The University of Texas, which built its fortune on oil, aims to profit in the fields of Crypto and AI.

Original Title: Oil-Rich University of Texas Wants to Cash In on AI, Crypto and Power

Author: Janet Lorin

Translated by: Luffy, Foresight News

A cryptocurrency data center in the small Texas town of Pyote, situated on land leased from the University of Texas System

Dozens of wind turbines stand tall under the desert sky, each as high as a 50-story building. A total of 800,000 solar panels blanket a scrubland area nearly equivalent in size to London’s Heathrow Airport. Inside a chilled cryptocurrency data warehouse, rows of computer servers hum noisily, occupying an area equivalent to two city blocks in New York. All this activity is taking place on land managed by the University of Texas System, which is leveraging these new initiatives to generate income for hundreds of thousands of students.

For years, the University of Texas System has relied on leasing its vast subterranean mineral rights in the Permian Basin to generate revenue: extracting oil and gas from North America’s most abundant reserves. Beneath the wind turbines and solar farms, pipelines that stretch for miles still carry the "liquid gold" that remains key to its wealth. Thanks to years of record-breaking fossil fuel production and investment returns, the University of Texas boasts a $47.5 billion endowment, ranking second among higher education institutions, only behind Harvard University.

Yet, the University of Texas System (which also manages land for Texas AM University) is increasingly seeking ways to generate income above ground. In addition to surface development initiatives that began decades ago—such as leasing rights for building roads, power lines, and pipelines, as well as land for grazing purposes—the university has more recently ventured into new opportunities: leasing land for renewable energy projects, battery storage, and cryptocurrency data centers. These sectors have become sources of revenue that barely existed five years ago.

A wind power farm in Rankin, Texas

In the one-year period ending last August, these surface-facing projects collectively generated nearly $130 million in revenue. This marks the highest amount ever, about five times what it was 15 years ago. That revenue surpassed half of the amount spent on scholarships and financial aid by the University of Texas at Austin (the flagship campus of the state) in the same year.

Revenue from the University of Texas System’s Land Holdings (for fiscal years ending August 31)

In May of this year, the University of Texas reached a preliminary agreement to lease 200,000 acres (representing 10% of its land holdings) to Virginia-based Apex Clean Energy for wind and solar energy projects. The company’s clients include Facebook’s parent company Meta and the U.S. Army. While financial details have not been disclosed, this is expected to be the largest land project deal in the university's history.

If such projects succeed, the University of Texas expects to generate tens of millions of dollars in additional annual revenue over the coming decades. The university is actively seeking to provide sites for large-scale AI data centers, companies aiding utilities and other entities to prevent carbon emissions from entering the atmosphere, and natural gas power plants.

William Murphy Jr., CEO of University Lands (the department managing the Texas University System’s state-owned lands), is working to diversify revenue streams across the system. Some oil company CEOs have recently stated that U.S. production in the Permian Basin has reached or is close to its peak. "Our mission is to create perpetual income for the institution. We have a long-term vision—30 to 50 years," Murphy said. "We see this as a marathon, and we’re just at the starting line."

William Murphy Jr., CEO of University Lands, in his Houston office

The University of Texas’ strategy emerges at a time when renewable energy is facing criticism in Washington, D.C. In a bid to counter the Biden administration’s support for renewable energy, fossil fuel advocates, including former President Donald Trump, have sharply criticized wind turbines, calling them unsightly and unreliable. "Big, ugly windmills—they're ruining your communities," he said in January.

The state of Texas itself has a love-hate relationship with renewable energy, which could pose challenges to the University of Texas’ plans. Texas is the largest producer of wind power in the United States and ranks second in solar power, behind California. "We believe in an ‘all-of-the-above’ approach to energy development," said Republican Governor Greg Abbott in December.

To support this strategy in 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 power demands of oil drilling platforms, new data centers, cryptocurrency mining facilities, and hydrogen production plants. "Without these new transmission lines, no one will want to expand wind or solar power in West Texas," said Ed Hirs, an energy economist at the University of Houston.

However, in 2021, following a devastating winter storm that caused widespread power outages, Republican officials in the state blamed the grid’s reliance on wind and solar power. Research found that failures at natural gas power plants were the primary cause of the outages. Nevertheless, the Republican-controlled Texas legislature is still considering bills that would make building solar and wind projects more expensive and difficult.

