Part Four: Two Texas Cities that Are Reexamining Data Center Deals

DUKE REITER
Hello, and welcome to ten Across Conversations. I’m Duke Reiter Today, our series exploring the impacts of an aggressive AI buildup on already strained resources in Texas concludes in interviews with Texans of all backgrounds and disciplines. We’ve had a unique window into how the next industrial revolution is playing out in the second largest state in the country, one with ambitions to be the major data center market.

At the end of the episode, we’ll reflect further on the implications for the entirety of the ten across region. Before we introduce today’s guests, here’s a quick recap of what we’ve already covered. We began the series with a look at the critical state of water in Texas. Due to rapid economic and population growth. By 2070, civic and political leaders are expecting state water supplies to be short 7 million acre feet annually.

That’s about half of current statewide demand. Although billions in state funds were recently approved for new water augmentation strategies, our second episode showed that a lack of regulatory oversight has left data centers one of the fastest growing consumers of water in Texas. Out of these plans, local utilities are struggling to account for future demands until this information becomes available.

Our third episode looked at changes in the Texas approach to energy, including its long established fossil fuel industries, surprising leadership in renewables, and a recent policy push to develop nuclear power. This focus is important as state energy trends often create unforeseen ripple effects in local water supply and economic development planning. All of this leads us to our final installment in the series.

We’re traveling to San Antonio and El Paso, two cities in the ten across geography that are quickly discovering how one AI data center, let alone several, can impact local resources and planned growth well into the future. Our first discussion is with San Antonio City Council member Rick Galvan. At 25, he’s among the youngest members ever elected to the council.

Last fall, Rick introduced a bold measure to reform the city’s approval process for permitting new data center developments, sparking some frank public discourse about the real returns these facilities bring to the city in exchange for the demand on resources and land. We’ll also hear from Bob Moore, founder and CEO of the independent nonprofit Newsroom. El Paso Matters about the challenges of covering this high stakes AI race, especially as it takes place in more rural areas where media coverage and civic engagement can be spread thin.
First, let’s hear from Rick.

DUKE REITER
So, Councilman Galvan, thanks again for joining us today. Thank you so much for having me. Let’s get right into it. You have been pretty vocal about suggesting that more definitive analysis is required to understand what data centers mean when they’re built, the implications after they’re built as the draw on resources becomes pretty profound and the impact on communities.

And I think you had a very important meeting on March 4th. Tell us about that meeting and what you were seeking in terms of the kind of analytics you think are required?

RIC GALVAN
Yeah, just a quick background. District six city council that I represent here in San Antonio had the largest concentration of data centers in the entire city and county here in Bexar County.

And that has become a major concern for a lot of our residents about, well, what does this look like for us locally, and what has it been like given the fact that these data centers have been here for about ten years? And so with that, we introduced our first policy initiative about data center regulation in terms of their growth.
We introduced that back to the November of last year in 2025. This sparked a wonderful conversation locally. Very grateful to the residents who have back me up on it and continue to push on my council, probably given the fact that more data centers are looking to be located not only in my district, but in other parts of the city as well.
And so after a couple months of city staff working with our municipal utilities, source for water, CPS, energy or energy, they came together and presented to us at City Council earlier this month and shared a bit about what they’re thinking.

DUKE REITER
So it seems like one of the first orders of business in taking this on is the very definition of a data center.
And if I’m not mistaken, under your previous zoning or maybe existing zoning data centers were considered to be something like generic office. They weren’t a separate category of activity. And not only San Antonio, but certainly happening here in Arizona and places in Texas trying to describe what these things are. Some see them closer to heavy industry. Some might see them another way.

Talk about the definition of a data center that you’re seeking that would allow people to understand it in terms that are different than, let’s say, an office building.

RIC GALVAN
right? Funny enough, I just got a message from one of my council colleagues yesterday where they sent over the next steps that Tucson is taking as well, and some of their definition work in Arizona.

