Bill Text: TX SB296 | 2027-2028 | 90th Legislature Regular Session | Introduced

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Bill Title: Relating to the siting, construction, permitting, and operation of certain data centers; requiring local option elections; imposing a temporary moratorium; establishing an annual payments to county residents; repealing certain tax exemptions; providing civil penalties.

Sponsorship: Partisan Bill (Democrat 1)

Status: (Introduced) 2026-11-09 - Filed [SB296 Detail]

Download: Texas-2027-SB296-Introduced.html

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By: Gutierrez S.B. No. 296

A BILL TO BE ENTITLED
AN ACT
relating to the siting, construction, permitting, and operation of
certain data centers; requiring local option elections; imposing a
temporary moratorium; establishing an annual payments to county
residents; repealing certain tax exemptions; providing civil
penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle B, Title 5, Health and Safety Code, is
amended by adding Chapter 398 to read as follows:
CHAPTER 398. DATA CENTER SITING, COMMUNITY CONSENT, AND PUBLIC
BENEFIT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 398.001. DEFINITIONS. In this chapter:
(1) "Artificial intelligence compute occupant" means
a person that owns, leases, controls, or uses computing equipment
at a covered data center primarily to train, develop, fine-tune, or
operate a generative or other machine-learning model for commercial
consideration. The term includes a person receiving dedicated
computing capacity through a contract with the owner or operator of
the center but does not include a retail customer making ordinary,
incidental use of an artificial intelligence service.
(2) "Commission" means the Texas Commission on
Environmental Quality.
(3) "Covered data center" means one or more buildings,
facilities, or installations under common ownership or control, or
designed or operated as an integrated project, that contain or are
proposed to contain computing equipment used for processing,
storage, distribution of data, or artificial intelligence, and
that:
(A) have a designed aggregate maximum electric
demand of 20 megawatts or more; or
(B) contain or are proposed to contain 50,000
square feet or more of space primarily devoted to the equipment
described by this subdivision.
(4) "Developer" includes an owner, operator,
applicant, affiliate, successor, or person acting in concert to
construct, expand, occupy, or operate a covered data center.
(5) "Local approval" means voter approval under
Subchapter C.
(6) "Project" includes a new covered data center or
expansion that increases a center's maximum electric demand by 10
megawatts or more or gross equipment floor area by 25,000 square
feet or more.
(7) "Host county" means the county in which a covered
data center is located. If a covered data center occupies land in
more than one county, each county is a host county and payments
under Subchapter E must be allocated among the host counties in
proportion to the maximum electric demand of the equipment located
in each county.
(8) "Eligible resident" means a natural person whose
principal residence is in a host county for at least 183 days of the
calendar year for which a stipend is paid. The term includes a minor
child; a payment to a minor shall be made to the child's parent or
legal guardian on behalf of the child. Ownership of real property,
citizenship status, and income may not be used as conditions of
eligibility.
Sec. 398.002. AGGREGATION; EVASION PROHIBITED. (a) For
purposes of this chapter, adjacent or nearby facilities within two
miles that share a common developer, financing, utility
interconnection, water supply, or operational plan are presumed to
be one covered data center.
(b) A person may not divide, phase, lease, convey, or
separately permit a project for the purpose of avoiding this
chapter. The commission shall consider reasonably foreseeable
future phases in determining applicability.
Sec. 398.003. APPLICABILITY; OTHER LAW. (a) This chapter
applies to projects proposed after the effective date of the Act
adding this chapter and to covered projects that have not commenced
substantial physical construction on that date.
(b) This chapter does not dispense with any permit,
approval, or requirement imposed by federal or state law, a
groundwater conservation district, or a political subdivision.
(c) A permit, interconnection agreement, zoning approval,
or incentive agreement does not substitute for approval required by
this chapter.
SUBCHAPTER B. TEMPORARY MORATORIUM
Sec. 398.051. TWO-YEAR MORATORIUM. (a) Before the second
anniversary of the effective date of the Act adding this chapter, a
state agency or political subdivision may not issue a permit,
approval, authorization, or certificate for the construction or
expansion of a project, and a utility may not energize a new or
expanded electric service connection for a project.
(b) A person may not commence or continue substantial
physical construction of a project during the period prescribed by
Subsection (a), except work necessary to address an imminent threat
to life, health, or the environment or to maintain a facility in
lawful operation on the effective date of the Act adding this
chapter.
(c) An application submitted during the moratorium may be
received and reviewed, but no approval may be issued and no vested
right to approval arises from its submission or review.
Sec. 398.052. EXISTING OPERATIONS. This subchapter does
not prohibit continued operation at the lawfully authorized demand
and floor area of a covered data center in commercial operation on
the effective date of the Act adding this chapter. An expansion
remains subject to Section 398.051.
