Bloomberg: The University of Texas, which built its wealth on oil, now wants to profit from Crypto and AI
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Bloomberg: The University of Texas, which built its wealth on oil, now wants to profit from Crypto and AI
The University of Texas has begun leasing its land for renewable energy, battery storage, and cryptocurrency data centers, creating revenue streams that barely existed five years ago.
Navigating Web3 tides with focused insightsBy Janet Lorin
Translation: Luffy, Foresight News
A cryptocurrency data center in the town of Pyote, Texas, located on land leased from the University of Texas System
Dozens of wind turbines rise beneath desert skies, each as tall as a 50-story building. Altogether, 800,000 solar panels blanket scrubland nearly the size of London’s Heathrow Airport. Inside a climate-controlled cryptocurrency data warehouse, rows of computer servers hum loudly across an area equivalent to two city blocks in New York City. The University of Texas System oversees all the land beneath these new ventures—projects that are generating revenue for hundreds of thousands of students.
For decades, the University of Texas System has relied on leasing rights to vast mineral resources beneath its Permian Basin lands—oil and gas extracted from one of North America’s richest reserves. Beneath the wind farms and solar fields, pipelines stretching for miles carrying the "liquid gold" remain central to its wealth. Thanks to years of record fossil fuel production and investment returns, the University of Texas holds a $47.5 billion endowment, second only to Harvard among universities.
But the University of Texas System (which also manages land for Texas A&M University) is increasingly seeking more income from above-ground uses. Beyond ground leases dating back decades—for roads, power lines, pipelines, and grazing rights—the university now has new initiatives: leasing land for renewable energy, battery storage, and cryptocurrency data centers, creating revenue streams that barely existed five years ago.
A wind farm near Rankin, Texas
In the year ended last August, these surface-use projects generated nearly $130 million—its highest-ever amount, about five times what it earned 15 years ago. That sum exceeds half the amount spent on scholarships and financial aid at the University of Texas at Austin, the state’s flagship campus, during the same period.
University of Texas System land holdings revenue (by fiscal year ending August 31)
This May, the University of Texas reached a preliminary agreement to lease 200,000 acres—10% of its land holdings—to Apex Clean Energy, a Virginia-based company, for wind and solar development. Apex’s clients include Meta, Facebook’s parent company, and the U.S. Army. While financial details haven’t been disclosed, this would be the largest surface-use deal the university has ever made.
If such projects succeed, the University of Texas expects to add tens of millions of dollars annually in revenue over coming decades. It is now pursuing opportunities to host large AI-focused data centers, companies helping utilities and other entities prevent carbon emissions, and natural gas-fired power plants.
William Murphy Jr., CEO of University Lands—the division managing state-owned property for the university system—is trying to diversify the system's revenue. Some oil executives have recently said U.S. output in the Permian Basin has reached or is nearing its peak. “Our mission is to create permanent income for the institution. We take the long view—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 for the University of Texas System, in his Houston office
The University of Texas’ strategy comes as renewable energy faces political headwinds in Washington, D.C. To reverse Biden-era support for renewables, fossil-fuel-backing President Donald Trump has aggressively criticized wind turbines, calling them unattractive and unreliable. “Big, ugly windmills—they ruin your community,” he said in January.
Texas itself presents a mixed picture on renewables, which could challenge the university’s plans. The state leads the U.S. in wind power production and ranks second in solar, behind only California. “We believe in an ‘all-of-the-above’ approach to energy development,” Republican Governor Greg Abbott said 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 major transmission lines, helping meet demand from oil rigs, new data centers, cryptocurrency mining facilities, and hydrogen production plants. “Without these new transmission lines, no one would want to expand wind and solar supply in West Texas,” said Ed Hirs, an energy economist at the University of Houston.
Yet after a devastating winter storm caused widespread blackouts in 2021, Republican leaders in Texas blamed the grid’s reliance on wind and solar power. Studies found that failures at natural gas plants were the primary cause. Nonetheless, the Republican-controlled Texas legislature is considering bills that would make constructing solar and wind projects more expensive and difficult.
