What west San Antonio, Medina County, Abilene, and ERCOT tell us about land, water, power, tax policy, and the new AI arms race
Introduction
Artificial intelligence is often discussed as if it lives in “the cloud.” It does not. It lives on land, behind fences, under transmission lines, inside substations, and within utility contracts. In Texas, especially west of San Antonio and into Medina County, AI is no longer just a technology story. It is a local infrastructure story, a land-use story, a water story, and an electric-grid story.
That is the correct frame for understanding what is happening now. Texas is poised to become the largest data center market in the country within about two years, and one recent industry survey cited by the Texas Tribune projected that data-center-driven grid demand in Texas could exceed 40 gigawatts by 2028. At the same time, ERCOT reported receiving 225 new large-load interconnection requests in 2025 alone, representing a 270% increase in megawatt demand since January.
Why This Matters Now in West San Antonio and Medina County
This is not a distant statewide trend. It is already landing in the San Antonio region. San Antonio Report reported on March 7, 2026, that CPS Energy currently provides power to 21 data centers in the area, generating about $110 million in revenue, and that 59 future projects are in various stages of planning. CPS further projected that those potential projects represent around 26,000 megawatts of energy demand, even though not all of them will ultimately be built.
That explains why San Antonio officials are now openly discussing new zoning rules. City leaders are considering whether data centers should be classified as general industrial uses and whether the city should require setbacks of at least 1,000 feet from residences, parks, and other incompatible land uses. That is not a symbolic discussion. It is a signal that local government now sees these facilities not as passive office-like development, but as major industrial infrastructure with neighborhood consequences.
The Land-Use Question: Rural Character vs. Industrial Footprint
For Medina County, the issue is even more visible. San Antonio Report documented the conversion of agricultural land into data center campuses and quoted residents alarmed that productive farmland is being taken out of use for what they view as industrialized “cloud space.” The publication described Microsoft as doubling down on its already large Medina County presence, with construction and expansion forcing residents to reckon with a kind of growth they never expected.
That is the first major point many boosters understate: data centers may be digital businesses, but their physical footprint is not subtle. They require large sites, access roads, security perimeters, substations, backup systems, lighting, and room for mechanical and electrical support infrastructure. Even when the buildings themselves are architecturally bland, the land transformation is profound. In a place like Medina County, where identity is tied to open land, agriculture, and lower-intensity development, that shift is not cosmetic. It is cultural and economic.
Visual Change, Construction Impacts, and Noise
The local friction does not begin when a data center is operating. It begins during site preparation and construction. Rowan’s 440-acre Cinco project in Medina County, for example, is a 300-megawatt hyperscale campus west of San Antonio. Public reporting says Rowan agreed to third-party monitoring of traffic, noise, and dust on neighboring properties and committed to site-logistics controls, erosion and sediment control, tree preservation, setbacks, and landscaping. Those are not incidental details. They are the exact kinds of mitigations communities seek when they know a project is likely to alter the visual environment and daily quality of life around it.
That leads to a broader point. When local residents complain about “visual blight,” they are usually not making a superficial aesthetic argument. They are responding to a cluster of changes at once: lighting, scale, road traffic, fencing, heavy equipment, land clearing, and the sense that a rural or semi-rural area is becoming an industrial utility corridor. Whether a particular project is tastefully landscaped does not change that underlying reality.
Water: The Constraint South Texas Cannot Ignore
Water is where the South Texas version of this debate becomes far more serious than the national talking points.
San Antonio officials say current data center water use is manageable. According to SAWS, data centers today use only around 0.1% of the utility’s drinking water, and the sector has shifted toward greater use of recycled water. In 2023, about 48% of local data center water use was recycled water; by 2025, that had risen to 75%. But that does not end the matter. SAWS also said new data centers are planning to request about 600 acre-feet of drinking water and 3,000 acre-feet of recycled water, and that the recycled-water system has only about 10,000 acre-feet of spare capacity before additional upgrades are needed.
In other words, today’s numbers are not tomorrow’s numbers. The correct question is not whether current usage looks small in percentage terms. The correct question is what happens as more facilities arrive, more AI workloads intensify cooling needs, and more industrial customers compete for finite recycled-water infrastructure in a region already conditioned by drought thinking.
Medina County’s smaller utilities make the pressure even easier to see. Express-News reported that more than half a dozen data centers are planned in Medina County, most owned by Microsoft, and that utilities there are requiring developers to bring their own water rights. In one case, a utility official said an initial proposal from a single facility was almost one-third of the system’s total water use. Developers are now being required to secure water rights equal to one-and-a-half times their annual demand to protect the system during drought cutbacks.