SUBCHAPTER C. LOCAL OPTION ELECTION
Sec. 398.101. LOCAL ELECTION REQUIRED. (a) The commission
may not issue a permit under this chapter unless the development of
the project has been approved by a majority of voters voting at a
local option election held under this subchapter.
(b) For a project in an unincorporated area, the county
shall conduct the election among the registered voters of the
county. For a project within a municipality, the municipality
shall conduct an election among its registered voters and the
county shall conduct a separate election among its registered
voters; both elections must approve the project.
(c) If the project crosses municipal or county boundaries,
each affected municipality and county must approve the project by
separate election.
Sec. 398.102. PETITION AND ORDER. (a) A developer seeking
local approval shall file a request with the governing body of each
political subdivision required to hold an election, together with a
project description, projected peak demand, annual water use,
emergency generation capacity, parcel description, and the
disclosure required by Section 398.151.
(b) The governing body shall order an election for the next
uniform election date under Section 41.001, Election Code, for
which the election can lawfully be ordered and administered. The
developer shall reimburse each political subdivision for the
reasonable cost of the election.
Sec. 398.103. BALLOT. The ballot shall be prepared to
permit voting for or against the proposition: "The approval of a
[name of project] data center at [general location], with a
proposed maximum electric demand of [number] megawatts and
projected annual water use of [number] gallons, subject to state
permitting, public disclosure, and annual payments to county
residents."
Sec. 398.104. EFFECT OF REJECTION; MATERIAL CHANGE. (a) A
project rejected at an election may not be submitted for another
election before the second anniversary of that election.
(b) An approval does not authorize a material increase of
more than 10 percent in the demand, water use, or physical footprint
disclosed to voters. A material increase requires another
election.
Sec. 398.105. PUBLIC NOTICE. At least 60 days before the
election, the developer shall provide a plain-language impact
statement on a publicly accessible website and by first-class mail
to residents of the host county. The statement must identify
projected electric and water demand, planned sources of electricity
and water, potential noise, emissions, requested incentives,
expected infrastructure costs, and the proposed annual county
resident stipend and the method for calculating it.
SUBCHAPTER D. STATE DATA CENTER PERMIT
Sec. 398.151. PERMIT REQUIRED. (a) A person may not
construct, expand, or commence operation of a project without a
data center impact permit issued by the commission in addition to
all other approvals required by law.
(b) An application must contain independently verified
studies of:
(1) projected hourly peak and annual electric demand,
required transmission and distribution facilities, and effects on
residential rates and grid reliability;
(2) daily and annual water withdrawals and consumptive
use, drought-stage operation, aquifer and surface-water impacts,
and effects on drinking-water availability;
(3) air emissions from emergency generation and other
sources;
(4) noise at the nearest residence and property
boundary, including low-frequency noise;
(5) cumulative impacts of other existing or proposed
facilities in the same watershed or electric service territory; and
(6) site restoration, emergency response, financial
assurance, and mitigation of adverse effects on surrounding
communities.
Sec. 398.152. INTERAGENCY REVIEW; FINDINGS. (a) Before
issuing a permit, the commission shall obtain written findings from
the Public Utility Commission of Texas concerning electric
reliability, system costs, and compliance with Section 37.0561,
Utilities Code, and from the Texas Water Development Board
concerning water supply and drought impacts.
(b) The commission may issue a permit only if the applicant
establishes by a preponderance of the evidence that:
(1) the project will not materially impair the ability
of local residents to obtain affordable, reliable electricity or
drinking water;
(2) the developer will bear all reasonably
attributable incremental interconnection and utility
infrastructure costs, without shifting those costs to residential
ratepayers;
(3) the project incorporates water-efficient cooling
technology and an enforceable drought curtailment plan;
(4) noise, air emissions, and other nuisance impacts
are minimized through best available practicable mitigation;
(5) required financial assurance and reclamation
plans are sufficient; and
(6) the applicant has obtained local approval and
entered into all agreements required by Subchapter E.
Sec. 398.153. PUBLIC CONTESTED CASE HEARING. (a) The
commission shall provide notice of a complete application to
residents of the host county and to each affected municipality,
county, utility, and groundwater conservation district.
(b) On the request of an affected person, the commission
shall refer the application to the State Office of Administrative
Hearings for a contested case hearing. A resident, property owner,
or political subdivision within the host county is an affected
person for purposes of this section.
(c) The applicant has the burden of proof. The commission
may not issue a permit before findings from the hearing are
considered.
