A proposed data center development near Cedar Creek Lake in East Texas has been withdrawn after Gov. Greg Abbott said the project failed to meet the state’s expectations for protecting local communities, natural resources, and the electric grid.
Abbott announced on Thursday that Diode Ventures will no longer pursue the planned facility in Henderson County after determining the project did not satisfy the governor’s directives or community expectations.
“Data centers that want to do business in Texas must meet a clear standard. This project did not,” Abbott said in a statement.
“Texas requires companies to put communities first, protect our natural resources and power grid, and respect the quality of life of our residents. Diode did the right thing by withdrawing their project. If other data center developments refuse to meet these standards, I expect them to do the same.”
Developer Cites Community Concerns
In a letter sent to Henderson County Judge Wade McKinney and county commissioners, Diode co-presidents Rachel Attebery and Josh Johnson said discussions with state officials, local leaders, and area residents led the company to conclude the proposed site near Cedar Creek Lake was unsuitable.
“The perspectives shared by residents, local leaders and stakeholders led us to conclude that the site under evaluation, in particular its close proximity to the rural residential community of Cedar Creek Lake, does not meet the higher standard we believe should guide data center development,” the letter states.
As a result, the company said it “will not pursue land development at this location” and instead will focus on future projects that better align with responsible development practices.
Diode also reaffirmed its support for water-efficient technologies, including closed-loop and air-cooled cooling systems, and pledged to engage communities early during future site evaluations.
Abbott Outlines New Expectations
The withdrawal follows Abbott’s June 10 directive to the Public Utility Commission of Texas (PUC) and the Electric Reliability Council of Texas (ERCOT), establishing new expectations for large-scale data center developments as the state’s artificial intelligence and cloud computing industries continue to expand.
Under the governor’s guidance, future data center projects should:
- Reduce, rather than increase, residential electricity costs through their grid interconnections.
- Pay the full cost of any electric infrastructure required for their operations so residential customers are not burdened.
- Add generating capacity to Texas’ electric grid instead of only increasing demand.
- Use water-efficient cooling technologies, such as closed-loop systems, to minimize impacts on local water supplies.
- Incorporate measures including setbacks from neighborhoods and noise-reduction technology to reduce impacts on nearby communities.
Abbott also said he plans to seek legislation requiring large data centers to report annual electricity and water usage to the PUC and repeal sales tax exemptions and other incentives he described as outdated or unnecessary.
Balancing Growth and Local Interests
Texas has become one of the nation’s fastest-growing markets for data centers as demand for artificial intelligence computing, cloud services, and digital infrastructure accelerates. While the projects often promise significant investment and job creation, they have also drawn scrutiny over their electricity consumption, water use, and impacts on rural communities.
The proposed Henderson County facility had faced concerns from residents over its proximity to Cedar Creek Lake and surrounding neighborhoods.
Abbott said the state remains committed to supporting responsible data center development while ensuring economic growth does not come at the expense of Texas communities.
“Governor Abbott will continue to advance policies that ensure data center growth does not come at the expense of Texas families or rural communities,” the governor’s office said.
