BILL ANALYSIS Senate Research Center S.B. 2211 By: Sparks Business & Commerce 4/8/2025 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Texas oil and gas production generates significant amounts of produced water, particularly in the Permian Basin, which produces 19-20 million barrels daily. This highly saline water is usually considered a waste product unless reused in oil and gas operations. With growing regulatory pressures and concerns about seismic activity, alternatives to disposal by injection are critical. Desalinating produced water is emerging as a viable solution, potentially providing high quality desalinated water for agriculture and industrial uses. The booming US tech industry is investing heavily in data centers, and Texas is well-positioned to benefit from this with its favorable business climate and natural resources. However, competition for freshwater between industrial, agricultural, and human needs is rising. Using desalinated produced water could provide an alternative to freshwater resources. By integrating power generation, desalination of seawater or produced water, and large-load data centers into a combined behind-the-meter industrial complex, Texas can alleviate strain on its electric grid, reduce freshwater demand, and preserve it for higher-value uses. Under current law, cogeneration facilities are permitted to sell to a thermal host, provided that the thermal byproducts are used in industrial processes to make industrial products. However, information or digital products are not clearly defined as industrial products; clarification is necessary to ensure that the final products, whether water or digital products, are recognized as industrial products. S.B. 2211 amends the Texas Utilities Code to define a "qualifying cogenerator" as an entity that generates both electricity and thermal energy, such as steam or waste heat, for use by a colocated desalination facility and serves a load focused on manufacturing digital products. The bill ensures that such cogenerators are not considered retail electric utilities simply because they sell electricity to purchasers of their thermal output. It further clarifies that the owners or operators of qualifying cogeneration facilities that provide electricity to digital product manufacturers and thermal energy to desalination plants are exempt from being classified as retail electric utilities. As proposed, S.B. 2211 amends current law relating to a qualifying cogenerator that serves a large load and a colocated desalination facility. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 31.002, Utilities Code, by amending Subdivision (13) to redefine "qualifying cogenerator." SECTION 2. Amends Subsection 37.001, Utilities Code, by amending Subdivision (3) to redefine "retail electric utility." SECTION 3. Effective date: upon passage or September 1, 2025.
BILL ANALYSIS
Senate Research Center S.B. 2211
By: Sparks
Business & Commerce
4/8/2025
As Filed
Senate Research Center
S.B. 2211
By: Sparks
Business & Commerce
4/8/2025
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Texas oil and gas production generates significant amounts of produced water, particularly in the Permian Basin, which produces 19-20 million barrels daily. This highly saline water is usually considered a waste product unless reused in oil and gas operations. With growing regulatory pressures and concerns about seismic activity, alternatives to disposal by injection are critical. Desalinating produced water is emerging as a viable solution, potentially providing high quality desalinated water for agriculture and industrial uses. The booming US tech industry is investing heavily in data centers, and Texas is well-positioned to benefit from this with its favorable business climate and natural resources. However, competition for freshwater between industrial, agricultural, and human needs is rising. Using desalinated produced water could provide an alternative to freshwater resources. By integrating power generation, desalination of seawater or produced water, and large-load data centers into a combined behind-the-meter industrial complex, Texas can alleviate strain on its electric grid, reduce freshwater demand, and preserve it for higher-value uses.
Under current law, cogeneration facilities are permitted to sell to a thermal host, provided that the thermal byproducts are used in industrial processes to make industrial products. However, information or digital products are not clearly defined as industrial products; clarification is necessary to ensure that the final products, whether water or digital products, are recognized as industrial products.
S.B. 2211 amends the Texas Utilities Code to define a "qualifying cogenerator" as an entity that generates both electricity and thermal energy, such as steam or waste heat, for use by a colocated desalination facility and serves a load focused on manufacturing digital products. The bill ensures that such cogenerators are not considered retail electric utilities simply because they sell electricity to purchasers of their thermal output. It further clarifies that the owners or operators of qualifying cogeneration facilities that provide electricity to digital product manufacturers and thermal energy to desalination plants are exempt from being classified as retail electric utilities.
As proposed, S.B. 2211 amends current law relating to a qualifying cogenerator that serves a large load and a colocated desalination facility.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 31.002, Utilities Code, by amending Subdivision (13) to redefine "qualifying cogenerator."
SECTION 2. Amends Subsection 37.001, Utilities Code, by amending Subdivision (3) to redefine "retail electric utility."
SECTION 3. Effective date: upon passage or September 1, 2025.