Sec. 398.154. MONITORING; REVIEW. (a) A permit holder
shall meter electric consumption and water withdrawals and
consumption separately for each project and submit quarterly
verified reports to the commission, the Public Utility Commission
of Texas, and the Texas Water Development Board.
(b) Reports, permit applications, compliance records, and
beneficial ownership of a permit holder are public information,
except for specific technical cybersecurity information protected
by other law.
(c) The commission shall review a permit at least once every
five years and may amend, suspend, or revoke the permit for material
noncompliance. A material increase in demand, consumption, or
footprint is a new project subject to Subchapter C.
Sec. 398.155. FINANCIAL ASSURANCE. Before construction,
the developer shall provide a bond or other financial assurance in
an amount determined by the commission sufficient to fund site
reclamation, groundwater remediation if applicable, and the
correction of reasonably foreseeable off-site harms.
SUBCHAPTER E. ANNUAL STIPEND FOR COUNTY RESIDENTS
Sec. 398.201. COUNTY RESIDENT STIPEND FUND. (a) A
developer shall, as a condition of receiving and maintaining a
permit under this chapter, establish an independently audited
county resident stipend fund for each host county. The fund shall
be held in trust solely for payments to eligible residents of that
county under this subchapter.
(b) A fund may not be used for general county operations,
economic development subsidies, tax abatements, or payments to the
developer or an affiliate. The commission shall provide for
independent administration, annual public audits, and disclosure
of the amount received and the amount distributed.
Sec. 398.202. ANNUAL PAYMENT BY DATA CENTER. (a) For each
calendar year during which a covered data center operates, the
developer and operator are jointly and severally liable for an
annual county resident stipend payment in an amount equal to the
greater of:
(1) two percent of gross receipts derived from the
provision of data processing, computing capacity, artificial
intelligence training, inference, data storage, or related
services performed using the covered data center; or
(2) $10,000 multiplied by the number of megawatts of
the covered data center's maximum authorized electric demand.
(b) Gross receipts include amounts received by an affiliate
or person under common control for services attributable to
computing equipment at the covered data center. For computing
capacity used by the developer or an affiliate rather than sold to
an unrelated customer, gross receipts shall include the fair market
value of that computing capacity as determined under rules adopted
by the commission.
(c) The payment is due March 1 for the preceding calendar
year. A partial year of operation is prorated by the number of days
the center operated. The obligation may not be avoided by a lease,
a service agreement, division of a project, or transfer of the
center to an affiliate.
(d) The developer shall file an annual sworn statement of
gross receipts and authorized demand. The commission may audit the
statement and examine records necessary to verify the annual amount
owed.
Sec. 398.203. ANNUAL STIPEND TO RESIDENTS. (a) Not later
than June 1 of each year, the administrator of the fund shall
distribute the money received under Section 398.202, less
reasonable audited administrative expenses not exceeding two
percent of the annual payment, in equal per-person amounts to all
eligible residents of the host county.
(b) The administrator shall provide a reasonably accessible
method for residents to establish eligibility, including an
alternative to electronic verification, and may rely on records
maintained by a state agency, school district, or county subject to
applicable confidentiality protections.
(c) A stipend may not depend on ownership of a homestead or
other property, income, employment, or whether the recipient lives
within a specified distance of the data center. A resident is
eligible only once for the same calendar year with respect to each
host county.
(d) Unclaimed payments shall be held for three years and
then added to the amount available for distribution in that county
for the next payment year. The administrator shall publish the
annual payment obligation, total eligible residents, and amount of
the stipend per person.
Sec. 398.204. PAYMENT IN ADDITION TO OTHER OBLIGATIONS. A
payment under this subchapter is in addition to all taxes, utility
charges, mitigation, and other obligations under law. The payment
may not be credited against or used to reduce an obligation
otherwise imposed on the developer and may not be collected through
a separately identified charge on residential electricity or water
bills.
Sec. 398.205. ENFORCEMENT. (a) The attorney general, the
commission, the county, or an eligible resident may bring an action
for an injunction, an accounting, or the collection of amounts due
under this subchapter.
(b) A court may award reasonable attorney's fees and costs
to a prevailing claimant. Remedies under this section are
cumulative of other remedies provided by law.
SUBCHAPTER F. ENFORCEMENT
Sec. 398.251. CIVIL PENALTY; INJUNCTION. (a) A person who
constructs, expands, or operates a project in violation of this
chapter is liable to the state for a civil penalty not to exceed
$25,000 for each day of violation. Each day constitutes a separate
violation.
(b) The attorney general, on request of the commission or an
affected political subdivision, may bring an action for an
injunction and civil penalties. A court may order cessation of
unauthorized construction or operation.
Sec. 398.252. RULES. The commission, in consultation with
the Public Utility Commission of Texas and the Texas Water
Development Board, shall adopt rules to implement this chapter.