And so we’re looking at 20 other cities to see what things are. They formulated that work within their state bounds, those within our own and really listen to, statewide zoning rules and regulations. And so here locally, right. To your point, we definitely consider data centers as simply office space that can be zoned within commercial use, that can be sold within industrial use.
They like to. But the commercial ones, I think, where a lot of our residents are a bit more concerned about, because it means that so many of the places along our major commercial corridors are eligible for data centers that pop up in without much community input, without much analysis about how they may impact the larger area or the natural resource in our community.

So all that being said, we’re working on a way to this. I’m advocating for putting them within industrial use and getting a specific use authorization. And that’s a really key component.

DUKE REITER
Are your residents and your constituents happy with the changes being proposed or the definitions being established? Are they satisfied with those?

RIC GALVAN
Yeah. And so last week we had a neighborhood meeting that we went out to, and almost the entire neighborhood came out to and talk with us.

And the number one question they had was about data centers and their concerns around traffic, around noise, around environmental concerns are being heightened by this industry growing in the area. And so they were very excited to hear that this was going on, thanks to myself in my office pushing this forward. But I couldn’t do without them. Right. And so that input has been really helpful to share with my colleagues, because there’s some conversation that council where it’s not fair to say, well, these antennas aren’t impacting our rates directly or, oh, these data centers, you know, still provide some good economic benefits.
And while there are some components we can debate there, it’s largely true. I’m always grateful to be able to share. Well, just because it’s not happening in your district just yet. I’ll tell you what it looks like right now. And by implementing these rules, we’re not only helping the neighborhoods that have long been overlooked on this issue for years.

We can also help other districts and other neighborhoods throughout our entire city dealing with having the that is in there, right next to someone’s home or separated by a fence. It looks like it is described by residents a giant jail cell.

DUKE REITER
It’s surprising how residents are boning up on these issues like that. They’re aware and of course they see their water bill, they see their power bill, and there’s concerns about changes to both of those, depending on how much of a draw there is.
The data centers, what do your constituents say? About that in terms of a concern? And how big of an issue is it for San Antonio to actually support these facilities?

RIC GALVAN
Yes, this is a major issue, a major part of the conversation. I think everything else I mentioned is still crucial to the quality of life concerns, but this is something that also has become a growing issue.

So when we own both our entry rider and our water provider here, and I’m very grateful for and I think gives us an opportunity right when we talk about what this regulation to look like, what the amount of resources are utilizing, we have the access to information because we own them. And so that’s really great. But given that there’s also different needs right in our community for both our utilities aging wastewater treatment plants, aging transmission lines and the need for new infrastructure, as well as we continue to grow as a city, is one of the fastest growing cities in the country, and so with all that, city council has raised rates for CPS for our energy provider twice in the past five years, and sources coming for our rate increase this year, as well as CPS later on in the fall. And so it’s kind of been a double, triple, quadruple punch here for a lot of our residents who are seeing their rates go up and up and up. And then our also seeing this growing industry come in as well.

At the same time, we’re hearing from our cities that we need a whole bunch of new money to invest in new infrastructure. So who is this infrastructure for? It became a larger question and who’s paying for it actually, and this has transcended neighborhoods all across my district that are further away and across the entire city who are saying, well, wait a minute, am I just subsidizing these connections here?

And what can we get out of that in that conversation? If anything goes forward?

DUKE REITER
Well, if you will. I mean, this is a national issue. Cities want the business, so to speak. They would like tax revenue and all kinds of other things. And so I think you’re reaching out and encouraging these companies to consider you. But at the same time, you want certain things in return.

And I’m sure that would be important to you as a council person to say, yeah, we do have this thing here. We’re doing our best to mitigate whatever the downsides might be, but for our schools and other things, we think we can make improvements, maybe even for your university. Do you think you’re pushing that argument as far as you can to get the benefits of this to the point where you’re not driving them away, and there must be a real fine line there?

RIC GALVAN
Yeah, and the fine line is difficult to walk, but I think we don’t. I try my best to do a good job. I think many my colleagues have showed their own support in their own way about how can we make sure that the infrastructure required to not impacting our residents is severely. However, we know that if we can get a lot of these to directly fund through some kind of agreement with our sales tax or our property tax revenue and or just a general alignment on resources, can we make sure that the revenues are going into education that’s needed for the right construction workforce, needed for these entities?

