Mr. Geesaman is for his campaign: P. O. Box 913, Smithville, Texas 78957.
Campaign Finance Reports are required by Texas law and are filed by political campaigns with the Texas Ethics Commission. These reports can be viewed at: https:// www.ethics.state.tx.us/search/ cf/SimpleSearch.php According to Transparencyusa.org, the biggest contributor ($5.4 mil) to Texans United for a Conservative Majority PAC is Timothy M. Dunn, a West Texas billionaire oil man.
www.transparencyusa.org/tx/ committee/texans-united-fora- conservative-majority-pac-00088252-gpac/payees.
Transparencyusa.org lists campaign contributions by Texans United for a Conservative Majority PAC to statewide office candidates, including Lt. Gov. Dan Patrick ($350,000) and Bo French ($100,000), the Republican candidate for the Texas Railroad Commission, and to all candidates for the Legislature. You can see how much money that candidates received and from whom on these sites.
- The Lieutenant Governor
On March 27, 2026, Lt. Governor Dan Patrick ( https:// www.ltgov.texas.gov/) issued a list of priorities for the Texas Senate in 2027 that included the following:
• Recommend ways to: (1) balance economic development benefits of growth against the impacts on landowners, private property rights, water infrastructure, and community integrity and (2) ensure industrial growth does not compromise the affordability of water for Texas residents and agricultural producers and Texans benefit from data center investment
• Study: (1) the adequacy of current statutory, regulatory, and infrastructure frameworks to meet the rapidly increasing demand from large electric loads, such as data centers; and (2) the cost and consequences of the sales tax exemption provided to data centers and make recommendations providing safeguards.
• Enact legislation to improve, enhance, or complete implementation of legislation from the 2025 legislative session including:
• Senate Bill 1145 - authority of the Texas Commission on Environmental Quality to issue permits for the land application of water produced from certain mining and oil and gas extraction operations;
• Senate Bill 1806 - inspection, purchase, storage, transportation, and disposal of petroleum oil and gas waste; • House Bill 48 - treatment and beneficial use of fluid oil and gas waste and related material, including a limitation on liability for that treatment or use.
This doesn’t suggest that tax breaks for data centers will end. It sounds like support for using produced water.
- The Governor
On June 10, Gov. Abbott ( https://gov.texas.gov/news) said he wants legislation and regulations enacted in 2027 to require:
• data centers to pay for their own electric infrastructure costs;
• data centers add to Texas’ electric capacity;
• all new data centers use water-efficient technologies such as closed loop cooling systems;
• data centers annually report electricity and water usage; and
• data centers reduce impacts on local communities by implementing best practices such as setbacks, noisereduction technology.
This does not say anything about giving local government officials any authority to control growth. Nor does it say anything about impact of commercial development projects on farmland or wildlife habitat. And even if the Legislature and state agencies require new data centers to “use water-efficient technologies,” there are already several hundred “old” AI data centers already operating in Texas (and likely expanding right now.) “Water-efficient technologies” for new data centers just enables them to be located in areas that don’t have big aquifers (like Fayette County).
- The Texas Republican Party - Legislative Priorities Committee At the Texas Republican Party State Convention on June 11th, the Legislative Priorities Committee, in its Legislative Priorities List for the 2027 Legislature, included: Regulate AI Data Centers: ...
- Grant cities and counties final authority over zoning, land development, and comprehensive planning decisions, including the approval and location of hyper-scale data centers. . . .
- Prohibit all forms of taxpayer funded incentives, property tax abatements, corporate welfare, or economic development packages for data centers.
Regulating data centers is listed at the bottom of the Legislative Priorities List.
https://www.houstonpublicmedia. org HB 1223 was passed by the Legislature in 2013 and is still giving tax breaks to data centers. Texas Tribune reported (4-8-26) that the State Comptroller has said, due to the data center exemption from paying state sales tax, lost revenue to the State has been $1.4 billion since 2014 and will be $1.3 billion in 2026 and $1.6 billion in 2027.
Stakeholders
Economic growth in Texas (rural counties) is inevitable. Big tech companies and oil companies are not going to “play nice” and take care of us. What the Legislature will do next year is anybody’s guess at this point. We can expect that lobbyists and executives of tech companies and oil and gas industry companies will be lining up in November to push legislators to pass laws that will minimize regulation and maximize profit.
County and city officials and people living in rural counties, as well as the Texas Association of Counties, the Texas Municipal League and Texas Farm Bureau, all also need to get active and make themselves heard, individually and collectively. That needs to start now. American Farmland Trust estimates that about 730,000 acres of farm and ranchland is now being lost in the U. S. each year to poorly planned development.
https://farmland.org/
The Legislature should enact laws that provide enough administrative authority, staffing and funding for state agencies to ensure they can effectively oversee largescale commercial development in the state to protect the health of Texans and the Texas environment. The Legislature must give rural county and city officials greater ability to participate in regulation of all types of large industrial and non-agricultural growth. Rural residents need to be given notice of what is being proposed for their communities and adequate opportunity to have input into the process.
State officials and legislators should have been working much more aggressively long before now on the regulation of AI data centers, on use of produced water and disposal wells and on all large-scale, non-agricultural development (produced water treatment plants/ pipelines, wind /solar projects, surface mining, housing developments, etc.) in rural areas. They now need to catch up and work to protect their constituents from loss of agricultural land and water and natural resources, from escalating costs of electricity and water and from “urbanization” of rural areas. That should now be “the number one” priority for legislators and state officials in the upcoming legislative session.
We need to tell them what we want and closely watch what they do. The stakes are very high and time is running out before there is irreversible damage to our natural resources and to rural communities.
The writer lives in Fort Worth & Ellinger.