That requirement matters because it strips away the fantasy that these projects are just another commercial customer. They are not. In dry parts of Texas, they are utility-shaping customers. Microsoft says it has switched its existing San Antonio data centers to air-cooled chillers and is moving newer designs toward zero-water cooling, while Rowan says its Cinco campus will use a closed-loop chilling system that recycles the same water repeatedly. Those are constructive moves, but they also confirm the scale of the issue: no one spends this much time redesigning cooling unless water is a serious local constraint.
Power, Transmission, and the Ratepayer Question
Electricity is the larger strategic constraint.
AI data centers need huge amounts of power, but the real challenge is not merely generating enough electricity somewhere in Texas. It is delivering large, reliable, site-specific power on time, through substations and transmission lines that often do not yet exist. ERCOT’s 2025 large-load surge shows that the queue of power-hungry projects is moving faster than the physical grid can comfortably absorb.
San Antonio’s own public discussion makes the same point at the local level. CPS Energy officials told City Council that large-load customers already make up 9% of CPS sales and could rise to 19% within five years. CPS also said it is beginning a pilot program that would allow data centers to develop on-site power generation, while still paying a tariff on that power. That is a local acknowledgment that the traditional “just serve them from the grid” model is becoming less realistic as AI infrastructure scales.
This is where ratepayer risk becomes a legitimate public issue. The political promise is that ordinary households will not subsidize the AI buildout. The White House formalized that principle on March 4, 2026, stating that companies will pay for all new power-delivery infrastructure upgrades required to serve their data centers so those costs are not passed on to ordinary households. OpenAI now uses similar language in its Stargate community materials, saying it will “pay its own way on energy” and fund incremental generation and grid upgrades required by its load.
That is the right principle. But it is also a reminder that the risk is real. If it were not real, neither Washington nor the AI companies would be stressing it. Once transmission upgrades, special tariffs, utility investments, and dedicated infrastructure come into play, the question of who ultimately pays is no longer academic. It becomes central to local politics.
Jobs, Tax Revenue, and the Limits of the Sales Pitch
The economic-development pitch for data centers is always stronger during the construction phase than during long-term operations.
Rowan’s Cinco project is expected to create about 600 construction jobs and more than 40 permanent jobs. That ratio is revealing. These campuses are capital-intensive, not labor-intensive. They employ electricians, trades, engineers, and contractors heavily during buildout, but once they are operating, permanent staffing is relatively thin compared with the scale of land use, utility demand, and public attention they attract. Brookings summarized the standard national model this year as producing mostly short-term construction jobs and relatively little long-term, high-value tech activity or large-scale employment.
Tax revenue is more complicated than press releases make it sound. Express-News reported that Medina County approved tax abatements for Microsoft and Rowan that waive 80% of county property taxes for designated periods after completion. That does not mean there is no fiscal benefit. It means the net local benefit is smaller and slower than the headline capital-investment number suggests. When communities are weighing land conversion, water use, industrial visual impacts, and power-system strain, that distinction matters.
Abilene Is the Warning Shot
If west San Antonio and Medina County show what the local front edge looks like, Abilene shows what happens when the buildout becomes strategic infrastructure at full scale.
Crusoe said in March 2025 that its Abilene AI data center campus would expand to eight buildings, about 4 million square feet, and 1.2 gigawatts of total power capacity. OpenAI’s current Stargate community materials explicitly identify Abilene as one of its existing Texas AI campuses and say the company’s first local OpenAI Academy will launch there.
That is the real warning for South Texas. Once AI infrastructure reaches this scale, it stops being a niche real-estate project and starts behaving like heavy industrial infrastructure. The conversation quickly moves beyond land prices and tax incentives into transmission, cooling design, water stewardship, workforce development, and whether local communities have enough leverage to negotiate terms rather than simply absorb impacts.
The National-Security Dimension
This is where the local story connects to the national one.
Federal language around AI infrastructure is no longer framed as routine economic development. The Department of Energy says its initiatives are designed to ensure the United States has the power needed to “win the global AI race,” while continuing to provide affordable, reliable, and secure energy. The White House has similarly framed energy reform and infrastructure expansion as necessary to “win the race” in AI.
Even when officials do not name China in every sentence, the strategic subtext is obvious. This is not how governments talk about ordinary warehouse development. This is how they talk about geopolitical competition, industrial capacity, and technological advantage. The implication for Texas is clear: communities with land, transmission access, and regulatory flexibility are increasingly being treated as host territory for national AI strategy, not just local commercial projects. That is an inference from the federal language and policy posture, not a direct quote, but it is a fair one.
Why Nuclear Is Back in the Conversation
Nuclear power is re-entering this discussion for one reason above all others: AI data centers need firm power.
The International Energy Agency says that over the next five years, renewables are expected to meet nearly half of the additional electricity demand tied to data centers, followed by natural gas and coal, with nuclear becoming increasingly important toward the end of the decade and beyond. That is a sober way of saying that renewables matter, gas will matter, and the search for always-on, low-carbon, high-reliability power is pushing nuclear back into the conversation.