Rules may not reduce the requirements or eligibility thresholds
prescribed by this chapter.
SECTION 2. Sections 151.317(a), (b), and (d), Tax Code, are
amended to read as follows:
(a) Subject to Section [Sections] 151.1551[, 151.359, and
151.3595] and Subsection (d) of this section, gas and electricity
are exempted from the taxes imposed by this chapter when sold for:
(1) residential use;
(2) use in powering equipment exempt under Section
151.318 or 151.3185 by a person processing tangible personal
property for sale as tangible personal property, other than
preparation or storage of prepared food described by Section
151.314(c-2);
(3) use in lighting, cooling, and heating in the
manufacturing area during the actual manufacturing or processing of
tangible personal property for sale as tangible personal property,
other than preparation or storage of prepared food described by
Section 151.314(c-2);
(4) use directly in exploring for, producing, or
transporting, a material extracted from the earth;
(5) use in agriculture, including dairy or poultry
operations and pumping for farm or ranch irrigation;
(6) use directly in electrical processes, such as
electroplating, electrolysis, and cathodic protection;
(7) use directly in the off-wing processing, overhaul,
or repair of a jet turbine engine or its parts for a certificated or
licensed carrier of persons or property;
(8) use directly in providing, under contracts with or
on behalf of the United States government or foreign governments,
defense or national security-related electronics, classified
intelligence data processing and handling systems, or
defense-related platform modifications or upgrades;
(9) [use directly by a data center or large data center
project that is certified by the comptroller as a qualifying data
center under Section 151.359 or a qualifying large data center
project under Section 151.3595 in the processing, storage, and
distribution of data;
[(10)] a direct or indirect use, consumption, or loss
of electricity by an electric utility engaged in the purchase of
electricity for resale; or
(10) [(11)] use in timber operations, including
pumping for irrigation of timberland.
(b) The sale, production, distribution, lease, or rental
of, and the use, storage, or other consumption in this state of, gas
and electricity sold for the uses listed in Subsection (a), are
exempted from the taxes imposed by a municipality under Chapter 321
except as provided by Section [Sections 151.359(j) and] 321.105.
(d) To qualify for the exemptions in Subsections (a)(2)-(8)
[(a)(2)-(9)], the gas or electricity must be sold to the person
using the gas or electricity in the exempt manner. For purposes of
this subsection, the use of gas or electricity in an exempt manner
by an independent contractor engaged by the purchaser of the gas or
electricity to perform one or more of the exempt activities
identified in Subsections (a)(2)-(8) [(a)(2)-(9)] is considered
use by the purchaser of the gas or electricity.
SECTION 3. Section 321.208, Tax Code, is amended to read as
follows:
Sec. 321.208. STATE EXEMPTIONS APPLICABLE. The exemptions
provided by Subchapter H, Chapter 151, apply to the taxes
authorized by this chapter, except as provided by Section [Sections
151.359(j) and] 151.317(b).
SECTION 4. Section 323.207, Tax Code, is amended to read as
follows:
Sec. 323.207. STATE EXEMPTIONS APPLICABLE. The exemptions
provided by Subchapter H, Chapter 151, apply to the taxes
authorized by this chapter, except as provided by Section [Sections
151.359(j) and] 151.317(b).
SECTION 5. The following provisions of the Tax Code are
repealed:
(1) Section 151.359;
(2) Section 151.3595; and
(3) Section 313.009.
SECTION 6. (a) An exemption under Section 151.359 or
151.3595, Tax Code, to which a person is entitled on the effective
date of this Act expires on that date. No person is entitled to a
refund or credit based on property purchased on or after that date
under either repealed section.
(b) An application for certification as a qualifying data
center or qualifying large data center project pending on the
effective date of this Act is considered denied and may not be
approved by the comptroller.
SECTION 7. (a) The Texas Commission on Environmental
Quality, Public Utility Commission of Texas, and Texas Water
Development Board shall adopt initial rules under Chapter 398,
Health and Safety Code, as added by this Act, not later than March
1, 2028.
(b) The moratorium imposed by Section 398.051, Health and
Safety Code, as added by this Act, terminates on the second
anniversary of the effective date of this Act, but all other
provisions of Chapter 398 remain effective after that date.
(c) The requirements of Subchapter E, Chapter 398, Health
and Safety Code, apply only to projects for which a permit is first
issued under that chapter after the effective date of this Act.
SECTION 8. If any provision of this Act or its application
to a person or circumstance is held invalid, the invalidity does not
affect other provisions or applications that can be given effect
without the invalid provision, and to this end the provisions of
this Act are severable.
SECTION 9. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2027.