The Lone Star Infrastructure Protection Act is a 2021 Texas law that prohibits businesses and government entities in the state from entering agreements that would give companies tied to China, Iran, North Korea, or Russia direct or remote access to, or control over, critical infrastructure. It covers five categories of infrastructure, applies to contracts signed on or after September 1, 2021, and, as currently written, contains no penalties for violations.
The Two Prohibitions
The act is often described as a foreign ownership restriction, but that framing misses what it actually does. It doesn’t stop a foreign-owned entity from owning an infrastructure asset. It targets the agreement that would let a restricted foreign company access or operate the infrastructure.
The law splits into two prohibitions:
- A business entity cannot enter an agreement relating to critical infrastructure if that agreement would give a restricted foreign company direct or remote access to or control of the infrastructure. This applies only when the business entity “knows” the counterparty meets the foreign-ownership criteria.1State of Texas. Texas Code Business and Commerce Code 113.002 – Prohibited Access to Critical Infrastructure
- A state or local governmental entity cannot contract with a restricted foreign company for anything relating to critical infrastructure. The government-side prohibition has no knowledge qualifier, making it a stricter standard.2Texas Legislature Online. 87(R) SB 2116 – Enrolled Version
A Texas Attorney General opinion confirmed that the act focuses on prohibiting “contracts or other agreements with certain foreign-owned companies in connection with critical infrastructure.”3Texas Attorney General. Opinion No. KP-0388> Willful ignorance would be a hard argument to sustain under the private-sector knowledge requirement, but a company that genuinely didn’t know about foreign ties may not have violated the plain statutory text.
What Counts as Critical Infrastructure
The statute defines critical infrastructure through five specific categories:2Texas Legislature Online. 87(R) SB 2116 – Enrolled Version
- Communication infrastructure systems
- Cybersecurity systems
- The electric grid
- Hazardous waste treatment systems
- Water treatment facilities
That list is narrower than many summaries suggest. Oil and gas pipelines, refineries, standalone data centers, and internet service providers are not specifically covered unless they fall within one of the five categories. A data center supporting electric grid control systems might qualify. A commercial data center hosting retail websites almost certainly wouldn’t.
The cybersecurity category is also defined tightly: measures taken to protect a computer, computer network, or other technology infrastructure against unauthorized use or access.2Texas Legislature Online. 87(R) SB 2116 – Enrolled Version It captures protective systems, not the broader tech industry.
Which Foreign Companies Are Restricted
The law targets companies connected to China, Iran, North Korea, and Russia. A company falls within the restriction if it meets either of two tests:1State of Texas. Texas Code Business and Commerce Code 113.002 – Prohibited Access to Critical Infrastructure
- Ownership or control: the company is owned by, or its majority stock or ownership interest is held by, citizens of a listed country or by an entity controlled by citizens or the government of a listed country.
- Headquarters: the company is headquartered in a listed country.
“Company” is defined broadly, reaching corporations, partnerships, LLCs, joint ventures, and sole proprietorships, along with their parent companies, subsidiaries, and affiliates.2Texas Legislature Online. 87(R) SB 2116 – Enrolled Version The prohibition applies regardless of whether the company’s securities are publicly traded or listed on a major exchange.1State of Texas. Texas Code Business and Commerce Code 113.002 – Prohibited Access to Critical Infrastructure Publicly traded companies with dispersed foreign shareholders don’t get a pass under the current text.
The governor has authority to designate additional countries. Governor Abbott’s Executive Order GA-48, issued in November 2024, referenced the federal foreign adversaries list maintained by the U.S. Department of Commerce, which includes the same four nations plus Cuba and the Maduro regime in Venezuela.4Office of the Texas Governor. Executive Order GA-48 Relating to the Hardening of State Government Whether that order formally triggers the statute’s “designated country” provision for Cuba and Venezuela remains an open question.
When the Law Took Effect and What Happens to Older Contracts
The act applies to contracts and agreements entered into on or after September 1, 2021.2Texas Legislature Online. 87(R) SB 2116 – Enrolled Version Pre-existing agreements do not have to be unwound. Any renewal, extension, or new agreement after that date must comply.