The market behavior of the major technology firms confirms that shift. Microsoft signed a 20-year agreement with Constellation tied to restarting Three Mile Island Unit 1. Google said its agreement with Kairos Power is intended to enable up to 500 megawatts of new 24/7 carbon-free nuclear power by 2035, with the first unit targeted for 2030. Meta announced in January 2026 that its nuclear deals could unlock up to 6.6 gigawatts to support what it explicitly called American leadership in AI innovation.
The honest view is that nuclear is promising, but not immediate. It is not a plug-and-play answer for every Texas site now waiting on power. In the near term, Texas will still rely on a mix of grid expansion, more transmission, natural gas, renewables, storage, and smarter tariff design. But for very large, strategic AI loads, nuclear is no longer a fringe idea. It is increasingly the medium-term firm-power option serious buyers are planning around.
Bottom Line
The core issue for west San Antonio and Medina County is not whether AI matters. It does.
The real issue is whether local communities are negotiating from strength or merely absorbing the burdens of a national buildout because they have open land, access to infrastructure corridors, and fewer immediate barriers to industrial-scale construction. Those burdens include farmland conversion, visual industrialization, traffic, dust, noise, water-system pressure, transmission buildout, and the risk that residents are told to celebrate “the future” while receiving only modest long-term employment and reduced near-term tax capture.
Texas may well become the country’s premier AI infrastructure state. But if that is going to happen responsibly, local governments need stronger siting rules, harder cost-recovery disciplines, tighter water protections, clearer community-benefit expectations, and far more honesty about what these projects actually are. They are not just tech campuses. They are industrial energy consumers at strategic scale.
Frequently Asked Questions
What is driving the AI data center boom in Texas?
Texas offers large sites, a historically business-friendly development environment, and access to a large independent grid through ERCOT. At the same time, AI workloads require enormous, always-on computing capacity, which means developers are looking for places where they can build quickly and secure large blocks of power. Texas is now projected to become the nation’s largest data center market in the near term, and ERCOT has reported a sharp jump in large-load interconnection requests.
Why are west San Antonio and Medina County seeing so much interest?
The west San Antonio–Medina County corridor has developable land, proximity to transmission infrastructure, and an existing cluster of data center activity. CPS Energy told San Antonio officials it already serves 21 data centers and is tracking dozens more potential projects, which is one reason city leaders are now discussing zoning and buffer rules for future facilities.
Why are local residents concerned about land use?
Because these facilities are physically large and visually industrial, even if the product they deliver is digital. Data centers can convert farmland or rural land into fenced campuses with large buildings, substations, security infrastructure, lighting, and access roads. In Medina County, local reporting has already documented concerns about farmland being replaced by industrial-scale development.
Do data centers use a lot of water?
They can, especially depending on cooling design. San Antonio officials say local data centers currently use only about 0.1% of SAWS’ drinking water and have shifted heavily toward recycled water, with recycled water accounting for 75% of data center water use in 2025. But officials also say new projects are seeking additional drinking and recycled water, and spare recycled-water system capacity is not unlimited. That means water may be manageable today, but it becomes a more serious issue as more facilities are added.
Why is water a bigger issue in Medina County than in some other places?
Because Medina County utilities are smaller and have less margin for large industrial loads. Local reporting says some utilities have required developers to bring their own water rights, and at least one proposed facility initially sought an amount of water equal to a large share of an entire local system’s use. In dry parts of Texas, that makes data centers more than ordinary commercial customers; they become utility-shaping customers.
Do data centers create a lot of permanent local jobs?
Usually not. They can create meaningful construction employment during the build phase, but the permanent operating workforce is typically modest relative to the size of the investment and the physical footprint. Brookings has highlighted that many communities are now questioning whether the long-term economic spillover from data centers is as large as promised beyond construction activity.
If they do not create many long-term jobs, why do local governments want them?
The main attractions are construction spending, expanded tax base, utility revenue, and the prestige or strategic significance of hosting major infrastructure. But that benefit depends heavily on how tax abatements, land-use impacts, utility costs, and infrastructure burdens are handled. That is why the debate is shifting from “Is this investment?” to “What are the actual terms for the community?”
Could ordinary households end up paying for the infrastructure needed to serve these facilities?
That is one of the central concerns. The White House’s March 2026 Ratepayer Protection Pledge says participating hyperscalers and AI companies will pay for all new power-delivery infrastructure upgrades required to serve their data centers so those costs are not pushed onto ordinary households. The fact that this pledge was made at all shows that ratepayer cost shifting is a real public-policy issue.
Why is ERCOT under pressure from data centers?
