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A controversial data center project in East Texas is no longer moving forward after the company said it wouldn’t be able to comply with Gov. Greg Abbott’s development standards.

Kansas-based Diode Ventures had proposed building a data center in Henderson County near Cedar Creek Reservoir, a historic waterway in a community heavily involved in water conservation. The Fort Worth Star Telegram reported the site was expected to take 12 years to build out and consume 5 million gallons of lake water per day by its fifth year.

The project’s location was concerning because it would have sat right in the middle of a developed subdivision with hundreds of homes around it, Henderson County Commissioner Wendy Spivey told The Texas Tribune. Residents were concerned that it would draw water from Cedar Creek Lake, which supplies water to the Fort Worth area. With little to no rainfall in the region this year, lake levels have been low for residents. They worried what years like this would look like with increased water withdrawals.

“This was a big, big step in a positive direction for Diode to back out,” Spivey said.

However, she does not believe this is the end of the fight. The landowners of the proposed site are still looking for ways to sell or use the land, and just because Diode backed out doesn’t mean another data center may not come in, Spivey said.

Data center proposals have cropped up in droves across the state, especially in the rural communities of East Texas that are water rich and have little to no regulation. In recent weeks, Gov. Greg Abbott said he wanted lawmakers to outright ban project developments in rural areas like those in East Texas and require data centers to be “responsible stewards” of the natural resources.

“Data centers that want to do business in Texas must meet a clear standard. This project did not,” Abbott wrote in a statement released Thursday. “Texas requires companies to put communities first, protect our natural resources and power grid, and respect the quality of life of our residents. Diode did the right thing by withdrawing their project. If other data center developments refuse to meet these standards, I expect them to do the same.”

Abbott’s tougher stance on data center developments and how they affect rural areas is what drove Diode Ventures co-presidents Rachel Attebery and Josh Johnson to cancel the project.

“After completing our initial evaluation and consulting with the community, as well as state and local officials, we have determined not to advance the site beyond preliminary planning and have concluded our work on the site,” Diode Ventures told the Texas Tribune in a written statement. “Diode remains committed to responsible development, ensuring careful assessment of each site and moving forward with only those that align with infrastructure availability, community priorities and long-term project viability.”

Cedar Creek, where the data center was to be built, and nearby watersheds have been the focus of several conservation efforts, including a federal lawsuit, in Henderson County.

Save Cedar Creek Lake, a volunteer-run coalition formed in early 2026 to push back against the proposed data center. Thousands of community members signed a petition demanding the project be canceled and asking lawmakers to establish strong requirements for data centers. The coalition announced it was going to take that fight to Austin during a July 27 committee meeting.

The company’s retraction came days later.

All across the state, data centers have faced more scrutiny by policy makers. Abbott, who has long championed business development, released sweeping regulatory recommendations on data centers for the Legislature to pass in the 2027 session. Among them are requiring data centers to pay for their own grid interconnection and infrastructure costs, requiring closed-loop water systems and banning federal sales tax exemptions for data center proposals.

Henderson County, like many others across Texas, signed a resolution asking Texas lawmakers to grant them authority to regulate these centers. Counties don’t currently have the power to demand any accountability or ensure their communities are protected. Spivey wants to see that change, she said.

“There’s not much the county can do,” Spivey said. “We don’t have zoning rules and regulations.”

Jess Huff joined the Tribune in 2023 and is based in Lufkin, Texas. She grew up in Utah and has also lived in Arizona and the Netherlands. Her latest adventure brought her to East Texas where she worked...