Murphy said if Texas officials move away from renewables, the University of Texas could shift strategies. For example, it might support projects powered by natural gas. “If those incentives change, it could alter the landscape in West Texas,” he said. “We’re not a political entity—we won’t push anything.”
Murphy’s Houston office is lined with black-and-white photos of early oil derricks, near ConocoPhillips’ headquarters and Shell’s main U.S. outpost. Dominating the room is a wooden wheel from an old oil pump, twice Murphy’s height—symbolizing that the university still values fossil fuel earnings. “We plan for oil and gas to be around for a long time,” said Murphy, 47, a fifth-generation Texan and former oil-and-gas lawyer who once managed one of the state’s largest cattle ranches.
In Pyote, Texas, an operator burns off excess 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—almost equal to the combined areas of Delaware and Rhode Island—spanning 19 counties centered on the famed oil town of Midland. In the 19th century, the state constitution granted the university rights to both subsurface minerals and surface use of this arid land, then considered nearly worthless except for grazing. But drillers struck oil in 1923, launching a wave of wealth for higher education in Texas.
The University of Texas does not explore for oil or gas, nor develop any projects on state lands. Instead, it leases the land and collects royalties based on production. Over the past 15 years, land leased to oil and gas companies has generated $15.8 billion. With rising prices and output, royalties have surged recently, exceeding $2 billion annually.
Renewable energy and energy storage projects on land managed by the University of Texas System
All this revenue flows into a fund supporting two major public universities in Texas. Two-thirds goes to the University of Texas, one-third to Texas A&M, which has a $20 billion endowment. Together, the systems educate about 350,000 students and operate hospitals, including MD Anderson Cancer Center in Houston.
The state constitution mandates that oil and gas revenues be used for capital expenditures—such as building classrooms, hospitals, and laboratories—not day-to-day operations. This wealth has fueled a construction boom, recently funding a $50 million cancer and surgery center at UT Rio Grande Valley, a $60 million “smart hospital” with virtual reality labs at UT Arlington, and a $54 million new home for Mays Business School at Texas A&M’s flagship campus.
New surface-use project revenues can go toward categories like “academic excellence” and special programs. Though still small compared to fossil fuel income, non-oil-and-gas revenues have totaled $1.2 billion over the past 15 years and are rising sharply. Last November, the University of Texas System announced it would use its endowment, non-fossil-fuel funds, and other sources to cover tuition for all undergraduate students from families earning $100,000 or less across its nine campuses.
Such flexible funding is especially valuable today, as higher education faces headwinds. The Trump administration has clashed with elite universities, cutting federal funding for areas it disapproves of—including diversity, equity, and inclusion initiatives. A Republican bill seeks to impose up to a 21% tax on investment income from the largest private university endowments. As a public system, the University of Texas isn’t a target, and regardless, its per-student endowment—about $230,000, the government’s standard measure of wealth—is far below Harvard’s, which exceeds $2 million.
Given growing population and college enrollment, Texas continues to seek more resources. Through partnerships with companies like NextEra Energy, a renewable energy provider based in Juno Beach, Florida, the University of Texas has signed five wind and five solar leases. It also has four agreements for cryptocurrency mining and 14 for battery storage systems, either operating or under construction. In the previous fiscal year’s record $127 million in non-oil revenue, only $7 million came from renewables.
A cryptocurrency data center in Pyote, Texas, located on land leased from the University of Texas System
The biggest potential gains may come from leasing land for massive data centers, which have drawn controversy due to their enormous energy consumption. Tech companies have pledged to spend hundreds of billions of dollars building them to meet artificial intelligence computing demands. “Texas is getting attention from everyone,” said Brant Bernet, senior vice president at CBRE Group, which helps companies find land for data centers.
Murphy is moving cautiously on these deals, wary of locking up too much land and missing out on more lucrative opportunities later. “We need to maximize returns, but we can’t rush,” he said. “We understand the future, and we understand its potential.”
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