Because AI data centers are not small incremental loads. ERCOT reported 225 new large-load interconnection requests in 2025 and said those represented a 270% increase in megawatt demand since January. ERCOT is also tracking approximately 239 gigawatts of load seeking interconnection, which shows how quickly new power demand is stacking up against the system’s planning and transmission processes.
Why does Abilene matter to this discussion?
Abilene shows what AI infrastructure looks like when it reaches strategic scale. OpenAI identifies Abilene as one of its key AI campuses, and Crusoe has said the site is being expanded to roughly 1.2 gigawatts across multiple buildings. That is no longer a routine commercial project. It is industrial-scale infrastructure, and it illustrates what other Texas communities may face as AI buildout accelerates.
Why is nuclear energy suddenly part of the data center conversation?
Because AI data centers need firm, around-the-clock power, and there is growing recognition that intermittent sources alone will not meet all of that need. The IEA says renewables and nuclear together are expected to provide nearly 60% of data center electricity consumption by 2030, up from 35% today. Major technology firms are also moving in that direction: Google’s Kairos agreement targets up to 500 megawatts by 2035, and Meta announced nuclear-related projects totaling up to 6.6 gigawatts to support U.S. AI leadership.
Is nuclear a near-term solution for west San Antonio and Medina County?
Not likely as an immediate answer for projects needing power now. Nuclear is increasingly a medium-term strategic option, especially for very large, always-on AI loads, but the near-term Texas answer is still more likely to be a mix of grid upgrades, transmission expansion, natural gas, renewables, storage, and stricter cost-allocation rules. Nuclear is credible, but it is not yet a plug-and-play local fix for every project in the pipeline.
What should local communities insist on before approving or supporting more data centers?
They should insist on clear siting rules, meaningful setbacks and landscape buffering, hard limits on cost shifting to residents, transparent water commitments, and tax arrangements that reflect the real long-term local benefit rather than just the headline capital-investment number. Brookings’ recent work argues that communities have more leverage than they think and should negotiate for durable local value rather than treating these projects as routine real-estate deals.
References Cited
- San Antonio Report. “San Antonio has over 20 data centers and more on the way.”
https://sanantonioreport.org/risk-opportunity-san-antonio-water-electricity-data-centers/ - San Antonio Report. “Data centers replacing Medina County farmland, straining resources and nerves.”
https://sanantonioreport.org/medina-county-farmland-data-centers-strain/ - San Antonio Express-News. “As tech centers bloom in the Hill Country, where will the water come from?”
https://www.expressnews.com/hill-country/article/data-centers-medina-county-microsoft-rowan-water-20239617.php - San Antonio Express-News. “Denver company building $900M hyperscale data center west of San Antonio.”
https://www.expressnews.com/business/article/rowan-digital-medina-county-lytle-data-center-20815729.php - Texas Tribune. “Texas forecast to be top market for data centers in two years, increasing grid demand.”
https://www.texastribune.org/2026/01/20/texas-top-data-center-market-power-grid/ - ERCOT. “System Planning and Weatherization Update” (PDF).
https://www.ercot.com/files/docs/2025/12/01/16.2-System-Planning-and-Weatherization-Update.pdf - ERCOT. “2025 Report on Existing and Potential Electric System Constraints and Needs” (PDF).
https://www.ercot.com/files/docs/2025/12/23/2025-Report-on-Existing-and-Potential-Electric-System-Constraints-and-Needs.pdf - Brookings. “Turning the data center boom into long-term, local prosperity.”
https://www.brookings.edu/articles/turning-the-data-center-boom-into-long-term-local-prosperity/ - OpenAI. “Stargate Community.”
https://openai.com/index/stargate-community/ - Crusoe. “Crusoe expands AI data center campus in Abilene to 1.2 gigawatts.”
https://www.crusoe.ai/resources/newsroom/crusoe-expands-ai-data-center-campus-in-abilene-to-1-2-gigawatts - U.S. Department of Energy. “Artificial Intelligence.”
https://www.energy.gov/topics/artificial-intelligence - The White House. “Ratepayer Protection Pledge.”
https://www.whitehouse.gov/articles/2026/03/ratepayer-protection-pledge/ - International Energy Agency. “Energy and AI.”
https://www.iea.org/reports/energy-and-ai - International Energy Agency. “Energy supply for AI.”
https://www.iea.org/reports/energy-and-ai/energy-supply-for-ai - Constellation. “Constellation to Launch Crane Clean Energy Center, Restoring Jobs and Carbon-Free Power to The Grid.”
https://www.constellationenergy.com/news/2024/Constellation-to-Launch-Crane-Clean-Energy-Center-Restoring-Jobs-and-Carbon-Free-Power-to-The-Grid.html - Meta. “Meta Announces Nuclear Energy Projects, Unlocking Up to 6.6 GW to Power American Leadership in AI Innovation.”
https://about.fb.com/news/2026/01/meta-nuclear-energy-projects-power-american-ai-leadership/
