Governor Abbott expands data center permitting pause to environmental permits pending ERCOT audit

On September 21, 2026, Governor Greg Abbott directed the Texas Commission on Environmental Quality (TCEQ) to halt all permits sought by data centers until the Electric Reliability Council of Texas (ERCOT) completes its audit. The new directive extends the moratorium beyond grid interconnection to include environmental permitting and explicitly provides that no state agency shall proceed with regulatory approvals related to data center development until the ongoing audits are completed.

The September 21 directive follows several related actions concerning data center development in Texas. On September 14, 2026, Governor Abbott directed the Texas Water Development Board (TWDB) to compel major water users, including data centers, to comply with water-use reporting requirements, impose legal consequences for past and future failures to comply with state law, and partner with ERCOT on the audit to obtain additional water-use information.

As we discussed in our prior alert, Governor Abbott's August 3, 2026 directive ordered the Public Utility Commission of Texas (PUCT) and ERCOT to conduct a comprehensive verification and audit of all data centers advancing through ERCOT's interconnection process. That directive paused the advancement of data centers through ERCOT’s interconnection process pending the completion of the audit and introduced mandatory disclosure requirements across five categories:

• Financial assistance
  
  
• Power consumption and on-site generation
  
  
• Water use and cooling technology
  
  
• Community impact mitigation
  
  
• Ownership and controlling interests

The August 3 directive builds on Governor Abbott’s June 10, 2026 directive, which requires data centers to fully fund the costs of the electric infrastructure needed to serve their operations.

This alert examines the TCEQ directive, its relationship to prior directives, and the practical implications for data center developers and investors with projects in Texas.

The TCEQ directive: Scope and requirements

Immediate permitting halt

Governor Abbott's September 21, 2026 directive orders TCEQ to halt the issuance of all permits sought by data center projects. TCEQ is directed “to pause the issuance of all permits related to data center projects until ERCOT completes its review.”

For data center developers, TCEQ authorization may be required across several key operational areas, including air quality, stormwater, and other water quality permits.

Legislative outlook

Governor Abbott also announced that he will work with the Texas Legislature next session to eliminate financial incentives for data centers.

Project timelines and development risk

Obtaining an ERCOT queue position or power agreement is no longer the only potential bottleneck for data center projects in Texas. Even projects with secured power may be unable to proceed with construction or operations that require TCEQ permits, effectively halting development timelines across all state regulatory bodies. Projects that were advancing environmental permitting in parallel with interconnection planning may now experience compounded delays.

Key questions

Several areas of legal and regulatory uncertainty remain:

• Pending applications. The directive provided that all permits related to data center projects are paused. Applicants with permits nearing final issuance face uncertainty about when processing may resume once the audit concludes, or whether they will need to satisfy new requirements.
  
  
• Non-ERCOT territories. While the directive applies statewide to TCEQ, the relationship between the ERCOT audit and permitting in non-ERCOT territories (including portions of East Texas, the Panhandle, and El Paso) remains undefined.
  
  
• Duration. The directive ties the permitting halt to completion of the ERCOT and TWDB audits but does not specify what findings from those audits would be sufficient to lift the freeze, or whether additional conditions – such as legislative action – will be prerequisites for resumption.
  
  
• On-site generation. Although the directive is linked to the ERCOT interconnection audit, the directive does not expressly exclude data centers that do not require a grid connection to meet their power demands.

Potential next steps

• Monitor the ERCOT audit timeline. ERCOT expects to complete its audit in December 2026. The survey of more than 400 data centers is underway, with questions made public on September 18, 2026, though individual company responses will remain confidential.
  
  
• Track the October 19, 2026 TCEQ compliance update. TCEQ is required to provide Governor Abbott’s office with an update on its compliance by October 19, 2026. That update may provide additional clarity on which permits and project types are affected and how TCEQ intends to operationalize the directive.
  
  
• Prepare for the 2027 legislative session. Governor Abbott signaled that he will pursue legislation to eliminate data center financial incentives and codify additional requirements and community protection practices. Developers may wish to monitor potential legislation and assess its implications for existing and planned projects.
  
  
• Evaluate contractual protections. Sponsors and developers may wish to review existing agreements, including power purchase agreements, offtake agreements, construction contracts, equipment supply agreements, and leases, for force majeure provisions, regulatory delay clauses, outside dates, and termination rights that the permitting freeze may trigger.

Learn more

DLA Piper will continue to monitor developments and provide updates as the ERCOT audit progresses, the TCEQ compliance report is issued, and the legislative session approaches.

For more information, please contact the authors.