In August, Gov. Greg Abbott ordered ERCOT to audit the data centers seeking to connect to the grid, pausing ERCOT’s batch zero study of the first cohort for a new process to connect large loads as a group. In September he told the Texas Commission on Environmental Quality to halt data center permits.
Rep. Drew Darby, the San Angelo Republican who chairs the House Energy Resources Committee, wants harder terms for those projects: data centers pay their own way, show they have tenants and financing, and earn support from the towns that host them. His 2025 bill, House Bill 3970, offered a faster path to the grid for large loads that bring their own generation or agree to cut use on ERCOT’s call. He faults the delay and says “the worst thing we could do is throw batch zero out.”
On this week’s Energy Capital Podcast, Joshua Rhodes talks with Darby about large loads and the infrastructure rural Texas carries for the rest of the state.
The rest of the conversation:
Dove Creek and speculative load: Darby says Beacon Data Centers left Dove Creek residents without answers on water, power and noise. One project shopped to five towns, he says, becomes 5 gigawatts of demand on paper.
The data center tax break: The 2013 sales tax exemption for data center equipment was pegged at $14.6 million for 2014-2015. The Senate Finance Committee projects $3.3 billion for 2028-2029. Darby would rework it rather than repeal it.
The 765-kilovolt review clock: Darby backs the new transmission lines but wants to add at least three more months to the Texas Public Utility Comission’s 180-day review. On one line, he says, 1,400-plus landowners were added to the review process late with no extra time.
Produced water: Oil wells bring up two to five barrels of brine per barrel of oil. Darby puts injection at 50 to 75 cents a barrel and treatment for reuse at about three times that. He counts three permits pending at TCEQ to discharge treated water into the Pecos River basin.
Rural representation: By Darby’s count, 17 House members represent the two-thirds of Texas west of Interstate 35. Harris County alone has 25.
After November: Darby credits the 76–74 House of 2009 with getting its work done because members worked together.
Plus: grid-enhancing technologies and HB 5200, which passed the House 128–0 and never got a Senate hearing, and how Tom Green County got its panhandle.
Chapters
00:00 - Welcome and Tom Green County’s panhandle
03:10 - Why data centers lost public support
05:12 - Making data centers pay their way
08:04 - What cities miss about rural Texas
12:24 - Keeping data center hookups moving
15:40 - Dove Creek and projects on paper
20:04 - What data centers owe host towns
22:11 - More time for landowners on power lines
29:34 - Getting more from existing power lines
32:00 - Oilfield wastewater as new water
38:27 - How much oilfield water Texas could use
40:23 - The election and working across the aisle
Resources
People & Organizations
Company & Industry News
KBTX - Abbott pauses data center permits pending water and power review
KERA - Texas lawmakers question billions in tax breaks for data centers
San Angelo LIVE! - Darby reacts to Dove Creek data center TCEQ permit application
Texas Tribune - Pressure mounts to allow treated oilfield waste in Texas rivers and on rangeland
Books, Articles & Filings Discussed
Office of the Governor - Governor Abbott directs comprehensive data center audit
ERCOT - New batch connection process for large electricity users
Texas Legislature - HB 3970 (89R), expedited large-load interconnection
Texas Legislature - HB 5200 (89R), grid-enhancing technologies
Legislative Budget Board - HB 1223 (83R) data center sales tax exemption fiscal note
Utility Dive - Texas regulators approve Permian Basin Reliability Plan
Related Podcasts by Energy Capital
Transcript
Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. I’m really excited to have Representative Drew Darby here to talk about kind of how rural Texas is dealing with, you know, these load growth, large loads, data centers, transmission, all the things we talk about when we’re talking about energy today. So Representative Darby is a member of the Texas State House of Representatives from his native San Angelo, Texas, where he represents District 72, which comprises the West Texas counties of Coke, Concho, Glasscock, Howard, Irion, Reagan, Runnels, Sterling, and Tom Green. And he’s also chairman of the House Committee on Energy Resources, so we obviously wanna talk to him. So Chairman Darby, welcome back to the Energy Capital Podcast.
Drew Darby: Well, thank you. It’s good to be here, Joshua. It’s always good to be with you. Very knowledgeable, and we always seem to have a very worthwhile and lively discussion.
Joshua Rhodes: Absolutely. No, I’m excited to get into it today. I did want to ask a question real quick. I do a lot of stuff like looking across different, you know, counties and other kinds of stuff like that. Tom Green is one of the more interesting-shaped counties. Like, it’s got a really long panhandle out on the west side of there. Is there a story there? I know I didn’t say I was gonna ask you this, but do you know if there’s a story about why it’s shaped like that?
