Show Us the Water: SB 338 Puts Strings on Data Center Tax Breaks

You want a Texas tax break for a giant data center? Then show us the water. Every gallon, every year, on the record.

Plain English summary

Senate Bill 338 was filed in Austin on November 12, 2026. The caption is four words: "Relating to data centers." The bill is not short. It ties every data center tax deal in Texas to strings on water, land, and the power grid. FACT (SB 338 as filed)

Sixteen senators are listed as authors: Perry, Campbell, Cook, Flores, Hagenbuch, Hall, Adam Hinojosa, Juan "Chuy" Hinojosa, Huffman, Hughes, Kolkhorst, Ligon, Parker, Paul, Paxton, and Sparks. FACT (bill history) The Texas Senate has 31 members. Sixteen is a majority on day one.

Here is what it does, in the bill's own terms. FACT for every line below.

• A "data center" means one or more facilities totaling at least 100,000 square feet, built to house servers.
• A city may not exempt more than 50 percent of a data center's abatable value in any year.
• Any data center tax deal with a city, county, or school district must require water-saving cooling only: closed-loop, dry, saline, or a system the PUC rules uses less water.
• The company must file its expected yearly water use and water source when it signs, then report actual use and source every year it runs.
• The company must pay to clean up environmental damage to the land, including after it shuts down or tears the place down.
• The company must record a permanent restriction on the land that bars a data center with any other kind of cooling there.
• Break the deal and the city can cancel it and must recover all lost property tax revenue, plus interest.
• A city may not hand a data center a loan or grant under its economic development program unless the same terms are in the contract.
• The Public Utility Commission must make data centers register as large loads on the ERCOT grid, and must adopt rules barring utilities from connecting a site that fails the cooling rule or skips the water paperwork, and requiring them to disconnect one that breaks it later.
• The PUC must send the water reports to the Texas Water Development Board every year.
• TCEQ must issue an emergency order to stop construction on a data center that does not or will not comply.
• Effective date: September 1, 2027. The new rules apply to deals and grid hookups made on or after that date.

Why it matters

East Texas runs on wells, lakes, and rural water supply corporations. When something big wants a lot of water, the people already here should know how much and from where before the first pipe goes in.

Data centers are being pitched all over Texas. Holland and Knight reported in June that Governor Abbott called for legislative action on data centers, and in September that the Senate was scrutinizing data center water use. DOCUMENTED INFERENCE (June report, September report)

This is not the first data center bill this month. Earlier this week I wrote about SB 293, the bill to end the data center sales tax exemption. SB 293 goes after the break itself. SB 338 keeps local abatements alive but puts conditions on them.

The receipt

• SB 338 as filed: capitol.texas.gov SB00338I FACT
• Author list and filing date: SB 338 history FACT
• The 50 percent city abatement cap: new Tax Code Section 312.204(a-1) in Section 7 of the bill. FACT
• Penalty equal to all lost tax revenue plus interest: Sections 3 and 8. FACT
• Grid connect and disconnect rule: new Utilities Code Section 39.920 in Section 12. FACT

What Ryan says

RYAN STATEMENT

I am not against a business building in Texas. I am against a business taking a tax break from my neighbors and then keeping its water use a secret.

If you want the break, you play by the rules that come with it. Report the water. Clean up the land. Stay the owner for the life of the deal. Break it, pay it back with interest.

That is not anti business. That is a contract. Folks in East Texas understand a handshake with terms.

The part I like best is the water reports going to the Water Development Board every year. Put it on the record. Let the people who plan our water see the numbers.

What I want answered before a vote: who gets to see those water reports? The bill sends them to the PUC and the Water Development Board. It does not say a family in Harrison County can pull them up. That is my read of the text, and I want it fixed. DOCUMENTED INFERENCE

Show me the water. Then we talk about the break.

What this does not prove

• It does not prove any data center in East Texas is wasting water. This article names no project.
• It does not prove the bill will pass. It was filed today. No hearing, no vote.
• It does not end the abatement. Cities can still exempt up to half the value.
• The reports go to state agencies. The bill text does not say they are posted for the public. DOCUMENTED INFERENCE

What it does prove

• Sixteen of 31 senators put their names on data center conditions on the day it was filed. FACT
• The bill makes water use a condition of the tax break and of the grid hookup itself. FACT
• Break the terms and the city must claw back every dollar of lost property tax, with interest. FACT

The bottom line

A tax break is a deal with the public. The public should see the terms.

SB 338 puts the water on paper, the cleanup on the company, and the grid on the line if they cheat. Make the reports public and I am all in.

Read the bill. Ask your senator where they stand.

Do not threaten anyone. Do not harass anyone. Do not contact anyone in my name. Read it. Share it. Send receipts, evidence, witnesses. Put eyes on the record.