The University of Texas has begun leasing land for renewable energy, battery storage, and Crypto Assets data centers, creating a source of income that barely existed five years ago.
Written by: Janet Lorin
Compiled by: Luffy, Foresight News
A Crypto Assets data center in Pilot Point, Texas, located on land leased from the University of Texas System
Dozens of wind turbines tower under the desert sky, each as tall as a 50-story building. A total of 800,000 solar panels cover an area of shrubland, nearly equivalent to London’s Heathrow Airport. In a refrigerated Crypto Assets data warehouse, rows of computer servers emit a noisy hum, occupying an area that could span two city blocks in New York City. The University of Texas system manages the land beneath all these new projects, which are generating income for hundreds of thousands of students.
For a long time, the University of Texas System has relied on leasing its vast mineral underground resources located in the Permian Basin to generate revenue: extracting oil and gas from North America’s richest deposits. Beneath the wind farms and solar fields, pipelines stretching for miles that transport “liquid gold” remain key to its wealth. Thanks to record fossil fuel production and investment returns over the years, the University of Texas has a $47.5 billion endowment fund, ranking second in higher education, only behind Harvard University.
But the University of Texas System (which also manages land for Texas A&M University) is increasingly seeking to generate more income from its land. In addition to ground development projects that began decades ago: leasing rights for the construction of roads, power lines, and pipelines, as well as land use rights for grazing. The university now has new attempts: leasing land for renewable energy, battery storage, and Crypto Assets data centers, creating revenue sources that barely existed five years ago.
A wind farm in Lankin City, Texas
In the one-year period ending last August, these ground-focused projects generated nearly $130 million in revenue. This is the highest amount ever, approximately five times that of 15 years ago. This revenue exceeded half of the scholarship and grant funding amount for the University of Texas at Austin (the state’s flagship campus) that year.
University of Texas System Land Holding Revenue (as of August 31 of each year)
In May of this year, the University of Texas reached a preliminary agreement to lease 200,000 acres (10% of its land holdings) to Virginia-based Apex Clean Energy for wind and solar power generation. The company’s clients include Meta, the parent company of Facebook, and the U.S. Army. Although financial details have not been disclosed, this will be the largest ground project deal for the University of Texas to date.
If such projects succeed, the University of Texas expects to increase its annual revenue by tens of millions of dollars in the coming decades. The school is seeking to provide sites for large data centers for artificial intelligence, companies that help utility companies and other organizations prevent carbon emissions from entering the atmosphere, and natural gas power plants.
William Murphy Jr., the CEO of University Lands (the department managing state-owned properties for the University of Texas), is trying to diversify the income of the system. Some oil company CEOs have recently stated that U.S. production in the Permian Basin has reached or is approaching its peak. “Our mission is to create permanent income for the institution. We have a long-term vision, 30 to 50 years,” Murphy said, “We see this as a marathon, and we are at the starting line.”
William Murphy Jr., CEO of University Lands, is in his office in Houston, Texas.
At the time of the strategic announcement by the University of Texas, renewable energy is facing criticism in Washington, D.C. To reverse the Biden administration’s support for renewable energy, fossil fuel advocates, led by President Donald Trump, have fiercely attacked wind turbines, calling them ugly and unreliable. “Huge, ugly windmills - they ruin your community,” he said in January.
Texas’s mixed feelings about renewable energy may pose challenges for the University of Texas’s plans. The state is the largest producer of wind power in the United States, with solar energy ranking second, behind California. “We believe in an ‘all-of-the-above’ energy development approach,” said the state’s Republican governor, Greg Abbott, in December.
To support this strategy for the Permian Basin, the Texas Public Utility Commission approved a $10.1 billion plan in April to build three transmission lines to help meet the demands of oil drilling platforms, new data centers, Crypto Assets mining sites, and hydrogen plants. “Without these new transmission lines, no one would want to expand wind and solar supplies in West Texas,” said Ed Hirs, an energy economist at the University of Houston.
However, in 2021, after a devastating winter storm caused massive power outages, the state’s Republicans blamed the electrical grid’s reliance on wind and solar energy. Studies found that failures at natural gas power plants were the main cause of the outages. Nevertheless, the Republican-controlled Texas legislature is still considering some bills that would make it more expensive and difficult to build solar and wind energy projects.
