Texas’ AI Boom vs. The Water Crisis: Can the Lone Star State Have Both?

You probably did it this morning. Maybe you asked Microsoft’s Copilot to draft an email, or had ChatGPT settle a bar bet about who was the backup quarterback for the Cowboys in ’92. It feels like magic, plucked from the air. But that AI magic has a physical cost, measured in gallons. A staggering number of them. By 2030, projections show this one industry could consume nearly 400 billion gallons of Texas water a year.

That’s a kind of thirst I understand in my bones. My great-grandmother, Dora Fay, was born in 1910 and used to tell me stories of fetching water from the Pease River in Foard County north of Abilene, where my family settled in the 1860s to farm cotton. For them, water was everything—the thin line between a good year and a bust.

Today, as a partner and the Chief Technology Officer at Blue Collar Commercial Group, I’m on the front lines of this new digital boom. Commercial real estate brokers like our group bring multi-billion-dollar projects to our state, and we’re proud of the jobs and investment they represent. But as a Texan who grew up in the Texas Hill Country communities of Bulverde and Bergheim, graduating from Boerne High School (Go Greyhounds!), and then settled in Canyon Lake to be close to the water, I see the collision coming. I have been looking out at that lake and seeing the bottom, because of historic lows, and see our vibrant oak trees brown under the strain of the years long drought.

The digital cloud that makes our lives easier is casting a long, dry shadow over the land we love. This isn’t a call to stop progress. Texas has never been about standing still. It’s a call to be smart. It’s about building the future in a way that honors our past and remembers that old slogan that’s more of a creed around here: Don’t Mess With Texas.

The New Digital Oil Boom

From my vantage point in commercial real estate, I can tell you exactly why the world’s tech giants are flocking to the Lone Star State. It’s the classic Texas formula: we have abundant land, relatively affordable power from our own independent grid, and a business-friendly attitude that cuts through red tape. Our state’s leaders have rolled out the red carpet, and the investment is pouring in on a scale that’s hard to comprehend.

We’re not just talking about a few new buildings. We’re talking about industrial-scale mega-projects that would make the oil barons of the 1920s tip their hats in respect. Out in Abilene, a $500 billion venture called the Stargate Project is underway, a partnership between giants like OpenAI and Oracle. When it’s finished, the campus will have a footprint that would swallow Zilker Park in Austin twice over, and it will need its own private power plant just to keep the lights on. South of Dallas, in Red Oak, a billion-dollar complex called GigaPop is rising, cementing the DFW metroplex as the second-largest data center market in the country. And near Amarillo, there are plans for a 5,800-acre campus—that’s larger than the entire Texas A&M campus in College Station—powered by an integrated grid of nuclear, gas, and renewable energy.

This is the 21st-century Texas miracle, and the numbers tell the story. The data center industry in Texas has grown from practically nothing to a $25 billion annual economic impact in just the past decade. These facilities don’t just house servers; they’re creating entire ecosystems of opportunity. Every major data center brings with it fiber optic networks that connect rural communities to high-speed internet for the first time. They bring engineering jobs that pay $80,000 to $120,000 a year in places where the median household income might be $45,000. They bring construction crews, security teams, maintenance specialists, and all the restaurants, hotels, and service businesses that spring up to support them.

But every boom has its cost, and this one is measured in megawatts and gallons. Our grid operator, ERCOT, is already warning that electricity demand could double by the end of the decade, driven in large part by these new, power-hungry neighbors. And where that kind of power demand goes, an incredible demand for water is sure to follow.

A Thirst the Size of Texas

You can’t see it, but the magic of AI runs on water. The thousands of servers packed into these data centers generate an incredible amount of heat. To keep them from melting down, most facilities in a warm climate like ours use a process called evaporative cooling. Think of it as a swamp cooler on a colossal scale. Water is used to absorb the heat, and then it evaporates into the Texas sky. It’s effective, but it’s also incredibly consumptive. Once that water turns to vapor, it’s gone from our local supply forever.

The numbers are staggering. A single large data center can use as much as 5 million gallons of water a day—roughly the same as a fast-growing Texas city like Fulshear or Celina. But that’s just the big ones. Even a mid-sized facility can consume 300,000 gallons daily, equivalent to about a thousand homes. Multiply that across the hundreds of facilities that are either operating or planned across our state, and you start to see the scope of what we’re dealing with.

This isn’t a hypothetical. In San Antonio, while residents were under strict watering restrictions during our worst drought periods, just two data centers used a combined 463 million gallons of water over the last couple of years. That’s enough water to supply the entire city of Georgetown for more than three months, or to fill Canyon Lake to 15% of its capacity during the current drought.