Right. Because it’s a lot of electrical work, it’s not so much as maybe an office building or other kind of buildings. And so there’s sometimes a need for a certain skills onsite for that construction. So can we work with the local school districts in the area and the local community colleges to make sure that our students here are able to actually benefit from those construction jobs, versus having folks come in from out of town, move in here and have to do that work until it’s done, then leave.

That’s something I think is part of the conversation there, along with right looking at other ways to invest in our physical infrastructure. There’s a little bit of conversation from our water utility asking, well, you know, we have this recycled water pipe program that goes throughout our city. We have one little missing piece there that helps us really move all this water around.
We already have dozers locating along them. Can you find a way to get that last little bit funded and some kind of joint partnership that it supports them? And of course, our sites that we do have to raise rates on our residents to finish that lateral pipeline.

DUKE REITER
As you’re getting further into this, is there a point? I think there are some 20 data centers in the San Antonio area region have. Is anybody done a back of the envelope saying, you know, I think 30 is our limit as is starting to happen. You saw it happen in Tucson. They’ve been they pushed to an opportunity outside the city and other places. There is a fair amount of pushback happening, but is there a limit and a point where you’ll have to be saying to some of these hyperscalers, I’m really sorry, you’re going to have to find another location. We would prefer that you do that.

RIC GALVAN
Yeah, I think it’s a little bit of a push and pull that. And I think this is a general rule for any kind of utilities overall, though, is trying to, always find a way to provide the customer the energy and water connection that they need in the area that they’re requesting.

So long as we can do that, then we’re good to go. We may take some time to do that. I think that’s what we’re looking at. City council, the larger level about what the timeline is for a lot of these entities, we have a pipeline of about over 50, I think, over the next couple of years. I think it’s what the next three years?

DUKE REITER
Wow. 50 in addition to your 20 that you already have. So you could be up to 75 units?  Wow.

RIC GALVAN
Right. And so some of the things that I mentioned earlier, right. Keep asking the questions about, okay, well how many of you are actually getting are going to be owned by somebody already or you’re going to have contracts signed today because otherwise we’re not going to build an infrastructure for a speculative industry.

Frankly, what’s been very exciting and encouraging. So similarly saying, you know, how much water you can actually utilize, are you a hyperscaler or not? And how can you provide that information outwards to our city planners as well, and to a larger public is really critical. And so I think those conversations are already looking at not just saying, yep, you’re wanting to come in, here’s a site, let’s do it, but actually answer the question, can you actually be a feasible company here?

So I’ve been really encouraged by those conversations. I don’t know if those were happening beforehand. I’m sure they were in some form, but I think there’s been a increased pressure to look at this, to take decisions based on the policy that we put forward.

DUKE REITER
Part of me, as I look at these things being built at the pace they are and the money going into them thinking ten years from now, are they going to be functioning exactly like this?

And we need them in that format? Or will something some other technological development have happened to suggest we could do this another way? And does that cross your mind, and are you interrogating that or having people really try to understand what the demand is at the moment and what it might be a decade out?

RIC GALVAN
That is something that the industry has talked to me a lot about. I think you may have come from a different point of view a little bit, but the point was made right. As you continue to evolve as a chip manufacturing industry changes and alters, we know for sure that these buildings are going to be shifted in some form. They talk about the history of how they used to have them, even here locally, where they would stack and really close to each other a second one on top of each other.

And we’ll try to find the right way to configure even the physical site. So that way there was a better internal cooling going on there. And so I think those things will definitely shape and shift as we go forward. And I think being able to be a little bit flexible in terms of what the buildings I can look like and being able to accommodate those changes are going to be crucial.

And I think also requesting that site plan is going to be critical because they can always change it. But having those conversations publicly is going to be important to understand. Oh, you know what? It’s not just a new mega data center coming here. They’re actually shifting their operations to look this way. Maybe it’s better for the community overall.