Murphy stated that if Texas officials move away from renewable energy, the University of Texas could change its strategy. For example, the University of Texas could support projects driven by natural gas. “If these incentives change, it could alter the status quo in West Texas,” he said, “We are not a political entity, and we will not push anything.”
Black and white photographs of early oil rigs hang on the walls of Murphy’s Houston office, which is close to ConocoPhillips headquarters and Shell’s main U.S. outpost in London. The main part of the office is occupied by a wooden wheel on an old-fashioned oil pump, which is twice as tall as Murphy’s, showing that the University of Texas still places a lot of emphasis on making money from fossil fuels. “We plan to let oil and gas exist for a long time,” said Murphy, 47, a fifth-generation Texan, a former oil and gas lawyer who at one time managed one of the state’s largest cattle ranches.
In Pilot Point, Texas, an operator is burning excess natural gas at a well on land managed by the University of Texas.
The University of Texas oversees 3,300 square miles of land in the Permian Basin, an area nearly the size of Delaware and Rhode Island combined, spanning 19 counties, centered on the famed oil town of Midland. In the 19th century, the state constitution granted mineral and surface mining rights to these lands to the University of Texas. At the time, this arid land was considered of little value other than grazing. But drillers discovered oil in 1923, bringing wealth to higher education in Texas.
The University of Texas itself does not explore for oil or gas, nor does it develop any projects on state-owned lands. It leases these lands and collects royalties based on the production of oil and gas. Over the past 15 years, land leased to oil and gas companies has generated $15.8 billion in revenue. Amid rising prices and production, royalties have surged recently, generating more than $2 billion in annual revenue.
Renewable energy and energy storage projects on land managed by the University of Texas System
All of this funding has flowed into a fund that supports two large public universities in Texas. Two-thirds of it goes to the University of Texas, and one-third goes to Texas A&M University, which has a $20 billion endowment. Together, these two systems educate approximately 350,000 students. They also operate hospitals, including the MD Anderson Cancer Center of the University of Texas in Houston.
The state constitution stipulates that oil and gas revenues must be used for capital expenditures, such as building classrooms, hospitals, and laboratories, rather than for day-to-day operations. This wealth has contributed to a construction boom, with a recent allocation of $50 million for the new cancer and surgery center at the University of Texas Rio Grande Valley, $60 million to fund the construction of a “smart hospital” equipped with a virtual reality lab at the University of Texas Arlington, and $54 million to support the construction of a new site for the Mays Business School at Texas A&M University’s flagship campus.
New ground project revenues can be used for categories such as “Academic Excellence” and support special programs. Although still small compared to fossil fuel revenues, non-oil and gas revenues have totaled $1.2 billion over the past 15 years and have been rising sharply. In November last year, the University of Texas System announced it would waive tuition for undergraduate students from families with incomes of $100,000 or less across all nine campuses, utilizing its endowment funds, non-fossil fuel funds, and other sources.
Nowadays, this type of funding is particularly valuable to universities because it offers flexibility in the face of a challenging environment for higher education. The Trump administration has been at odds with elite universities, cutting off federal funding in areas it dislikes, including any deemed related to diversity, equity, and inclusion. A Republican bill is seeking to impose a tax of up to 21% on the investment income of the largest private university endowments. As a public school system, the University of Texas is not a target of attacks, and in any case, its per capita endowment (a government measure of wealth) is too low, at about $230,000, while Harvard’s exceeds $2 million.
Given the growing population and enrollment in higher education, Texas remains eager for more resources. Through partnerships with companies such as NextEra Energy, a renewable energy provider based in Juneau Beach, Florida, the University of Texas has signed 5 wind and 5 solar lease agreements. It also has 4 protocols for cryptocurrency mining, and 14 for battery storage systems, which are either running or under construction. Of the record $127 million in non-oil revenue in the last fiscal year, only $7 million came from renewables.
A Crypto Assets data center in Pilot Point, Texas, located on land leased from the University of Texas System
The biggest benefit may be leasing land for large data centers, which have sparked controversy due to their enormous energy consumption. Tech companies have committed to spending hundreds of billions of dollars to build them to meet the computing needs of artificial intelligence. “Texas is on everyone’s radar,” said Brant Bernet, senior vice president of CBRE Group, which is responsible for finding land for data centers for companies.
Murphy is cautiously making these trades because he doesn’t want to occupy too much land while giving up more profitable opportunities. “We need to maximize our returns, but we can’t rush it,” he said, “We understand the future, and we also understand its potential.”
