On January 10, 1901, oil erupted more than 100 feet into the air at Spindletop outside Beaumont, Texas, igniting a boom that would transform the state and draw entrepreneurs, workers and investment from across the country.
Rather than retreat from the upheaval that came with change, Texans embraced the new industry and bet on its potential. They drilled wells, laid pipelines and built refineries, turning disruption into opportunity and opportunity into prosperity. That willingness to charge into the future rather than fear it helped make Texas what it is today. Now another transformative industry is arriving, but this time state leaders are hitting the brakes.
In August, Gov. Greg Abbott ordered the Public Utility Commission of Texas and the Electric Reliability Council of Texas to audit every data center advancing through ERCOT’s interconnection process. No project can move forward until the review is complete, creating an effective moratorium on new grid connections.
Abbott is responding to a real challenge. ERCOT is considering more than 474 gigawatts of requests from large electricity users, roughly 90% of them data centers. Current demand, by comparison, is about 91 gigawatts.
But enormous demand is not an argument for stopping growth. It is a reason to get to work to build more.
Data centers are the physical infrastructure of the digital economy. Artificial intelligence, cloud computing, financial transactions, medical records, manufacturing, supply chains and defense systems all depend on facilities filled with servers, fiber, cooling systems and electric power. The digital economy may feel weightless, but it rests on steel, concrete and electricity.
Texans should want that infrastructure built in Texas.
The state has abundant land, enormous energy resources and a culture built around free enterprise and risk taking. Texas has never treated infrastructure as a fixed resource to be rationed. That is the approach that has made the Lone Star State a place defined by opportunity, optimism, and the belief that innovation is something to be met with action rather than hesitation.
Texas had already begun moving in the right direction.
Senate Bill 6 established new rules for large electricity users, including provisions aimed at ensuring they contribute to the infrastructure required to connect them to the grid. Then, in June, regulators approved ERCOT’s new “Batch Zero” process for major loads, designed to determine how much new demand the grid could accommodate while maintaining reliability.
Research by the Goldwater Institute has proven that this is exactly what Texas should be doing: establish clear rules, make large users pay their own way and allow investment to proceed.
The same principle applies to water. Data centers use it, and communities have every right to protect scarce supplies. But modern facilities increasingly use air cooling, closed-loop systems and reclaimed or non-potable water. Companies also have a powerful financial incentive to conserve because water is an operating cost.
None of this means data centers deserve special treatment. They should not receive sweetheart subsidies. They should also bear the infrastructure costs they create. Governments should enforce objective rules protecting property rights, grid reliability and local water supplies.
But once companies meet those rules, Texas should let them build.
That was the lesson of Spindletop. The oil boom created enormous new demands for pipelines, refineries, storage and transportation. Texans did not respond by declaring that existing infrastructure could not handle the growth.
They built more.
Artificial intelligence may prove to be one of the defining technologies of this century. The states that provide the electricity, land and infrastructure it requires will capture much of the investment and economic activity that grows around it.
Texas should be one of them. After all, Texas became Texas by building for the future, not putting it on hold.
This op-ed was originally published in the Current Revolt.
Carl Paulus, PhD, is an author, political historian, and public policy analyst with the Goldwater Institute.