And so being able to have that, I think trust is going to be crucial not only between leaders and folks in the industry, but with the communities that we’re serving to be able to show that work out and say this, are we being good partners in our larger city development? Because there’s a conversation my zoning director and I often have about these are these are going to be here one way or another, whether they’re doing AI or they’re doing just simple data storage.

We have to find a way to make them work for our communities the same way we did, with, frankly, electricity, with the railroads, with any new technology technological around, it’s changing our society. Even the internet itself. Right. That’s what it largely is. And so being able to understand that, being able to be reasonable with those conversations is, I think, the focal point for it.

DUKE REITER
Yeah. Well, Councilman Gavin, thank you for your time. This has been really informative and we appreciate it.

RIC GALVAN
Thank you so much.

DUKE REITER
Have to stay in touch. All right. Take care.

DUKE REITER
Ric’s final thought in our discussion echoes another we had with Michael Weber in our last episode. Each preceding Industrial Revolution is brought about by the introduction of new energy systems, which in turn shape the economy and the built environment. The race to realign zoning and resource policies in San Antonio before new AI developments materialize shows that communities want to navigate this next wave of technology successfully and avoid limiting land use, infrastructure, and economic commitments.

Now we’ll hear from Bob Moore in El Paso. Two years ago, his city council approved permits and a very generous tax abatement for a data center project planned by meta, the parent company of Facebook and Instagram, which is investing heavily in proprietary AI infrastructure. Like many projects of its kind, it moved through the city zoning process very quietly due to a nondisclosure agreement obscuring the facility’s ownership, long term resource needs and growth plans.

Based on recent reporting from El Paso Matters, Meta’s one gigawatt facility will run on over 800 small gas fired generators, represented to be water line, but expected to emit significant amounts of carbon monoxide and nitrogen oxide. The company has also reversed course more than once on how it plans to source its energy. Why did meta choose El Paso?

What motivated El Paso to agree to such generous terms? And what has the public response been since Bob’s account of this process speaks to what is perhaps the core issue raised by our series? How can communities best protect their interests when negotiating with some of the most powerful corporations in the world?

DUKE REITER
Good afternoon Bob. Thanks for taking the time to talk with us today.

BOB MOORE
Always great to chat with you Duke.

DUKE REITER
You and I had a chance to speak when you were here at a conference in Phoenix. Built around AI. And AI is made possible by what are turning out to be very large facilities that are hungry for both energy and water. What makes El Paso attractive for major data centers or high end users of AI?

BOB MOORE
So two main factors I think one is availability of inexpensive land, and two is a political environment. Here that has sort of bent over backwards to attract new facilities. You know, the average private sector wage in El Paso is like two thirds of the state national average. And because of our low income rates, El Paso’s property tax system is heavily tilted toward residential.
And so the city’s been desperate to bring in more commercial properties. So we often really put a lot of incentives out there. And I think other communities don’t have to in order to attract things. And that’s certainly proven to be the case with the largest data center that’s being built in El Paso, which is built by meta. And I’m sure we’ll talk some more about that.

DUKE REITER
Diego Mendoza munoz of your staff did a really nice podcast about this facility, and we’re going to put a link to it in our show notes so that people can hear that. But he focuses on the need for what I think is 400,000 gallons of water per day. But also the abatement that you just mentioned. These places would seem to find El Paso attractive for a whole lot of reasons.
Is that essential that that kind of incentive is required to get them there?  

BOB MOORE
A lot of really smart people in the business world have told me, no. The city government, when they approved a meter data center in 2023, I don’t even think they even contemplated not offering incentives. I think there’s some remorse from local government now, as these things have become more in the forefront across the country, and it’s clear that that El Paso did some things that other communities haven’t done.

So, you know, we basically gave tens of millions of dollars in incentives to a $2 trillion company that has tens of billions of dollars of cash laying around. And by the way, that is commitment in this long term is 100 regular jobs. So this is not going to be a job creator outside of the construction work that’s going to be done.