Drew Darby: Well, there is. Generally, back in the day, and I’m talking about long in the day, Tom Green County was part of the old Bexar County, all the way down in San Antonio. So over the series of years, there were other counties formed out of that, and Tom Green County originally was more of a rectangular shape.
And the folks in Irion County decided that they wanted to be separated from Tom Green County, so they petitioned the legislature and Irion County was created. But at the time, Tom Green County, of course, the city of San Angelo, where it is right now, has to be physically connected to the other parts of the county. And so at that time, Reagan County was still part of the Tom Green County or old Bexar County.
And so the panhandle had to be created to connect what is now San Angelo and the major part of Tom Green County with Upton County while separating out Irion County. And then ultimately Reagan County was formed, and of course, Irion County left, and what you have now is Tom Green County with the bulk of the county in a kind of a square, but then a panhandle on top.
Joshua Rhodes: Yeah, it’s always one of the more interesting shapes. I’m from deep East Texas, where most of the counties are defined by rivers and things like that, so real squiggly lines versus kind of the western part where you get more squares. Although there’s a couple. Pecos County’s got, you know, a big old squiggly line on it, too, out there.
Drew Darby: We don’t have a lot of squiggly lines in my part of the world. It’s all pasture land and cropland. So there’s not many creeks.
Joshua Rhodes: Yeah. From Nacogdoches, we got lots of them over there. All right, so let’s get into it. So, um—
Drew Darby: Well, you’ve got a pretty interesting county there.
Joshua Rhodes: Yeah. Yeah. Two— shaped by two. It’s got a teardrop shape kinda, and then Angelina below it the same.
Let’s get into it. So when you joined Doug Lewin on the Energy Capital Podcast, I think it was back in May of 2025, you know, you talked about Texas needing a pathway for large loads to come online, especially if they brought their own generation and flexibility, and you argued that these projects couldn’t wait. You know, well, fast-forward 18 months, and we got ERCOT’s Batch Zero process is paused for an audit. The governor has halted, you know, data center permitting at the TCEQ, you know, level, and the lieutenant governor is a— you know, advocating for a moratorium. What has changed in the past year and a half? Like, were the risks underestimated, or have the politics just shifted that much?
Drew Darby: Well, the politics have changed, plain and simple. Yeah. Clearly, we’re going through a very heated election cycle, and this issue, along with many others, have become a focal point for the election cycle. You know, for the first time, you know, in my experience, urban and rural Texas have kinda come together and said, “No, we don’t want this type of development unless changes and regulations are in place.”
So this is not just simply a Texas problem, as you’ve seen, and we’ve all seen this is a problem going on all over the United States. People are pushing back against data centers ‘cause they don’t see the value for their own communities, and so they think the AI’s gonna take their jobs or take the jobs from their children and grandchildren. And of course, the recent developments of the prognostication that it’s gonna end humanity as we know it within so many years. I mean, I mean, what a terrible message.
Joshua Rhodes: It’s not a good pitch, yeah.
Drew Darby: It’s not a good pitch. And so the state has to step in when this public support, when this, what I would call a social license, goes away. The state has to step in and provide a strong hand in that regard. And so I feel certain that the state is gonna take a very strong hand with regard to this issue as we move forward.
Joshua Rhodes: Yeah, I’m already getting ahead of myself in questions. Since you brought it up, what do you think a Texas-shaped strong hand looks like? I’m assuming y’all are gonna pick this up in the new year, but what do you think that looks like?
Drew Darby: Well, it covers the whole spectrum. I mean, clearly tax policy is part of it, I think. We’ve had in place for a number of years, 12 years, I think, to be exact, that franchise tax exemption for equipment purchases. I can remember Harvey Hilderbran was the author of that bill, and very clearly on the floor of the House, he talked about the economic impact, and it was a very small economic impact. Well, that small, perhaps $14 million at the time, has now become, estimated, perhaps $3.5 billion. And so, you know, that’s just one of those issues that we’re gonna have to take up and talk about. I’m not saying we eliminate it, but certainly we’re gonna have to talk about how do we make it more effective.
How do we make sure that these data centers are paying their fair share of the infrastructure necessary? We always focus on clearly the big things like energy. Making sure they pay for their own energy, water. We clearly have a legitimate concern for that for our communities, but there’s a lot of other infrastructure that is necessary for that data center to exist. You gotta have roads. You have to have city roads or county roads or state roads that get to that facility. Those require maintenance. Certainly during the construction period, you have a lot of trucks going in and out. You’ve got a lot of people, perhaps, and our road conditions are critical importance.