That creates a practical question when a long-term infrastructure contract comes up for renewal. The parties have to reassess whether the counterparty triggers the ownership or headquarters tests, and for multinationals with complex subsidiary structures, that assessment isn’t always straightforward.
The Warranty and Support Carve-Out
The statute allows one narrow form of access: access “specifically allowed by the business entity for product warranty and support purposes.”1State of Texas. Texas Code Business and Commerce Code 113.002 – Prohibited Access to Critical Infrastructure A Texas utility that buys equipment from a manufacturer with Chinese ownership can still receive warranty service and technical support. What it cannot do is grant that manufacturer broader access to or operational control of the infrastructure itself.
How Compliance Is Actually Enforced
The most visible compliance mechanism operates through ERCOT, which manages the Texas electric grid. Companies registering as ERCOT market participants must submit an attestation disclosing whether they, or any subsidiary, parent, or affiliate, meet the foreign ownership or headquarters criteria. If an affiliate does meet the criteria, the form asks whether that affiliate would have direct or remote access to ERCOT’s wide-area network, market information system, or the data from those systems.5ERCOT. Attestation Regarding Market Participant Citizenship, Ownership, or Headquarters
On the government side, state agencies, cities, counties, and school districts cannot contract with restricted foreign companies for anything involving covered infrastructure. That reaches procurement, service agreements, and operational contracts.
The Missing Penalties
The law’s most significant weakness is one many readers don’t expect. It contains no enforcement mechanisms, no penalties, and no fines. There is no provision authorizing the state to void a prohibited agreement, no civil penalty schedule, and no criminal liability for entering a restricted contract. The statute creates the prohibition but doesn’t spell out what happens when someone violates it.
The practical consequence of a prohibited agreement would likely be that a court considers it unenforceable as contrary to law. But the statute doesn’t say that, and no published case has tested the question.
Two bills in the 89th Texas Legislature (2025) would change that. SB 2368 would authorize the Attorney General, at ERCOT’s request, to investigate whether a business entity’s disclosures about foreign ownership are accurate or sufficient. It would also let ERCOT suspend or terminate a market participant’s registration on reasonable suspicion that the company meets the restricted criteria, subject to Public Utility Commission dispute resolution.6Texas Legislature. 89(R) SB 2368 – Committee Report (Unamended) Version – Bill Analysis SB 2117 would broaden the law’s scope while formalizing exemptions for passive ownership interests that don’t result in control by a foreign adversary, transactions governed exclusively by federal law, and transactions already submitted to CFIUS for review.7Texas Legislature. Bill Analysis C.S.S.B. 2117 (Substituted) As of mid-2025, neither bill had been signed into law.
The Federal Preemption Question
The biggest legal cloud over the act is whether federal law preempts it. CFIUS, housed at the U.S. Treasury, reviews foreign transactions involving sensitive assets, and FIRRMA broadened that authority in 2018 to cover non-controlling investments and certain real estate transactions.8U.S. Department of the Treasury. The Committee on Foreign Investment in the United States (CFIUS) A transaction that passes CFIUS review is not automatically exempt from the Texas law, and an agreement prohibited by the Texas law might not trigger CFIUS review at all.
A Texas energy company operating as a subsidiary of a Chinese investment group challenged the act in the Western District of Texas on preemption grounds. The district court dismissed the challenge, and the case was appealed to the Fifth Circuit. In November 2025, the Eleventh Circuit ruled on a parallel challenge to Florida’s foreign ownership law in Shen v. Simpson, holding that state registration and disclosure requirements don’t conflict with CFIUS authority and at most “complement” the federal regime, with any effect on foreign affairs being “minor or incidental, insufficient to warrant preemption.”9U.S. Court of Appeals for the Eleventh Circuit. Shen v. Simpson, No. 23-12737 That ruling isn’t binding on Texas courts or the Fifth Circuit, but it provides persuasive authority for a similar outcome.
Until the Fifth Circuit rules, the act’s core prohibition remains in force, and companies that enter Texas contracts touching the five infrastructure categories should evaluate their counterparties against both tests before signing.