That’s what’s happening now. The future projections are even more sobering. Researchers estimate that by 2030, data centers in Texas could consume nearly 400 billion gallons of water a year. That’s an eightfold increase in just five years. To put that number in perspective, it’s eight times what the entire industry is projected to use this year—a volume of water that could supply a city the size of Austin for multiple years. By the end of the decade, this single industry could account for almost 7% of our state’s entire water use.

My ancestors managed their farm with a few acre-feet of water per season. We’re now talking about a new industry that will require a significant portion of the state’s entire water budget. And it’s happening in the middle of one of the worst droughts in living memory, at the same time that our population is projected to grow by nearly 10 million people over the next two decades.

A Collision in the Hill Country

I’ve spent my life in the Hill Country. I’ve seen the good years, when the rivers ran full and the springs flowed freely. I remember floating the Guadalupe River as a kid, when the water was so clear you could see limestone bedrock twenty feet down. I’ve seen the bad years too, when stock tanks dried up and century-old oak trees started dying from the roots up.

This drought we’re in now feels different. It’s deeper, longer, and it’s colliding with a level of growth my parents’ generation could never have imagined. We’re not just dealing with the natural cycles of wet and dry that have always defined life in Texas. We’re dealing with a fundamental shift in how water gets used and where it goes.

Here in Comal County, we’re at the epicenter. For nearly three years, many of my neighbors have been under Stage 4 drought rules, the most severe level. Canyon Lake is a shadow of its former self. The lake that used to lap at the edges of boat ramps now sits 40 feet below full capacity, exposing limestone cliffs that haven’t seen sunlight in decades. The Edwards Aquifer, the lifeblood of this region, has been stressed to the point that authorities declared a Stage 5 critical period for the first time in the aquifer’s recorded history.

You can see the stress everywhere. The Comal Springs, which have flowed continuously for thousands of years and gave our county its name, have slowed to a trickle. Local businesses that depend on river recreation—the tube rental companies, the riverside restaurants, the fishing guides—have watched their livelihoods evaporate along with the water. Property values along the lake have started to dip as potential buyers question whether waterfront property will still be waterfront in ten years.

As someone who makes a living helping Texas grow, the most alarming sign came this past March. The Texas Water Company, which serves much of our county, announced it could no longer provide service to nine planned residential subdivisions. Over 4,100 new homes, representing more than $2 billion in planned development, put on indefinite hold. It was a stark reminder of a simple truth that my great-grandmother understood: when the water runs out, everything else stops.

This is the reality on the ground. And while we’ve received some rain lately—enough to fill some stock tanks and green up the pastures—the experts tell us it’s a drop in the bucket compared to what we need. The Texas Water Development Board estimates it will take three to five years of steady, above-average rainfall to fully recharge our depleted aquifers and reservoirs. Yet, into this precarious situation, we are introducing a massive new industrial water user, and our state’s long-term water plan hasn’t even begun to account for it. The next plan isn’t due until 2027, and by then, billions of gallons of our future water supply will have already been spoken for.

The Cost of Inaction: A Texas Miracle at Risk

It’s tempting to think we can grow our way out of this, that the next rain is just around the corner, that Texas ingenuity will find a solution before we hit the wall. I wish I could believe that. But if we continue on our current path—welcoming this massive new water demand without a smart, cohesive plan—the consequences will be severe. This isn’t speculation; it’s a forecast based on what we’re already seeing.

First, the Texas Miracle itself will be at risk. Our state’s incredible economic engine is built on a foundation of reliable resources, and water is the most critical of all. A prolonged, severe drought, amplified by this new industrial demand, could cost our state hundreds of billions in lost GDP and over a million jobs—an economic blow potentially worse than the Great Recession or the COVID-19 pandemic.

What does that look like on the ground? It means boardrooms in other states deciding against moving to Texas because they can’t be confident there will be enough water for them to operate reliably 25 years from now. It means existing corporate citizens—the ones who already provide thousands of good-paying jobs—might reconsider their Texas footprint and relocate to places with more secure water supplies. I’ve already heard whispers from site selection consultants that water availability is becoming a bigger factor in location decisions than it was even five years ago.

It means the small businesses that are the backbone of our communities will be the first to suffer. When water restrictions get tight enough to impact commercial use, it’s the local car wash that has to lay off half its staff. It’s the nursery in New Braunfels that can’t keep its inventory alive. It’s the landscaping company that loses half its contracts because watering lawns becomes prohibited. It’s the local diner in Seguin that depends on workers from a nearby manufacturing plant that can no longer operate at full capacity because of water restrictions. These aren’t just abstract economic losses; they are our neighbors losing their livelihoods.

