Texas Data Centers and Water: Emerging Issues for Landowners and Water Users

By Trey Wilson, San Antonio Real Estate Attorney and Texas Water Lawyer

Texas is beginning to see a shift in how large-scale development is evaluated, particularly as it relates to data centers.

These facilities have historically been viewed through the lens of economic development. That perspective is evolving as their infrastructure demands become more apparent.

In April 2026, the Texas Lieutenant Governor directed Texas Senate committees to study the impact of large electric load users, including data centers, on landowners, infrastructure, and water infrastructure.

When water infrastructure is included at this stage of legislative review, it signals that the issue is beginning to take shape at a policy level.

Data Centers as Infrastructure-Intensive Development

Data centers require substantial and continuous inputs of power and, in many cases, water. As a result, they are increasingly being evaluated not only for their economic benefits, but also for their demands on local systems.

The Legislature’s current inquiry — issued in the form of 2026 Senate Interim Legislative Charges –reflects a broader set of considerations:

• Capacity of the electric grid
• Allocation of infrastructure costs
• Effects on surrounding landowners
• Impacts on water supply systems

At the same time, lawmakers are reviewing the fiscal impact of tax exemptions provided to data centers, which have increased significantly over time.

Together, these factors suggest that additional policy development is somewhat certain.

Water Supply Considerations

The Senate’s directive specifically references the need to evaluate data center growth in light of impacts to water infrastructure.

This is a notable development. Water supply issues are typically addressed in response to scarcity or drought. Here, the issue is being raised in connection with industrial demand and long-term planning.

Water has already become one of the most important variables in Texas real estate, affecting value, development potential, and long-term usability. I address that in more detail here: What Every Texas Real Estate Broker Needs to Know This About Groundwater. 

In many parts of Texas, particularly in Central Texas, groundwater systems already serve a mix of residential, agricultural, and commercial users. The addition of new, high-volume users can affect how those systems are managed.

Groundwater Regulation and Chapter 36

Groundwater in Texas is governed by the Rule of Capture, but its use is regulated through groundwater conservation districts under Chapter 36 of the Texas Water Code.

As demand increases, groundwater districts are often required to balance competing uses within their jurisdiction. This can lead to changes in how permits are evaluated and how production limits are applied.

Landowners dealing with wells—whether new, shared, or disputed—should already be familiar with these regulatory layers. For a practical overview, see: Texas Landowners: Read This Before Drilling a Water Well.

Potential areas of increased focus include:

• Evaluation of new high-capacity well applications
• Assessment of aquifer conditions and sustainability
• Consideration of impacts to existing users

These issues are already playing out at the legislative level. For example: East Texas Groundwater Goes to Austin.

Interaction with the Rule of Capture

The Rule of Capture remains a foundational principle of Texas groundwater law. However, it operates within a regulatory framework that continues to evolve.

As groundwater districts respond to changing conditions, landowners may encounter:

• More detailed permitting requirements
• Closer review of production levels
• Greater emphasis on aquifer management goals

Even so-called “exempt” wells are not immune from scrutiny. See: Exempt Water Wells in Texas: What Landowners Need to Know. :contentReference[oaicite:6]{index=6}

These developments do not eliminate the Rule of Capture, but they can affect how it functions in practice.

Potential Areas of Dispute

Where demand increases and regulatory frameworks are tested, disputes often follow. In the context of data center development, several areas may warrant attention.

• Transactions and Disclosure

Water-related issues are already central to real estate transactions involving rural and semi-rural land. Wells can be assets—or liabilities—depending on capacity, quality, and legal status.

For a focused discussion, see: Water Wells in Real Estate Deals: What Buyers and Sellers Must Know.

• Groundwater District Decisions

Permitting decisions by groundwater conservation districts may be subject to challenge, particularly where competing uses are involved.

Those disputes can escalate quickly when large-volume users are involved.

Neighboring Landowner Impacts

Shared water sources and overlapping use create friction. Many disputes arise where multiple properties rely on a single well or aquifer source.

For a practical look at those dynamics, see: Shared Water Well Agreements Are Not Just About Sharing Water.

Infrastructure Development

Large-scale facilities often require expansion of supporting infrastructure, including transmission lines, pipelines, and access routes. These projects frequently intersect with private property rights and easement law.

Regional Considerations in Central Texas

Central Texas is likely to see many of these issues develop more quickly due to existing growth patterns and water resource constraints.

Counties such as Hays, Comal, and Guadalupe are already managing increasing demand on groundwater resources. Additional large-scale users will become part of that broader landscape.

Practical Considerations for Landowners

Landowners should:

• Understand groundwater rights and regulatory frameworks
• Monitor nearby development and infrastructure activity
• Evaluate water-related risks in real estate transactions
• Stay informed on groundwater conservation district actions

Looking Ahead

The Legislature’s inclusion of water infrastructure in its review of data center growth reflects an early stage of policy development.

As that process continues, additional clarity will emerge regarding how large-scale water users are integrated into existing systems.

For landowners and water users, the key is recognizing that water is no longer a background issue—it is becoming central to how land is valued, developed, and contested in Texas.