• Texas’ pause on data center permits could delay projects through at least mid-December
• Developers are already withdrawing some more complex planned projects from Texas
• Bracewell lawyers said developers should build more flexibility into financing and project agreements

Some developers are abandoning planned data center projects in Texas as the state pauses permits for data center projects, say lawyers familiar with the situation.

On Monday, Texas Governor Abbott directed the Texas Commission on Environmental Quality (TCEQ) to “halt all permits sought by data centers” beginning September 21 2026.

In his letter, Abbott directed a pause until the Electrical Reliability Council of Texas (ERCOT) has completed its audit of large load data centers, which he directed the agency to do on August 3rd.

This directive would effectively pause data center development until mid-December, said lawyers at Bracewell LLP, as ERCOT anticipates it will complete said audit.

The directive to pause all permits for data center projects raises a number of concerns for developers, said Matt Paulson, an environmental lawyer at Bracewell.

“There are lots of questions and there are areas of uncertainty,” said Paulson.

The biggest uncertainty is whether the pause on permits at the TCEQ is a pause on permit processing, or a pause on issuing final approvals.

The latter would serve developers better, said Paulson, as developers would wait three months until mid-December to receive an update on ERCOT’s decision.

If the TCEQ actually pauses processing of permits, developers would have to wait longer to receive permits, which could hinder project financing.

“Three months delay can sometimes be managed, but six months is a huge delay and is more likely to create problems,” said Jared Berg, another lawyer at Bracewell.

He added that in traditional project finance, significant delays on permitting and date of completion could really impact financing structures, and the ability for developers to retain sponsorship.

In response to inquiries, the TECQ said they would issue additional clarity on the pause in October.

“The agency will ensure its regulatory evaluations incorporate findings from ERCOT’s review and provide a full update on compliance to the Governor’s Office by October 19, 2026,” said the TECQ in an emailed statement to NPM.

Another looming question is whether behind-the-meter projects will be impacted by Abbott’s directive.

In his letter, Abbott wrote that he directed the TECQ to pause “the issuance of all permits related to data center projects.”

Berg said that this means that permits for behind the meter and generation projects will likely be affected, though the TECQ may clarify this point on October 19.

Developers leaving Texas

Bryan Clark, a partner at Bracewell said that some clients who had planned data centers in Texas have withdrawn projects from the state, amidst the halt on data center buildout.

He said that most of the projects that he’s seeing being withdrawn are projects that are more complex to build in the first place. This includes developers that may choose to build projects on land that requires extra permits, for instance, rather than larger MW projects.

However, developers are likely to keep projects that already have significant work done on them.

NPM’s data has identified 41 under construction data center projects, and 158 planned projects in Texas.

As delays ensue, Berg recommended that developers prioritize flexibility for planned data center contracts with sponsors and lenders.

“I would ensure agreements have some leeway built into committed performance schedules as well as contracted rights to delay deadlines due to changes in law and permitting delays ,” said Berg.