That’s also worth noting that when the deal was initially signed in 2023, has said that it was going to use solar and other renewables to power this facility. They have reversed and now say, oh, we can’t bring solar online fast enough, so we’re going to build a massive natural gas plant, which, yeah, it has all kinds of environmental consequences for El Paso and certainly climate change impacts to that solar wind bring, I will say that the Public Utility Commission, which is the electric regulator in Texas, has basically told El Paso Electric that you need to wall off the investments you’re making for this meta facility and charge those to meter and not allow it into the rate base. But the agreement that meter has with El Paso Electric is only for five years. So at the at the end of that time, we’re going to have this natural gas facility that cost hundreds of millions of dollars. And we’ll have, you know, large ongoing operational costs.

DUKE REITER
So that’s the way to handle the energy demand. Is there anything about the water side of this equation that will affect how El Paso currently manages this water?

BOB MOORE
Yeah. So that a couple of answers to that. The first is I think we have to acknowledge El Paso water has a great track record in conservation efforts. It’s been one of the leaders in the country, especially in desert areas on conservation. John Bellew, the CEO, is a top rate water executive. So they’re on top of this. And one of the first things I’ll point out is that 400,000 gallons a day is a large amount of water, no question about it. But it does not place matter in the top ten water users in El Paso. Most of our top water users are government entities school districts, El Paso Electric is by far the largest water user, because those natural gas plants require a lot of water to keep cool.

But the one interesting thing that John Blue told Diego, a few months ago that really caught my attention, the data center is going to be a part of Northeast El Paso, which is right up toward the New Mexico state line. A lot of empty area out there. That’s a dream for a long time. To get a car manufacturer out there, for example, hasn’t happened, but I think El Paso would still like to to get a manufacturing center out there.

But but John Blue told Diego that we can’t put another data center in northeast El Paso, not because there’s not enough water, but because we don’t have the infrastructure to move the water out. There’s just not enough piping to to build a second data center. And that got me to thinking that there’s a potential opportunity cost here, that by making this deal with Meta, El Paso may have foreclosed other economic development opportunities around manufacturing facilities that would be very water intensive.

DUKE REITER
The other thing I wanted to talk to you about, we talked about the basic, needs of these places in terms of water and energy. You describe the pretty modest employment affiliated with them. But being a journalist, I think you’ve suggested that because these are pretty big, complicated places and maybe not everybody is immediately a yes, going into a place that has less than robust coverage from a journalistic point of view might also be an advantage.

In addition to making sure you’ve got the power and the water to do that as a journalist, talk about the role of what you try to do to communicate what’s happening so people are aware.

BOB MOORE
Yeah. So this is a basic democracy question for me, right. About how we operate as a society. And, you know, that means our elected officials are making decisions on behalf of the voters, that requires voters having information about what’s going on.
And as you seen, the degradation of traditional media across the country, it’s become harder and harder for people to follow their local governments in particular. And I’m not saying that these massive tech companies are particularly targeting, news deserts. I think that becomes kind of a side benefit for them because they increasingly they’re moving away from heavily populated areas and more to less populated areas.

That certainly was the case with with the Metta facility that was approved in 2023. You know, El Paso matters is a really small news organization. We have five reporters, and four other people working in the newsroom. And so, you know, we’re we’re obviously stressed and we’re healthy compared to most news organizations in El Paso. And so in 2023, the El Paso City Council had this facility that was code named, it was not we never knew it was meta, until after the deal was done.

And so there was really no public conversation nor, unfortunately, much media coverage. And this is something that alone, we did not kind of recognize the importance of this quickly enough and weren’t able to inform the community. And so it really wasn’t until last year that people in El Paso really became aware of this data center. So almost two years after the deal got signed, and, you know, immediately people are getting upset, about the water issues and other things.

And their first question is, how can we stop it? You know, the sad answer to that is you’re two years too late and and so I think we’re seeing this playing out all across the country.

DUKE REITER
And certainly El Paso Matters is a standout institution in this country. But these issues are really hard to suss out. Now that this has happened in the long term, let’s assume these facilities are up and running.

You’re there. What are the tools you’d like to see in place or what are you needing to build up in terms of your capacity to monitor the situation?

BOB MOORE
There’s several things we have to do. First of all, meet A has to meet conditions to get the city tax benefits. So we need to stay on top of that. As a media organization, I hope other media organizations do.