What about the schools for the employees? How does this data center benefit schools? Clearly, long-term permanent jobs are critically important. So, and healthcare, I mean, nobody’s gonna wanna live there unless they have quality healthcare. So all of that, I think, is gonna come into focus in the next legislative session, and we’re just gonna make sure that this is the type of the development that the community wants. Then how do we make sure that they pay their fair share, and they pay their own way, and the priority needs of the community are protected?
Joshua Rhodes: That makes a lot of sense. I mean, considering how fast they also wanna get connected, right? I mean, I think that’s also part of it, it’s just the velocity. It’s just coming down the pike, right?
Drew Darby: It’s just... It’s come at us. As you know, Josh, who would’ve thought, you know, two years ago we would be engaged in this type of consideration at this level? But we’re seeing that now. It’s here. We’re talking about it. It’s become a hot topic on everybody’s mind, and so I think that discussion is gonna extend well into the next session and beyond.
Joshua Rhodes: No, absolutely. You brought up kind of uniting, you know, urban, rural, maybe a little bit of left and... As we’re recording this, I recently spoke with Chairman Rafael Anchía, who represents parts of Dallas, and so I was just kinda curious to get a gauge for that, what lawmakers representing urban areas sometimes fail to either appreciate about the rural communities that are often hosting this infrastructure that supports the rest of Texas.
Drew Darby: I love Chairman Anchía. I’ve served with him my entire time in the legislature. Served on him on several committees, Energy, currently on State Affairs with him. He’s a terrific gentleman, very knowledgeable, great statesman, very knowledgeable about energy resources. So he— Rafael Anchía is not a problem.
What is a problem is people who live and work in cities fail to realize that it takes people living in rural Texas in order to support the infrastructure necessary for folks to live in cities. And have used it in the past. I said, “The last I checked, they don’t grow beef cattle in the back of the H-E-B in San Antonio. They don’t grow cotton in the back of the Men’s Wearhouse in Dallas, Texas.” But where they do grow cotton and grow beef is in rural Texas, and that’s also where they generate most of the electrons that is allowing people who wanna live and work in cities to live and work in cities. And without people maintaining that infrastructure in rural Texas, you would not have a city. And so there’s a balance.
Even though most of the people live in cities, and rightfully so, they have to recognize that for people to live and work in rural Texas, I always say we need four basic things to live and work in rural Texas, and that is, we need good schools. We need water. We need good access to healthcare, quality healthcare, and we need higher education and good jobs. And if we can have those things and we allocate resources as a state to maintain those basic infrastructure needs for rural Texas, whether it be in East Texas or South Texas or West Texas or North Texas, all of those areas need to have all those basic infrastructure needs met.
Now, the reality is there are not many rural members in the Texas Legislature. The last time I checked, we have 17 rural members that represent two-thirds of the land mass of Texas. That is all the land lying west of I-35. Two-thirds of Texas. That is represented by 17 members of the Texas Legislature. There are 25 that represent Harris County alone. So you can see why we are at a distinct numerical disadvantage.
But you know, I think it’s incumbent upon me as a fairly senior member of the legislature and other members, those 17 members that need to stand up and say, it’s great that you live in cities, but we live out here providing the essential services to you to allow you to live in cities. And so we’re gonna need these basic elements. We have to stand up. We have to be articulate. We have to be connected. We have to build relationships. And all of that serves the purpose of providing for the essential elements throughout the state of Texas that allow people that wanna live and work and raise their kids here in this state.
Joshua Rhodes: Yeah, absolutely. I feel that, like, where the part of the state that I’m from also provides a lot of the timber, a lot of the wood that people use to build their houses and things like that.
Drew Darby: Absolutely.
Joshua Rhodes: Talk about we got a lot of creeks, we got a lot of trees, too.
Drew Darby: Well, we don’t have many of those. The tree part, we don’t have many of those.
Joshua Rhodes: Well, it’s funny is, you know, when you talk to people about Texas who aren’t from Texas, they think of your part of Texas. They don’t think of my part of Texas very often. They—
Drew Darby: Well, that’s probably true.
