Palomino Alpha Data Center, Zorn, Texas

Palomino Alpha LLC has proposed an 870-acre data center off Highway 123 near Zorn, in northern Guadalupe County, Texas. The project still has no water contract: the Crystal Clear Special Utility District board put off the company's request for up to half a million gallons a day at its August 27, 2026 meeting, saying they could not get answers about how the data center would work.

The project is also covered by a statewide freeze Gov. Greg Abbott ordered on August 3, 2026, pausing new data centers' connections to the Texas power grid until regulators audit projects waiting in line. Project representatives "asked not to be placed on tonight's agenda" at the August 27 meeting, the utility district's attorney said, after missing three consecutive meetings they were supposed to attend.

Board member Joseph Benavides said no one had told him how the system would work, how much water it needs or what chemicals it would use. "That unsettles me a lot because it really sounds like they're just telling us what we want to hear, and we're getting hoodwinked," he said. State Rep. Alan Schoolcraft urged the district to delay or deny the request.

At an earlier meeting in June, the board tabled the same water agreement after hours of public comment. A consultant for Palomino Alpha, Thomas Dubel, told the board the project would "probably put a minimum of $400 million of tax, property tax revenue" into the Navarro ISD school system.

Guadalupe County has already granted the project a tax abatement zone. The Commissioners Court approved it in December 2024 and, in February 2026, voted 3-1 to expand it with a buffer for neighbors; Commissioner Stephen Germann voted no. County Judge Kyle Kutscher abstained both times, saying his family owns nearly 200 acres in the project area next to the region's largest electrical substation, land that has been in his family since the 1930s.

On July 20, 2026, the Data Center Action Coalition and residents sued the Guadalupe County Commissioners Court, claiming its approvals for Palomino Alpha and the nearby CloudBurst project broke the Texas Open Meetings Act, the Texas Tax Code and conflict-of-interest law. The suit says Kutscher and his family own 186 acres being sold to Palomino Alpha and that he lobbied for the approvals despite recusing himself from the formal votes.

"What was happening in Guadalupe County was a pattern of meetings that didn't quite meet the standards required under state law," said Bobby Levinski, an attorney with the Save Our Springs Alliance. Residents have also raised concerns about water use, heat, noise, backup generator pollution and wastewater reaching tributaries of the San Marcos River. "The water bills, I don't want them to go up any higher," Seguin homeowner Cynthia told KSAT. "But if the data centers start draining the waters from the homeowners, what do we do?"

The next decision is Crystal Clear's. Because the August 27 item was listed for discussion only, the board could not vote, and the district's notice says its board has not taken any action on the proposed Palomino Alpha service agreement. The lawsuit against the Commissioners Court is pending; Levinski said the plaintiffs will argue the approvals "should be considered void and should not be enforceable."