Gov. Abbott hits the Pause Button on Data Centers

The investment in Artificial Intelligence (AI) data centers and their associated infrastructure is the biggest economic undertaking in U.S. history.  It dwarfs every other construction project we have ever attempted.

Annual Infrastructure Spending as % of GDP*

AI Data Centers  3.63% 2025 – 2032 est.

Telecom   1.1%  1996 - 2003

Highways   1.1%  1956 – 1973

Electrification  0.5%  1905 – 1925

Railroads   2.2%  1870 – 1890

Canals   0.7%  1836 - 1841

_{*Source: Wall Street Journal}

The investment is creating hundreds of thousands of new jobs.  But… once the new construction runs its course (projected to be in 2032), the number of jobs created drops.  For example, at the Meta (Facebook, Instagram) data center in El Paso, the construction employs 4000 workers.  After the center opens, there will be 300 permanent positions.

A year ago, Gov. Abbott welcomed data centers and the money they would bring to Texas. A goal of the Trump administration is to make the U.S. the world's dominant AI power.  The data centers are a critical component of that plan. Trump encouraged Gov. Abbott to help make it happen, and he did.

Texas was expected to be the favorite location for data centers because of the availability of natural gas and the easy permitting process.

The data centers will run on natural gas turbines. Typically, approving a big power plant might require public hearings and months of detailed vetting, but under Gov. Abbott’s leadership, the Texas environmental regulators signed off in days

But time marches on, and now it’s an election year. Gov. Abbott now faces an unexpectedly tight race for reelection against State Representative Gina Hinojosa.  In this spirited campaign, the popular backlash against data centers has become an issue for Governor Abbott.  

So... last week Gov. Abbott hit the pause button on new data centers in Texas. Data centers and the money they generate are no longer the top priority. For now, the November election is Gov. Abbott’s priority.

Gov. Abbott’s decision to pause data center construction has national implications. Texas is leading the way in data center construction. One of Texas's appeals is its availability of natural gas. Utah and the Appalachian states, with their natural gas reserves and relaxed regulations, have also welcomed data centers.  

Data center companies have responded to public resistance. The chant “Bring Your Own Power” has died out, and their concerns have shifted to water use and noise. And now a concern that comes up more frequently is air pollution from the gas generators.

The Town Hall Meeting

Ken and I attended a town hall meeting in Sulphur Springs sponsored by CyrusOne, the Company that has acquired the rights to the proposed data center site in Sulphur Springs. (Any meeting that includes chicken nuggets from Chick-fil-A can’t be all bad.)  

CyrusOne is a Dallas company that builds and operates data centers. They currently manage 61 data centers, so they have a lot of experience and know what they are doing. I was favorably impressed with the management team.

About 200-300 people were in the room, and the meeting lasted 2 hours. The format was a short slide presentation by CyrusOne followed by a long Q&A. The audience was mostly older people pleading with the Company not to disrupt the serene, comfortable, rural life that they love.

Here are my takeaways on the usual data center issues.  

• Water is not a problem.  
• Noise is not a problem.  
• Power is still an outstanding issue.    

The choice on power is to:

1.  Rely on power from the grid with lots of backup power from diesel-powered generators to fill in the gaps when needed, or      

2.  Build a natural gas power plant that would provide all the power they need and feed extra electricity into the grid when the data center doesn’t need it.  

They haven’t decided on power yet.  If they go with the natural gas power plant, air pollution might be an issue, but that didn’t come up in the meeting.  

CyrusOne said it will take another 9 months to finish its due diligence and develop a detailed plan.  At that point, they will be in a position to make a firm commitment to build the data center. Until then, a data center in Sulphur Springs is not a certainty.

What does that mean for MV?  

The Sulphur Springs data center has the potential to make a big impact on our corner of Texas. The property taxes that would be generated could double the current property tax revenue of the City of Sulphur Springs. That money would enable Sulphur Springs to fund projects that can only be dreams for other communities.

The spillover to Mount Vernon would mean:

• more families living here, largely because of MVISD,
• more students in our School, and
• more customers for our businesses.

But…for now…Gov. Abbott has put all of that on hold.  

​What happens next?

Nothing until after Tuesday, November 3.  But… stay tuned… the decisions made after the election will be very important for our area.