Joshua Rhodes: I mean, it’s in the movies, right? I mean, people know what they know. We’ll spend a little more time on large loads, data centers, community impacts. You know, in 2025, you authored HB 3970. SB 6 ultimately became law, and since then we got the Batch Zero process trying to inject some discipline into this large load queue. Looking where we are today, what important pieces of HB 3970 are still missing, and how would you approach large load interconnection differently, you know, knowing what we know now? I guess I’m trying to tease out, like, what are we expecting to see this— this coming session? Yeah.
Drew Darby: What’s the preview? Well, you know, not much has changed. House Bill 3970 worked in tandem with SB 6. Somehow, some way that messaging got conflicting that said that my bill was anticipated to supplant or replace SB 6. It was never the case. If you can think of it simply is SB 6 was a stick and House Bill 3970 was a carrot. And I think they worked together to create a— what my intention was with 3970, and I’ll give you a preview: we’re gonna be back. I think a lot of the objectives stated in that bill clearly exist today.
I don’t wanna upend Batch Zero. I think we’ve made progress. It is critically important that we get that generation on the grid, not only for reliability purposes, but to provide some sort of a fast pass system, if you will, to provide not only reliability, but backup power for the grid. And so I think we’re gonna work on a similar project next session.
I think we’ve learned some things, but the worst thing we could do is throw Batch Zero out. I know it’s been delayed. I find fault with that. I think that the Permian Basin Reliability Plan was in place. The study and the objective is still there. There’s still a need. There’s still vast areas of our state that are important to generate energy that right now having to wait months and years to get connection, that still exists.
So I think by delaying Batch Zero even further, it’s simply gonna delay the process even longer. Maybe there might be a tweak or two, you know, that we could look at to SB 6, but I do not wanna take Batch Zero and the objective for SB 6 off the table. I think we need to move forward with that as quickly as possible.
Joshua Rhodes: Yeah, when we were talking to Pablo Vegas, I mean, that was, you know, one of the things he said is, you know, “Batch Zero is not perfect.” It’s gotta be something, right? As I’m having these conversations also kind of, you know, in other states, you know, they’re looking to Texas to look at, “Well, someone’s actually finally doing something. You know, it ain’t perfect, but, you know, we’ll figure out the kinks as we get there.” I agree with you on that. I don’t think we should throw that out. I think that would send a bad message that, like, we’re just uncertain and, you know, shifting policy is, you know, not great for business of any kind really.
Drew Darby: Yeah. Well, we can’t reinvent the wheel here while Batch Zero is still being ironed out, and so I think it sends a terrible message to our industry partners in this process, and I would urge that process to move forward.
Joshua Rhodes: Yeah. Sounds good. Sorry, let me take one step back. So this audit, I’ve kind of been calling the step zero of the Batch Zero process, I guess. I mean, we’ll see kind of how it goes, but one of the things is they’re sending out this audit to, you know, collect information about all these data centers, some which have not been the most forthcoming with that information in the past.
And so I wanna zoom in on a project, if you don’t mind, that you’ve been rather vocal about. There’s a data center project at Dove Creek that you’ve recently called in for the developer to withdraw its application. I think you’ve sent two letters on that. Is your opposition primarily about the location, the impacts, or the way that the developers develop with the community? And I guess, like, to follow on, what could they have done differently such that you would not be pushing back so hard?
Drew Darby: First of all, I think you’re referring to Beacon Development, which is proposed development there in the western part of Tom Green County at, near the community of Dove Creek and Knickerbocker. I think that company was operating under the old system of going fast and breaking things. They did not engage timely nor truthfully, in my opinion, in the community engagement process. There were attempts, very puny attempts, to engage with the community, but there was no real information, no firm, concrete answers given to the community, and so there were a lot of hard feelings developed.
I wrote a letter asking for information about their operational needs, both in water and power and noise and lights and traffic, and all the things that community was concerned about. Almost two months passed, and there was no real answers given, so I think Senator Perry came out and voiced objection to the project. And of course, I and the governor said, “Wait. Stop.” In our opinion, I’m not necessarily saying they’re bad actors. I’m just saying that their actions were not designed to give truthful and accurate and timely answers to questions that the community deserved.
And so I think we’ve reached a point in the discussion where these data centers need to do more than what’s b— minimally required of them. I mean, clearly, how much water are you gonna use? How is your power gonna be generated? What is the noise level? What are the pollutants? If you’re gonna be generating electricity on site, are there any air pollution issues if it’s gonna be thermally generated? All of those questions deserve answers. If you don’t have an answer to that, then maybe that’s not the proper site for you. And so that’s kinda where we are on that.