El Paso city government has a really poor history of kind of monitoring these agreements and making sure they’re being delivered on. So if the city’s not going to monitor, somebody else has to. I do think that a lot. There’s some community groups that are coming online. They’re also going to get involved in that. We have to monitor the Public Utility Commission to make sure that they’re living up to the promises they’ve set for now, that basically requiring El Paso Electric to wall off these meter expenditures.
The next rate case from El Paso Electric probably is 4 or 5 years out. I may or may not still be in journalism at that point. So I need to build an infrastructure here that like, hey, 4 or 5 years out, we need to really go through the electric company rate application to make sure they did all this,same with water. We have to, have journalist understand water issues and understand regulatory issues that can really dive into that.

And that’s not something that most small local news organizations have historically had. You know, we have a city hall reporter and a county reporter. Schools reporter. But these are highly technical areas that we have to get more involved in.
And there are a lot of, you know, good new support organizations out there in the country. Now, that’s something that I think they need to focus on is providing the training opportunity and the skilling opportunity, not just in journalism, but in other community groups and other groups that are interested in these issues. This can’t be a trust me issue.
The stakes are way too high.

DUKE REITER
Too high, and the scale of the issues is enormous, and the technical complexity is are profound. So, Bob, thank you so much for taking the time to chat with us about this. And congratulations on all that you do with El Paso matters. We appreciate you as a friend, and I hope we can do some more things together.

BOB MOORE
Yeah. Thanks, Duke. I appreciate the conversation.

PODCAST OUTRO
The power struggles and transparency issues surrounding data center development are playing out across the country, but Texas offers an especially compelling lens given its scale and ambitions. Many of the guests we spoke with understood that AI and data infrastructure development is of state and national interest. At the same time, they all underscored the need to clearly and carefully consider impacts at the local level.

Ten across is dedicated to connecting communities on the front lines of social, economic and environmental change and seeking to highlight actionable ideas around proactive resilience planning. Therefore, we want to close with a short list of takeaways we gleaned from these decision makers and residents caught in the middle of the relentless Texas AI build out. They are as follows.
First, local utilities must recognize their influence in shaping and clarifying a project’s impacts in much of Texas. While utilities are legally obligated to connect any customer where supply exists, AI developers bring a sense of urgency and access to capital that has created opportunities for compromise and negotiation. Strategic questions about the facilities, consumption efficiency standards, and long-term growth should be routine in every application process.

Second, states need to plan for the possibility that today’s boom might be tomorrow’s burden. The AI industry is cash rich and moving fast, but the dot.com collapse of the early 2000 provides a sobering reminder that technology infrastructure can become stranded assets overnight, while local financial and land commitments endure. Lastly, winning a development agreement is not the same as winning for the community.

An investment from an industry giant like Google or OpenAI may generate exciting headlines today, but does it create lasting outcomes for employment and public revenue? Does it give back to the systems that sustain it, or does it create excess strain on current rate payers water and energy supplies? A data centers value should be evaluated not only by a desire to participate in an AI driven future, but also by the implications of a changing climate, unpredictable employment trends, and the fluidity of technology.
Cities and states throughout the I-10 region are among the most growth oriented and competitive in the US, but here the growth mindset also intersects with intensifying environmental constraints. Paying attention to our knowable future reminds us that private investments must offer more than name recognition or pure dollar value. But rather should act as a vehicle by which communities can advance social, environmental and economic resilience initiatives.

We thank you for listening and engaging with these conversations. Please feel free to send your thoughts or tips for what we should cover next to tenacross@asu.edu. That’s tenacross@asu.edu.

This episode was written and produced by Taylor Griffith and edited by Kate Care for research and additional support was provided by ten across team members Ray Ulric, Kelly Saunders, Maya Cherry and Sabina Butler. Special thanks to our guests Rick Allen and Bob Moore. If you enjoyed this discussion and would like to hear more, be sure to follow us wherever you get your podcasts or subscribe to our newsletter at tenacross.org.

That’s the number ten across.org. We’re also on LinkedIn, Instagram and X with the handle ten across. I’m Duke Rider. Thank you for listening.