For my family and thousands of others with roots in Texas agriculture, the future looks even more grim. Our state’s “Rule of Capture” groundwater law essentially means the person with the biggest pump wins. In a fight between a family farm that’s been working the same land for four generations and a multi-billion-dollar tech giant that needs millions of gallons a day, it’s not hard to see who has the deeper pockets to drill deeper wells and install more powerful pumps. Inaction means we are choosing to let our agricultural heritage be dewatered, aquifer by aquifer, threatening not just a way of life but a critical part of our nation’s food supply.

But the most dangerous risk is one we’ve already had a taste of: cascading infrastructure failure. We all remember the 2021 winter storm, when the failure of the power grid knocked out water treatment plants, leaving millions of Texans to fend for themselves without power, heat, or clean water. A severe drought could trigger the same domino effect, just in reverse. Depleted reservoirs and aquifers could strain power plants that need water for cooling, leading to grid instability and rolling blackouts. Those blackouts, in turn, could knock out the very pumps and treatment facilities that provide our drinking water. It would be a public health crisis born not of ice and cold, but of heat and our failure to plan for a finite resource.

Finding the Texas Solution

So, what’s the answer? Do we turn our backs on the AI revolution and tell these companies to go elsewhere? Do we slam the brakes on the biggest economic opportunity of our generation? Absolutely not. That’s not how we do things in Texas. We don’t run from a challenge; we face it head-on and figure out how to win. Remember the Alamo? Remember the oil boom? Remember how we built the world’s largest wind energy industry when everyone said it couldn’t be done? We innovate, we adapt, and we find a way to get the job done.

This isn’t about more government red tape or passing a bunch of laws that will stifle the very growth we’re trying to encourage. This is about a call for common sense and collaboration. It’s about getting the right people in the room—the tech companies, the local water districts, community leaders, and folks like us in the real estate business—to find solutions that work for everyone. It’s about finding the Texas way forward.

First, we need to lean into what Texas does best: innovation. The truth is, these data centers don’t have to be so thirsty. Water-guzzling evaporative cooling has been the go-to method because it’s been the cheapest option, especially when water has been undervalued and abundant. But better technologies exist, and they’re getting better and more affordable every year.

There are closed-loop systems that recycle the same water over and over, like a radiator in your truck, cutting water use by up to 70%. There are even advanced immersion cooling techniques where servers are submerged in a special fluid that conducts heat better than water, virtually eliminating the need for water cooling altogether. It’s not science fiction; a new data center in Irving is being built on a waterless air-cooling design, proving it can be done right here in our hot, humid climate.

And the economics are getting better fast. A closed-loop system might cost 15% more upfront, but it can cut operating costs by 30% over the facility’s lifetime. In a drought-prone state where water prices are climbing and availability is becoming uncertain, that math works strongly in favor of efficiency. Companies that invest in water-independent cooling today are protecting themselves from the risk of restrictions, shortages, and price spikes tomorrow.

As a business community, we should be championing these technologies. They’re not just good for the environment; they’re good business. In a state where water is becoming more precious by the day, securing a water-independent future is the smartest long-term investment a company can make.

But here’s the thing—while market forces are powerful, they work best when they have the right guardrails and incentives. We need our state leaders to create smart policies that accelerate this transition without stifling innovation. Texas already knows how to do this right. We’ve used targeted tax incentives to build the world’s largest wind energy sector, turning what was once a niche technology into a dominant industry that now provides more than 25% of our state’s electricity. We could apply that same playbook here: offer property tax abatements or franchise tax credits for data centers that adopt water-efficient cooling technologies. Make it profitable to do the right thing, and watch how fast innovation follows.

We also need to ensure that communities have the information they need to make smart decisions about their water future. That means requiring water impact assessments for large projects—not bureaucratic obstacles designed to slow things down, but straightforward studies that help local water districts plan for the future and ensure adequate supply. When someone wants to build a facility that will use as much water as a small city, the people in that community deserve to know what that means for their wells, their water bills, and their long-term water security.

And while we’re at it, let’s set some baseline efficiency standards that give everyone a level playing field. We don’t need to micromanage how companies meet those standards—let them innovate and find the most cost-effective solutions. But having a clear target ensures that all players are working toward the same goal of water conservation. It’s the same approach we’ve taken with energy efficiency standards in commercial buildings, and it works without stifling competition or innovation.

And here’s the kicker—if Texas leads on this, we’re not just solving our own problem. We’re positioning ourselves as the go-to state for sustainable tech infrastructure. When Arizona, Nevada, and other Sun Belt states hit their own water walls in a few years—and they will—guess where companies will want to build? Right here, where we figured it out first. We’ll have the expertise, the infrastructure, and the regulatory framework that makes water-efficient data centers not just possible, but profitable.