I just think that they were acting under a, an environment that encouraged hyperscalers to go out and find proposed locations. Part of the challenges that we saw in SB 6 was the fact that we had this extraordinarily high projected use or need for electricity in this state, far in excess of what we could ever provide. But what was real and what was not?
So you had an environment where hyperscalers would look at five different areas of the state and then go to each one of those five communities and say, “We need to put a data center that can generate in a need of, you know, 1 GW of power.” Well, all of a sudden, there are five communities, city councils, county commissioners, county judges contacting legislators all over the state saying, “We’ve got the prospect of having a 1 GW facility in our, in our community.” Well, there was only gonna be one, but now we think there’s 5 GW of power needed, when in fact they’re probably only realistically gonna get one.
And so we’ve created a playing field in which I think the capabilities and the needs of the industry were far overstated for what was practically or financially possible. And so that’s what Batch Zero was designed to do is sort out the wheat from the chaff. That’s why Batch Zero is critically important. Do you have a tenant? Do you have your money? Do you have all of these things? And if you do, then you get to the front of the line.
Joshua Rhodes: Yeah. That phrase, separating the wheat from the chaff, has been something I’ve been using quite a bit too, in terms of, like, the process, right? I mean, and if you look at the high-level numbers and, you know, ERCOT’s, you know, peak demand’s 91.5 GW or so, and there’s 400 GW of, you know, projects. A lot of them are doing this queue shopping, as you say, the same project in five different places. But something that just popped in my head is, like, that creates a lot of work that might end up being nothing, right? And a lot of times you got other things to deal with in these communities.
Drew Darby: You know, there’s a lot of community alarm. I mean, that’s why community involvement, community support is so critically important, and that’s where I would look in the weeks and months and years to come, is do you have community support? Have you gone the extra mile? It’s not what we require you to do. It’s what have you done that go well beyond what we require, and you’ve communicated your operations to the community, and you’ve involved them, and you’ve created an incentive for that community to support you.
And what we’re seeing, thankfully so, is proposed data centers in rural Texas, familiar with several in the Panhandle, that are doing magnificent and quality upgrades to infrastructure in that area, providing access to water, providing millions of dollars to upgrade water treatment facilities, not only provide for the needs of the data center, but provide for the community that supports them. I think that’s critically important that these data centers engage in the extra mile, if you will, the extra effort to create community support by enhancing and benefiting the local community that’s gonna be served, and it will serve them.
Joshua Rhodes: Yeah, absolutely. I was speaking at the Texas Economic Development Council’s annual meeting last week, and we were talking about this on stage and on a panel, and about the audit that the governor’s doing in terms of, like, you know, if I were a data center, I would want to have the best answers to all of those questions. I wanna be a shining star among, like, you know, everybody else with, like, everything I’m gonna do for the community and all the benefits and things like that.
Let’s turn to transmission. We briefly talked about Permian, the Permian Reliability Project, but let’s turn to transmission. So there’s also been some substantial pushback against some of the proposed 765, you know, transmission lines across Texas. At an August hearing, you suggested a 180-day review timeline needed to be reconsidered. You know, what specifically are you looking to change, and how do we, you know, do that without creating delays that might threaten the economic and, you know, reliability development that some of this infrastructure might bring?
Drew Darby: Well, I’ll say this: having been around, I’m one of the few members that was around in the infant stages of the CREZ transmission development. My first term in the legislature was 2007. And the legislature had approved CREZ in 2005, but there were other measures that we considered at the time and the money associated with it and kind of the process.
And so we built transmission in this state and about $7 billion worth of transmission and extended lines into part of the state. There was no actual generation at the end of those lines. But we built it truly believing that if we built it, they will come. They did come, and we’ve seen extraordinary growth in electric generation in this state, largely through renewables, but it’s there and consumers are getting the benefit of that.
That was a situation where, you know, there’s vast land with large ranches. There were relatively few owners that were a part of that process. There were eight, if I remember right, separate developers in that. And so each of the eight kinda dealt with the landowners on that particular part of the route, and we had a 180-day review period.
Well, guess what? Now we’re building transmission. Oh, by the way, there were 22 million people in Texas in 2005. So today there are 32 or 31 million Texans. So we’ve got a lot of these proposed routes in the 765 transmission build-out that we’ve involved lots of landowners in that process, and some would say, including me, the process is too short. I think we need to give at least a three-month extension for these type of developments in the future, and we want this to happen.
Part of the process is you’ve got to give landowners adequate notice. Well, the reality is 180 days, when you have 60 days reserved for the SOAH process, you don’t really have a lot of time to delve into why that line might impact you and your family and your tract of land.
