Texas Republicans turn against data centers, putting big tech on notice

By Helen Coster and Dawn Kopecki

NEW YORK, Sept 3 (Reuters) - Less than a year ago, ‌Texas Governor Greg Abbott hailed Texas ​as the "epicenter of AI development." ​Now, in his bid for re-election, he is calling for sweeping new restrictions on data centers.

And he’s hardly alone.

Across the country, as Democrats ride a wave of local opposition to data centers ahead of the November elections, Republicans are increasingly breaking from U.S. President Donald Trump’s pro-AI agenda.

Republican candidates in at least five states – including Michigan, Wisconsin and Pennsylvania – have recently adopted tougher rhetoric on data centers or proposed ‌restrictions on their development, creating a new fault line within the party.

The debate is “pitting pro-growth instincts and the push to beat China in the AI race against a populist backlash ⁠over affordability,” said Brad Dayspring, a Republican strategist with Purple Strategies.

The most striking shift is happening in Texas, a conservative, oil-rich state that has worked for years to reinvent itself as a national tech hub. Abundant land and business-friendly regulations have attracted leading tech companies like SpaceX and Oracle and lured ‌wealthy entrepreneurs like Elon Musk.

Even there, though, public sentiment has turned ‌sharply against data centers, which opponents say drive up electric and water bills, pollute the night sky with lights and don't create enough tax revenue or jobs to justify the incentives states have paid.

An August poll by the Texas Politics Project found only 30% of respondents would support a data center in their community.

Big tech companies are trying to play catch-up, pouring more than $300 million into the midterms, according to election records, company and committee disclosures, and rolling ​out a massive ad campaign to educate consumers about the benefits of data centers.

But as the backlash spreads, Abbott is calling for expansive new regulations on data centers, the repeal of tax incentives for their construction and restrictions on development in rural communities. A state audit he announced on August 3 has effectively paused approvals for new grid connections.

Republican Attorney General Ken Paxton, locked in a tight Senate race, has also hardened his stance on AI, unveiling a plan ⁠late last month that his campaign says will keep America competitive while stopping the "negative impact of data centers."

Abbott and Paxton’s rhetorical pivot puts them at odds with Trump, the leader of their party, who warned in a Truth Social post Monday that Americans fighting data centers risked ending up “backwards and poor.”

Republican officials have downplayed ​the split with Trump.

"We're going to advise our candidates to do what's best for them and their communities," said Natalie Baldassarre, national press secretary for the Republican National Committee. “It’s not a one-size-fits-all approach.”

JOCKEYING FOR POSITION

Texas is one of the nation's largest and fastest-growing markets for AI-related data center development, hosting OpenAI's flagship Stargate campus in Abilene, among other major projects.

Paxton once ​embraced AI data centers as an engine of job creation and economic growth. As a state senator in 2013, he voted for ‌a tax incentive that later became a major driver of data-center investment in Texas.

In February, local commissioners in Hood County, Texas, requested Paxton’s opinion on whether they had the legal authority to temporarily halt development of data centers. Half a year later, the request is still pending, according to the attorney general’s website.

Paxton’s opponent, Democrat James Talarico, has accused him of political opportunism, pointing to ⁠campaign contributions he’s accepted from the tech industry.

“He’s scared his ties to big data center companies will lose him the election, so he’s making a sad attempt to reverse course,” Talarico said in a statement.

The Paxton campaign did not respond to questions about his shifting position on data centers, but accused Talarico of taking money from some of the same corporate interests and voting for a sales tax incentive for large data centers as a Texas state senator in 2023.

“He’s a hypocrite who’s bought and paid for by his coastal billionaire donors,” Paxton's campaign ⁠said in a statement.

Both candidates trying to position themselves as populists standing up to deep-pocketed donors is a sign, analysts say, of how much the ground has shifted.

For Republicans especially, who have long positioned themselves as champions of corporate America, there is growing recognition that “it's important ​to put some distance between themselves and the big tech companies behind these data centers,” said David Karol, a political scientist at the University of Maryland.

In the governor’s race, Abbott’s Democratic opponent Gina Hinojosa has called data centers “the fight of this election season.”

“Everybody knows that his temporary pause on the approval of new data center developments ends November 4, the day after the election,” Hinojosa said in an interview.

Eduardo Leal, press secretary for Abbott’s campaign, said in a statement that the governor “has directed Texas regulators to ensure data centers do not take ‌water needed by communities or power needed by the Texas grid … lower electricity costs for consumers, and pay for their own electricity infrastructure.”

BIG TECH PLAYS CATCH-UP

That data centers have become such a prominent feature of this year’s midterm elections is a product of big tech being slow to respond to public backlash, observers say.

“Two years of local opposition and the industry wasn’t ‌necessarily engaging at the level they needed to,” said veteran political strategist Kevin Madden, a former adviser to Republican presidential candidate Mitt Romney.

Leading AI companies are trying to rectify the mistake.

Two super PACs with ties to Anthropic have so far spent more than $2.6 million in Texas, while super ⁠PACs linked to OpenAI co-founder Greg Brockman have spent more than $4.8 million across the state, federal ‌election filings show. Meta has given about $1.4 million to a super PAC ​focused on candidates for state office in Texas, according to tax filings.

But changing the conversation will be an uphill battle for data center supporters, who now face resistance from Democrats and Republicans alike.

"It’s striking at a time when the parties seem to disagree on everything that there's been bipartisan movement against data centers,” Karol said.

(Reporting by Helen Coster and Dawn Kopecki in New York; Editing by ‌Jesse Mesner-Hage and Alistair Bell)

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