James Talarico calls for tighter regulations on data center development

By Kayla Guo, The Texas Tribune
July 22, 2026

Democratic U.S. Senate nominee James Talarico on Wednesday called for a broad set of tighter regulations on data centers in Texas, seizing on what has become a potential political liability for Republicans who until recently had embraced the explosion of artificial intelligence-driven development in the state.

“Texas should be a leader when it comes to innovation and technology, but that only works if Texans get a say and get a share of that economic growth — and that’s not what’s happening right now,” Talarico said at a news conference in Austin where he rolled out his plan. “We’re often told in our politics that we have to choose between policies that are pro-growth and pro-people. I reject that choice, and the plan that we’re outlining today to hold data centers accountable, I think, strikes a balance between welcoming those investments while also protecting working people.”

Talarico’s proposals include:

• setting minimum federal requirements to protect the grid, environment, jobs and transparency related to new data center development, “preventing a race to the bottom for communities competing to recruit data centers;”
• ending “sweetheart tax deals for big tech companies” by repealing the state’s data center sales tax exemption;
• ensuring large energy users pay for their own infrastructure and grid interconnection costs;
• requiring data centers use closed-loop water systems that reuse a fixed amount of water;  
• granting local communities the authority to approve and reject data center development in their towns;
• releasing government records detailing individual tax break data for data center facilities in Texas.

Talarico is among several statewide Democratic nominees taking aim at data centers as the party looks to seize on Texas voters’ discontent over the industry’s rapid expansion. Echoing the message of his statewide counterparts down the ballot, Talarico on Wednesday framed the proliferation as a product of corporate greed and Republican leadership more sympathetic to big business than everyday people, pointing to the facilities as a culprit for high everyday costs under the Trump administration. 

“Data centers are jacking up utility bills across the state of Texas,” Talarico said. “Billionaire-backed politicians are giving sweetheart tax deals to giant AI companies and then sticking us with the bill.”

State Rep. Gina Hinojosa, the Democratic candidate for governor, unveiled her own plan Thursday after she visited Amarillo and Lubbock over the weekend on a campaign swing focused on rural communities’ concerns about data centers. She has attacked Gov. Greg Abbott for campaign contributions he’s accepted from donors with ties to data centers and blamed him for state policies, from Texas’ light regulatory touch to its tax incentives for data centers, that have contributed to the initial buildup of the facilities. Lawmakers expanded the sales tax exemption in 2015, during Abbott’s first term, creating a new tax break category for larger data center projects.

“That’s why there is this mad rush to start a data center in Texas — it is like the gold rush,” Hinojosa said during a virtual news conference Thursday. “Greg Abbott talks a big game about what he will do after the election. The thing is, he has the power to do it today.”

Hinojosa called on Abbott to sign an emergency executive order imposing a moratorium on data centers until the Legislature reconvenes in January, noting the governor could also call a special legislative session on the issue at any point before 2027. 

Her proposals also included requiring data centers to hire union workers, empowering local officials to negotiate with developers or reject new projects, barring data centers from using non-disclosure agreements to conceal their water and energy usage, and shielding consumers from data center-driven utility hikes.

“What is happening with data centers is an example of the one fight of our time, and it is the fight to decide: Is this going to be a Texas that is by and for the people, or is this the billionaires’ world and we just live here?” Hinojosa said.

At Hinojosa’s news conference, residents of Granbury, Lubbock and El Paso spoke of data centers and crypto-mining facilities that had popped up in their neighborhoods, describing a lack of local say and transparency surrounding the projects’ development and the tax breaks they received.

“Since when do billionaires deserve charity?” Tom Weeks of Granbury said. “We’re being drowned in our taxes and they’re getting all these breaks. I just think that we’re getting the middle finger is what we’re getting, and I’m at a point where I want to snap that middle finger off.”

The Texas Tribune reported in April that the state is poised to lose $3.2 billion in tax revenue over the next two years because of the data center sales tax exemption first approved by lawmakers in 2013, when the facilities were smaller and used fewer resources. Local officials have asked the state to give them more authority to regulate data center development in their communities. Tracking data center growth in Texas is also difficult, as the state does not log new data center construction, and information about their location and energy use has not been made public.

A spokesperson for Abbott’s campaign did not respond to a request for comment. Shortly before Hinojosa’s news conference, Abbott’s office announced that a data center project near Cedar Creek Lake in East Texas had withdrawn its proposal “after not meeting Gov. Abbott’s standards.”

“Texas requires companies to put communities first, protect our natural resources and power grid, and respect the quality of life of our residents,” Abbott said. “Diode did the right thing by withdrawing their project. If other data center developments refuse to meet these standards, I expect them to do the same.”

The three-term governor, who is running for a fourth, initially gave his full-throated support for the industry, declaring in November that Texas would become the “epicenter of AI development” while announcing Google had made a $40 billion investment in cloud and artificial intelligence infrastructure in the state. He has since projected greater concern about how the industry’s development is affecting nearby residents, and last month he proposed a sweeping regulatory scheme that calls for repealing the sales tax exemption and requiring new facilities to add power generation to the state’s grid, among other planks.

Talarico’s GOP opponent, Attorney General Ken Paxton, has been quieter on the issue. A spokesperson for Paxton’s campaign did not provide comment Wednesday.

Recent public polling found that a majority of Texans oppose the construction of data centers in their community, with opposition strongest in rural communities, where data centers are more likely to be built and which have historically voted red.

Last week, state Rep. Vikki Goodwin, state Sen. Sarah Eckhardt and Clayton Tucker — the Democratic nominees for lieutenant governor, comptroller and agriculture commissioner, respectively — backed a moratorium on data center development.

“This isn’t about being anti-technology, it’s not about being anti-AI,” Tucker, who has made reining in data center development central to his campaign, said. “It’s about who controls that AI. Because right now, it’s not us. It is a few greedy folks from Wall Street, from Silicon Valley, some of them not even based in the United States.”

Talarico did not call for a moratorium, saying he wanted to support innovation and technology while ensuring local communities had a say in projects looking to build near them. Projects that did not meet “basic guardrails,” he said, should not move ahead.

His plan overlaps significantly with Abbott’s proposals, with both looking to kill the sales tax exemption and require data centers to cover grid interconnection costs and use closed-loop water systems, among other parallels. Abbott later also called for a ban on data center development in “rural neighborhoods.”

Talarico said Wednesday he didn’t know the details of Abbott’s plan, but that he was “willing to work with anybody, including the governor, to pass these commonsense regulations.”

“It should be plain for anybody to see, whether it’s the governor or whether it’s our campaign,” he said. “All of us are hearing the same thing from Texans all over the state, and that is that we don’t have a balance between welcoming growth and protecting people.”

In a statement to the Tribune after the news conference, Talarico said the governor “signed one of the country’s biggest data center giveaways. If he is serious about helping working Texans, he should immediately end these sweetheart tax breaks for data centers.”g Texans, he should immediately end these sweetheart tax breaks for data centers.”

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This article first appeared on The Texas Tribune.