The Texas midterm elections are prompting fresh questions about the state’s business environment, from data center development and tax incentives to environmental permitting and corporate governance. As new state leaders prepare to take office, businesses should expect shifts in regulatory priorities, greater scrutiny of certain projects and incentives, and opportunities to help shape the legislative agenda.

1. Data centers will be a central focus of the next legislative session.

Proposals under discussion include requiring data centers to cover the power costs and water usage associated with their projects, expanding opportunities for community input, increasing developer transparency and requiring union labor for construction. Tax incentives are also under scrutiny. These proposals address concerns about whether large projects could increase utility costs or reduce resource availability for existing customers. The details of any legislation will matter: how costs are calculated, which projects are covered and how new requirements apply to projects already under development remain key questions.

2. ERCOT’s large-load process remains a near-term priority.

ERCOT’s batch review process currently applies to projects meeting a 75-megawatt threshold. Proposals to lower that threshold could bring additional projects into the process, affecting manufacturers and other large electricity users. Environmental permitting and electricity interconnection involve separate requirements. A manufacturing facility may be outside a data center-specific permitting restriction while still facing large-load interconnection requirements. Both processes can affect when a facility begins operating.

3. Incentive programs may face new priorities and more detailed review.

The Texas Enterprise Fund, Texas Semiconductor Innovation Fund and JETI program involve discretionary decisions about public support for private investment. Eligibility is one component of an award decision, alongside program priorities and the merits of an application.

A transition in leadership may bring different funding priorities, additional questions and longer application reviews. Businesses should be prepared to explain the public benefits of proposed investments, including jobs, capital spending and local economic effects. Project budgets should clearly distinguish requested incentives from approved commitments.

For data centers receiving sales tax exemptions, compliance with investment, employment and timing requirements remains essential. Contracts should also clearly address responsibility for taxes if an expected exemption is unavailable.

4. Environmental oversight could change before the underlying statutes do.

Texas’ environmental programs operate under existing statutes and rules, providing continuity through a political transition. Agency interpretations, enforcement priorities and permit-review practices can change within that framework. Legislative changes could affect public participation and penalty assessment for noncompliance. Companies evaluating project schedules should confirm the scope of applicable permitting requirements and associated timeframes for agency review and permit issuance.

5. Local concerns will remain central to project development.

Cities and counties are taking a more active role in reviewing data centers, battery storage and renewable energy projects. Issues include setbacks, road access, fire safety, water demand and the adequacy of local infrastructure. Municipal and county authority differ, so requirements will vary by location. Companies should engage stakeholders, explain project impacts clearly, answer questions about resource use and infrastructure, and provide meaningful opportunities for community discussion. State approvals and local requirements each deserve attention.

6. Texas’ recent bipartisan corporate law reforms provide continuity through the transition.

Texas’ bipartisan 2025 corporate law reforms, including Senate Bill 29, established statutory standards governing corporate decision-making and certain shareholder claims. Neither party has expressed an interest in reversing these statutory standards, and in any event doing so would require legislative action. For companies considering Texas incorporation or reincorporation, the relevant questions remain the same as before the election: the protections available under the statute, the provisions a company may elect to adopt, and how those choices fit its governance needs. Unlike Delaware’s corporate law which is largely based in caselaw, Texas corporate law is primarily statutory in nature with little flexibility for judicial interpretation.  However, around the margins, courts will continue to interpret and apply those provisions in individual cases.

7. Leadership changes will take time to translate into policy.

Agency appointments and subsequent decisions will provide clearer indications of the state’s regulatory priorities. For businesses, the practical effects will depend on the actions agencies take, the requirements they adopt and when those requirements become effective.

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For more than 185 years, Baker Botts has helped clients navigate the legal and business issues shaping Texas. Our lawyers advise across energy, environmental regulation, tax, project development, corporate governance and litigation, bringing multidisciplinary experience to matters involving state and local government. We encourage you to reach out for guidance on any issues, and we will continue to monitor for any noteworthy actions.

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