And then you add the complication that these TDUs, they will, as a result of the legislature process, they have all these potential routes lined out. For example, if they wanna get from point A to point B, well, they have designed three proposed routes to get from point A to point B. But within each of the three routes, they have three additional routes associated with the sub-routes.
And so you have nine, what I would call nine ant beds, nine ant beds of landowners that you’re now saying that line is gonna go across your property. Well, they’re all up in arms, and should be. They’ve hired lawyers. They’ve gone through the process. And now, what is it? 87 percent of the affected landowners are not gonna be affected by the transmission line. So you’ve just stirred up 87 percent more people than you actually needed to be involved in the process.
Now, what is the right margin? Should we go back to not having as many proposed routes, therefore involving as many landowners? But in one of the lines in this current process, there’s over 1,400 landowners that weren’t a part of the original application but became a part of the revised process, and they had to be alerted, but the timing was not extended on their behalf. So 1,400 different landowners got in late to the game, didn’t have as much time, and so I don’t think their rights were properly heard or advocated, and that’s a problem.
So as we look at the CCN process, I think we need to look at if you’re gonna involve more landowners, then you need to pause, if you will, the process and allow them adequate time to respond and then resume the process. So there needs to be some sort of built-in process along with extending the time, but I think we’re gonna look at all that.
By the way, for the folks that says the legislature approved a 765 kV line is just not accurate. We never voted on 765. We simply allowed the TDUs and the PUC and ERCOT to decide what is the appropriate hardware necessary to provide suitable, sustainable, reliable, cost-effective service for this state, and they decided 765 best suited this state for ultimately providing the electric spine that’s gonna allow this state to grow into the future.
Joshua Rhodes: Yeah, no, it’s a tough one there. I should say, full disclosure, I was in one of those dockets, I think with about 5,000 other people. So I know I sat through a fair bit of that. But yeah, it’s like, it is tough, right? ‘Cause like, you know, as part of the Texas miracle, like, we wanna keep things going, and I think as you said, those CREZ lines, I think they’ve been really good for the state in terms of a hedge against, you know, volatile prices. You know, someone does something halfway around the world, and it affects energy prices. It’s nice to have something here that’s not affected by that. Yeah, so I wanted to kind of—
Drew Darby: Were you affected personally by one of those proposed routes?
Joshua Rhodes: No, my area in the northwest Nacogdoches County is too far east, I think, on this. This was... I was just involved.
Drew Darby: If we think this is a very emotional process for these lines headed out to West Texas, just wait till they build the loop into East Texas going from Houston to Dallas. There will be two other lines to close the loop, if you will, for electric transmission in the state.
Joshua Rhodes: Yeah, and in, and in general, the land holdings in the eastern part of the state are quite a bit smaller than they are in the western part, so you’d be dealing with a fair number of people. It’s just one of those things is we talk about how many heads of cattle you can run per acre, and I think out in West Texas, y’all talk about how many acres per head, right? It’s just like— it’s just a totally different game. I remember we used to run, we had 58 acres, and we’d run 20 head of cattle on there and make three cuttings of hay at the same time. I mean, it’s just so much, you know, in that part of the state. But yeah, that would be a tough one.
Drew Darby: Well, one of the quickest ways for us to stall all infrastructure in the state is to make people feel like they can’t engage in the process. So I think that’s the objective that we need to keep in mind as we move through all of these issues into the next legislative session.
Joshua Rhodes: Absolutely. So one of the things I talked, also talked about, Chairman Anchía, earlier last week, was a House bill that y’all worked on together. I think y’all joint authored HB 5200, which looked at grid-enhancing technology’s ability to maybe squeeze a bit more out of, like, either the current lines we’ve got or, you know, anything new that we build. My understanding was that that went through the House and got basically no one voted against it, but it never made it, you know, saw the light of day in the other side. I mean, is that something that’s also you think should come back? I mean, it’s like transmission’s the hot topic. Seems like it’d be worth a shot, you reckon?
Drew Darby: Absolutely. I mean, I’m frustrated. My bill on transmission got out of the House fairly quickly, in good order with a lot of support, and never even got a hearing in the Senate. Similarly, Chairman Anchía with House Bill 5200, legislation that I actually joint authored. I was a joint author on that bill, and as you might suspect, I’m kind of a all-of-the-above guy.