Here’s something most people don’t realize—water-efficient data centers actually make our entire grid more resilient. When a facility doesn’t depend on massive water cooling systems, it can keep running even when water treatment plants go down or when drought restrictions force other facilities to shut down their cooling systems. That means the digital infrastructure keeping our hospitals, banks, emergency services, and communications networks online stays stable when we need it most. It’s not just about saving water; it’s about building the kind of redundant, resilient infrastructure that can weather the next crisis, whatever form it takes.

That’s why we can’t wait for the next official planning cycle. The 2027 State Water Plan will be too late for the decisions being made today. We need interim solutions now—regional compacts between counties that let them share water resources more efficiently, emergency planning protocols that prioritize critical infrastructure during shortages, and fast-track permitting for companies that want to retrofit existing facilities with water-efficient cooling systems. The companies breaking ground today will determine whether we have enough water left for the ones coming in 2028 and beyond.

Second, we need to encourage genuine partnership, not just permitting. Smart developers are already realizing that being a good neighbor is essential to getting things done in Texas, especially in smaller communities where a data center can represent a major change to the local landscape. We’re seeing the rise of Community Benefit Agreements, which are basically handshake deals backed by a contract and built on mutual respect.

A company comes to a town and says, “We want to build here, and in return for your support, we’ll commit to funding upgrades to the local water infrastructure, providing scholarships for local kids, guaranteeing local hires for good-paying jobs, and maybe even helping fund that new fire station or EMS facility you’ve been needing.” It’s a way of ensuring that the prosperity of these projects is shared with the communities that host them, and it’s a model that fits the Texas spirit of mutual respect and local control.

But for these agreements to work, they need to have teeth. Communities need the leverage to negotiate from a position of strength, which means having access to good information about water impacts and having some regulatory framework that ensures promises get kept. That’s not anti-business; it’s pro-community, and in Texas, strong communities are good for business.

This is the path forward. It’s not about saying no to growth or turning our backs on the future. It’s about growing smart and building sustainably. It’s about asking the tough questions upfront and working together to find answers that ensure the long-term prosperity of our state. And when the market needs a little nudge to move in the right direction, it’s about using the lightest touch possible to get there—incentives instead of mandates, information instead of interference, and standards that reward innovation instead of stifling it.

Our Heritage and Our Future

My family’s story in Texas began with a dependence on water, and for 160 years, that fundamental truth hasn’t changed. From the cotton fields of the rolling plains to the sprawling data centers of the digital age, our success as Texans has always been tied to this precious, finite resource.

The AI revolution is our generation’s boom. It holds the promise of transforming our economy, securing our state’s leadership for the next century, and creating opportunities for our children that we can barely imagine today. At Blue Collar Commercial Group, we are all-in on helping to build that future. But we have to do it right. We have to build it in a way that our ancestors would have understood—with a deep and abiding respect for the land and the water that sustains us all.

We’ve faced challenges bigger than this and have always come out stronger. This is our moment to show the world how to build the future without sacrificing our past, how to embrace innovation while honoring our heritage. But this isn’t a problem we can leave to someone else to solve. It’s on all of us—business leaders, community leaders, and every Texan who cares about the future of our state.

Here’s what you can do. Get involved with local water conservation groups who are on the front lines of this fight. Support organizations like Texas Living Waters that are working to protect our rivers, springs, and aquifers. And just as importantly, let your state legislators in Austin know that securing our water future is a top priority for you, your family, and your business.

Tell them you want a Texas Water Innovation Tax Credit, modeled after our renewable energy incentives that turned us into the wind energy capital of America. Tell them you want streamlined permitting for companies that commit to closed-loop cooling and other water-efficient technologies. Tell them you want regional water planning authorities that can move faster than the current five-year state planning cycle, because the AI boom isn’t waiting for our bureaucracy to catch up.

And tell them you want transparency. You want to know how much water these facilities are using, where it’s coming from, and what the long-term impact will be on your community. You deserve that information, and you deserve a voice in decisions that will affect your water supply for generations to come.

This is our state, our water, and our legacy to protect. The decisions we make in the next few years will determine whether Texas remains the land of opportunity for our grandchildren, or whether we become another cautionary tale about a place that grew too fast and consumed too much.

Let’s get to work, and let’s prove, once again, that you don’t mess with Texas—because when you’re dealing with Texans, we don’t just solve problems, we solve them in a way that makes everyone else wish they’d thought of it first.