Murphy noted that if Texas officials move away from renewable energy, the University of Texas could shift its strategy. For instance, the university could support projects powered by natural gas. “If these incentives change, it could alter the dynamics in West Texas,” he said. “We’re not a political entity. We’re not here to push any agenda.”

Murphy’s Houston office is adorned with black-and-white photographs of early oil rigs and is located near the headquarters of ConocoPhillips and Shell’s primary outpost in the U.S. A wooden wheel from an old-fashioned oil pump, towering twice as high as Murphy himself, takes center stage in his office, underscoring the University of Texas’s ongoing focus on earning profits from fossil fuels. “We plan on having oil and gas around for a very long time,” said Murphy, 47, a fifth-generation Texan, former oil and gas attorney, and one-time manager of one of the state’s largest cattle ranches.

In Pyote, Texas, an operator flares excess natural gas at a well located on land managed by the University of Texas.

The University of Texas oversees 3,300 square miles of land in the Permian Basin—nearly the combined size of Delaware and Rhode Island—spanning 19 counties and centered around the famed oil town of Midland. In the 19th century, the state constitution granted the mineral and surface rights of these lands to the University of Texas. Back then, the arid lands were considered nearly worthless beyond ranching. But when drillers struck oil in 1923, it became a windfall for higher education in Texas.

The University of Texas does not drill for oil or gas itself, nor does it develop any projects on state-owned lands. Instead, it leases the land and collects royalties based on oil and gas production. Over the past 15 years, leasing land to oil and gas companies has generated $15.8 billion in revenue. With recent increases in prices and production, royalty revenue has surged, surpassing $2 billion annually.

Renewable energy and energy storage projects on land managed by the University of Texas System.

All these funds flow into a foundation that supports two large public universities in Texas. Two-thirds of the allocation goes to the University of Texas, and one-third to Texas AM University, which boasts a $20 billion endowment fund. Combined, these two systems educate approximately 350,000 students. They also operate hospitals, such as the MD Anderson Cancer Center at the University of Texas in Houston.

The state constitution mandates that oil and gas revenues must be used for capital expenditures, such as building classrooms, hospitals, and laboratories, rather than for daily operations. This wealth has fueled a construction boom, including a recent $50 million allocation for a new cancer and surgery center at the University of Texas Rio Grande Valley, $60 million for a "smart hospital" equipped with virtual reality labs at the University of Texas at Arlington, and $54 million to assist in building a new home for Mays Business School at Texas AM University's flagship campus.

Revenue from new land projects can be used for categories such as "academic excellence" and to support special programs. While still relatively small compared to fossil fuel revenues, non-oil and gas income has totaled $1.2 billion over the past 15 years and has been steadily rising. Last November, the University of Texas System announced it would use its endowment funds, non-fossil fuel income, and other sources to eliminate undergraduate tuition for families earning $100,000 or less across its nine campuses.

Today, such funds are particularly valuable to universities because they come with flexibility at a time when higher education is facing headwinds. The Trump administration had clashed with elite universities, cutting federal funding to fields it disliked, including anything perceived as related to diversity, equity, and inclusion. A Republican bill is seeking to impose up to a 21% tax on the investment income of the largest private university endowment funds. As a public school system, the University of Texas is not directly targeted by these attacks. Furthermore, its per capita endowment (the government’s measure of wealth) is relatively low at around $230,000, compared to more than $2 million at Harvard University.

Given the growing population and higher education enrollment in Texas, the state remains eager for additional resources. By collaborating with companies like NextEra Energy, a Florida-based supplier of renewable energy headquartered in Juno Beach, the University of Texas has signed five wind energy and five solar energy lease agreements. Additionally, it holds four agreements for cryptocurrency mining, as well as 14 agreements for battery storage systems, all of which are either operational or under construction. Of the record $127 million in non-oil revenue generated in the last fiscal year, only $7 million came from renewable energy sources.

A cryptocurrency data center in Pecos, Texas, located on land leased from the University of Texas System

The biggest advantage might be leasing land for large data centers, which have sparked controversy due to their massive energy consumption. Tech companies have pledged to spend billions of dollars constructing these centers to meet the computational demands of artificial intelligence. "All eyes are on Texas," said Brant Bernet, senior vice president at CBRE Group, who specializes in finding data center land for companies.

Murphy is cautiously negotiating these deals because he doesn't want to tie up too much land and miss out on potentially more lucrative opportunities. "We need to maximize returns, but we can't rush into it," he said. "We understand the future, and we understand its potential."

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