I think we need it all. I represent some part, a large part of the Permian Basin, but I’m also represent part of the state that has a lot of renewables, whether it be solar, battery, wind, all the above. I’ve supported nuclear, I’ve supported brine mining and geothermal, and all different ways to generate electricity. So I’m 100 percent in support of grid-enhancing technologies ‘cause they actually help, depending on how they’re used.
But, you know, I guess what happened to my bill and perhaps Anchía’s bill is utilities probably did not support it at a level that we needed, but I’m here to tell them, “No more excuses.” The old system’s not working anymore. We need new innovation. They don’t replace transmission. They simply offset the need for new transmission, and so it means that we can lower some costs.
It doesn’t make a lot of sense to me to not consider how we can encourage demand response, how we cannot consider urging people and companies to take a look at how they can scale their operations to respond at a time we have very limited residential demand response incentives. And we need to take a look at all that as we move forward for pol— we need to make sure policies are pushed that make the most sense for the grid to be as efficient as it can be.
Joshua Rhodes: Absolutely. One of the things you’ve also increasingly talked about is for on the data center side, and we’ve touched on a little bit, is water, especially in West Texas, where there’s not as much. You’ve previously discussed, you know, using alternative sources of treated wastewater, produced water from oil and gas operations, things like that. Is that something that the legislature can help nudge? Or is like how do you see the role in trying to, you know, open up new sources of water? Or, you know, what’s that conversation look like these days?
Drew Darby: We all talk about oil, and we talk about the value of oil, and we talk about how it’s traditionally valued. We price oil at a price per barrel. We recognize that that barrel needs to be transported to a refinery, and it needs to be refined, and all the products derive from it. Gasoline is one of the products, and we know how that gasoline is now transported to delivery system at our local convenience store, and so we pay for it per gallon. And so we understand the value of oil and gas ‘cause we pay it all incremental parts of that.
But with water, it’s always been treated differently because people consider water to be something, of course, from God, and it flows from the skies, and it accumulates in our lakes after being delivered by our rivers, and there it’s provided for our agricultural, industrial, and residential use. We understand that w— how we have to pay to treat that water and distribute it to the ultimate user, but we never have considered the ultimate value of the resource itself. Water itself has never been valued as a commodity. We value all the separate parts of it, but we don’t value the resource.
Well, times are changing. We need to value that as a resource now, and so it’s critically important that we look at ways to make our water usage more efficient, yes. But when I look at water as a valuable resource, then what can we do as a state to encourage technologies that provide new resource and to our hydrological cycle?
One of the extraordinary options and opportunities available to this state is using produced water. Think about a minute when we produce 6 million barrels of oil a day. Well, for every barrel of oil we produce, we also produce another four to five barrels of what’s been characterized as waste. Oil and gas waste. And so that’s an extraordinary volume of water that we have traditionally simply reinjected it back into the ground. It’s the cheapest way to do it. We pay 50 cents, 60, 80, 75 cents a barrel to reinject it back into the ground. But we’re running out of places to put it. Those places have been diminished.
We’re now having to inject some areas under high pressure. Well, that high pressure not only fills the reservoir, costs more to dispose of it that way, but it also creates seismicity issues. When you have that injection occurring in fault-prone areas, there are seismicity issues, and we’re simply running out of places to put produced water.
And it makes sense to me that if oil and gas operators spend millions of dollars to drill down and produce an asset, then let’s figure out how to utilize it and make it available for the hydrological cycle of this state. The reality is it’s just not economical. Like I said, it takes 50 to 75 cents a barrel to inject it, but it takes three times that to treat it to a level of reuse that you can reintroduce it back into the cycle with proper permits, of course, into the rivers. Proper permits, we could utilize this to provide water for our data centers.
I can’t think of a better public relational bonsai, a benefit than a statement from the Data Center Coalition and the Produced Water Coalition saying that they’ve worked a partnership. Every drop of water used in a data center will ultimately either come from produced water or the benefits of that produced water has given by putting it in the stream bed and allowing it flow down river to where it can be extracted by a data center. Or a data center in East Texas perhaps give credits, if you will, to treating produced water in West Texas so that they could have an offset for their operations.
So this is one of those things that I’ve worked on. We’ve created the Produced Water Consortium in prior legislative sessions. I had legislation that kinda aligned the liability of operators.
If you deliver that oil and gas waste, if you will, to a recycler and you take that waste off the leased premises from which it was developed, you take it and combine it with other produced water from other oil and gas leases, then if that recycler spends the time and the money to treat it and it becomes valuable, then that goes to the benefit of the recycler. We don’t have to worry about alignment of responsibility to pay for that. And this is all in the absence of a lease or surface use agreement that addresses that issue.
