Texas is building data centers faster than almost any other state, and the water they need is becoming a planning issue. The Houston Advanced Research Center, an independent nonprofit research organization, estimates that existing data centers in Texas will consume about 25 billion gallons of water in 2025, or 0.4% of the state's total water use, according to reporting by The Texas Tribune. By 2030, HARC estimates, that share could rise to as much as 2.7% of annual water use in Texas, equivalent to the consumption of 1.3 million average US households.
The state has more than 400 data center facilities, with about 70 more on the way, according to the Tribune. The estimates cover both direct water use for cooling and water used to generate the electricity data centers consume.
How data centers use water
Data centers use water in two ways. The first is direct: many facilities use evaporative cooling, in which hot air from servers passes through water-soaked material and the evaporation removes heat. That method uses less electricity than mechanical chillers but consumes water. Liquid cooling, increasingly used for AI hardware, circulates coolant through cold plates attached to chips and can operate in closed loops that use far less water once filled.
The second is indirect. Power plants that run on natural gas, coal or nuclear fuel use water for cooling, so every megawatt-hour a data center draws from the grid carries a water footprint. In Texas, where most electricity comes from gas-fired plants, along with wind, solar, coal and nuclear, the indirect water use of data centers depends on which plants are running.
Air cooling avoids direct water use but can account for up to 40% of a data center's total energy demand, according to a University of Texas at Arlington engineering professor quoted by the Tribune. The trade-off between water and electricity is therefore a central design choice.
The Abilene example
The Stargate campus outside Abilene, a collaboration between OpenAI, SoftBank and Oracle, is using a closed-loop cooling system. The Tribune reports that the facility will initially use 8 million gallons of city water to fill the system. An assistant director at Abilene's water utility said that compared with the city's average daily use of 22 million gallons, the initial fill was minimal, though the system will need some additional water over time and occasional draining and refilling for maintenance.
Closed-loop systems substantially reduce ongoing water consumption compared with evaporative cooling, but they rely more on electricity to reject heat, particularly on hot days.
A planning blind spot
The Texas Water Development Board's long-term planning relies on historical water use data. In 2024 the board sent surveys to nearly 70 data centers asking how much water they used and who supplied it. Although responses were required by state law, only about one-third replied, according to the Tribune. The penalty for non-compliance is a Class C misdemeanor with a maximum fine of $500.
The board has said it is working to move data centers into a separate category of water user to track them better. Experts quoted by the Tribune said data centers will likely not be reflected in state planning documents until 2032. Texas faces recurring drought, which adds pressure on planners to anticipate new demand.
Local stress matters more than state totals
At 0.4% of state water use, data centers are a small user in aggregate. Researchers point out that local effects can be much larger. A large campus in a small community, or in an area that draws on a stressed aquifer, can account for a significant share of local supply. In the Panhandle, residents of Amarillo have organized against planned data centers because of concerns about the Ogallala Aquifer, which is being drawn down faster than it recharges.
A Purdue University researcher quoted by the Tribune noted that the same volume of water use carries a different environmental burden in Texas than in a wetter state like Iowa.
Other states are acting
California lawmakers passed a bill in September requiring new data centers to report projected water use before starting operations; it awaits the governor's decision. Minnesota requires data center developers to consult the state environmental agency to confirm that a proposed site has adequate water supply. Arizona and other western states have also debated data center water use, particularly in the Phoenix area.
The link to the grid
Water and power planning for data centers are connected. Texas passed legislation in 2025 that requires large loads, including data centers, to provide the grid operator ERCOT with information on their power needs and location, and to join a queue. The state's power demand is projected to rise sharply by 2030, driven in large part by data centers. Data centers that build their own on-site generation, which some in Central Texas are doing, take on the cooling water needs of those plants as well.
The Texas market had about 10,234 MW of data center demand, according to the research firm Baxtel, cited by the Tribune.
Technology responses
Cooling technology is evolving. The University of Texas at Arlington is leading a project funded by a $2.84 million grant from the US Department of Energy's COOLERCHIPS program to develop two-phase liquid cooling that uses a refrigerant instead of water. In laboratory testing, the system cut cooling energy from about 40% of total energy use to 5%, according to the project team.
Hyperscalers are also changing designs. Microsoft has announced a data center design for AI workloads that uses zero water for cooling, which it says avoids about 125,000 cubic meters of water a year per facility. Google reported consuming about 8.1 billion gallons of water across its operations in 2024, much of it at data centers using evaporative cooling.
What it means for energy and water markets
For energy markets, the water question shapes where data centers are built and what cooling technology they use, which in turn affects their electricity demand. Facilities in water-stressed areas may opt for air or closed-loop cooling, raising power use, especially in summer when the grid is under most pressure.
For water utilities and regional planners, data centers are a new category of large, fast-growing demand that does not fit historical trends. The gap between the pace of data center development and the state's planning cycle is likely to remain a point of tension.
What to watch
Key developments include whether Texas strengthens reporting requirements for data center water use, how the Water Development Board's reclassification proceeds, and whether local governments in water-stressed regions impose conditions on new facilities. The response to California's reporting bill will also be watched by other states.