But absent a surface use agreement or an oil and gas lease to the contrary, that water becomes the property of the recycler. And so if they treat it and get a valuable asset associated with it, then they get the benefit of it.
So we continue to look for opportunities to try to find opportunities. You know, we’re carefully monitoring the TCEQ. There are multiple recyclers that have made application with the TCEQ for permits to introduce some of that produced water to be tested and monitored by TCEQ, but that remains an elusive objective of getting an actual permit to do that, and we’ve got billions of dollars at risk here waiting to make sure that we get it right. We’re closely monitoring that as well, Joshua.
Joshua Rhodes: Yeah, and in an industry that, like, I’ve been shocked at how some of the lack of, like, I guess, pushback against some of the bad PR that they’ve got. I’m just gonna brainstorm here is like we’re reducing earthquakes and getting the Rio Grande to make it to the Gulf every year or something like that. That sounds like a much better pitch, right? If you’re making more water.
Drew Darby: It does, and the Pecos River, you know. I mean, there are, I think, three permits pending to reintroduce that back into the Pecos River basin. I mean, I know that area. There’s very little water in the Pecos River.
If we can give you some ideas to the scope of the water I’m talking about, think about the water in Lake Travis. Think about all the millions of gallons in Lake Travis. There’s enough produced water developed in this state to replace all the water in Lake Travis once a month. You could drain Lake Travis once a month and replace the water within that 30 days. And that’s the volume of the water we’re talking about.
So it doesn’t make sense to me that this shouldn’t be a priority investment by this state that would kill multiple birds with a few shots here. I think we just need to consider this as a priority. I think every industry in this state could get the benefit of it, and we could use some of that produced water to irrigate our crops. They’re testing to make sure that the product that has been retreated is not harmful to growing crops, especially non-edible commodities, cotton for one. So I think it’s a win-win. And I think if Texas is gonna grow to 50 million people over the next 15, 20 years, then where are they gonna work? What are they gonna drink? You know, those are the questions that we need to be answering.
Joshua Rhodes: Absolutely. And I say every single one of them Texans is gonna want an air conditioner, and I don’t blame them either, so we gotta power that.
Okay, so we’re getting close to time. As we’re recording this, it’s a couple weeks before the November election, so I’m not 100 percent sure when this will come out. But I did ask Chairman Anchía for some of his predictions, and if you’re willing, would like to— you don’t have to. If you’re willing to talk about... ‘Cause one of the things is it feels like a lot of things are kind of in play that haven’t been in play in recent years, everything from, you know, senatorial race to the governor spending a lot of money on this election.
Do you have any predictions on kinda how November will go? And then if things do shift toward there’s either one or one chamber is, you know, flips parties, like how would that change how the next legislative session would go, do you reckon?
Drew Darby: Would certainly change the dynamics at every level. I’m not gonna predict who’s gonna win, but I will tell you that I have served in a legislature in 2011, I believe it is, or 2009. 2009, my second session, there was a young lady from the Metroplex, Linda Harper-Brown, won her election by 150 votes. She was the 76th vote out of 100 members of the Texas House. It was 76-74. And I can recall particularly well that we accomplished great things in that legislative session. We worked together.
And that’s the message that I would like to leave to your audience, is that regardless of the outcome of the election, we’re all Texans. Yep. We’ve gotta solve problems. Whoever holds those positions need to come not with a political mind, but with a mind for how do we solve Texas problems.
A sentiment that I’ve used is try to hit it down the fairway. Don’t get in the rough. Let’s just focus on real infrastructure needs of this state. Let’s try to leave some of this inflammatory pieces of legislation out of the discussion, and let’s— there’s enough on our table right now. When we talk about the need for roads, when we talk about the need for quality and affordable healthcare, when we talk about the need for funding a public education system and a higher education system, when we talk about all of those things, those are things that will make Texas succeed. Not the other divisive issues.
So whoever wins the elected spot, I just hope that that person puts politics aside, says, “That was an election. Now I’m elected. Now I gotta govern.” And that’s the decision each and every one of those officials needs to make, and I hope they make it on the— they come down on the side of focusing on doing their job that they were elected to do and not trying to be a, an obstacle to that process.
Joshua Rhodes: Well, I think that’s a good place to stop. Chairman Darby, good luck in November, and we’ll see you on the other side.
Drew Darby: Thank you, Joshua. Appreciate it. Have a good one.
