Crises, it’s often said, create their own opportunities ― and with a buoyant regional economy, North Texas currently has no shortage of the latter.
Yet booming growth is running headlong into the reality of scarce resources ― primarily water. Unless something changes, current supplies won’t be able to satisfy multiplying demand associated with the relentless buildout of data centers, a soaring population and the everyday needs of current residents.
With Texas preparing to invest billions over the coming decades to address the Lone Star State’s growing water needs, the focus is shifting to how private companies can help the state avert a crisis.
Enter Coltala Holdings, a Dallas-based private equity firm that last month acquired Alsay, a municipal and industrial well water powerhouse located in Houston. Coltala has put nearly $500 million to work in Texas-based companies.
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Alsay, which has more than 60 years of experience and more than $100 million worth of business, now becomes Coltala Water Holdings ― a linchpin to helping address Texas’ growing supply needs by tapping into private sector ingenuity.
It’s part of what Edward Crawford, Coltala’s co-founder and co-CEO, calls the firm’s “moonshot in water,” he told The Dallas Morning News in an interview last month.
“If you look at all the data centers coming online, that’s going to be massive, like, we’re gonna need tons of water for that. That’s not talking about going from 30 million people to 50 million people in the population.”
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Although officials are rallying to build out reservoir capacity, projects can take decades or longer to complete. For a booming North Texas economy ― whose population is expected to double by 2070 ― time is of the essence.
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“If you look at Dallas, specifically, if you look at the Bois d’Arc reservoir, it took, what, 30 years to build that” for about 2 million residents, Crawford said. “Like, we don’t have 30 years.”
‘A lot of business’
Water flows through a sedimentation basin at the North Texas Municipal Water District 400-acre treatment plant in Wylie, Texas in 2018. North Texas Municipal and Dallas Water Utilities are preparing for the big increases in demand in the coming decades as well as taking into account the ever present threat of drought.
Tom Fox / Staff Photographer
Texas has a double-barrel problem, in which rapid economic expansion is putting growing strains on resources like energy and water. According to state projections, water supplies may tumble 18% by 2070, just as demand is expected to jump by 9%.
As the population swells, officials need to upgrade tens of billions in aging infrastructure (which public officials are required to fix), while finding new water supplies large enough to satisfy a massive influx of residents (often the domain of private companies).
That includes the number of companies planting down roots to tap into the Lone Star “miracle” of low taxes and light regulation.
Those considerations were partly why Coltala found value in buying Alsay, whose top-producing wells can crank out thousands of gallons of water per minute.
“As the older water wells start to age out…they need to be replaced. And so that is a revenue stream for so that’s a lot of business,” Joe Slavik, President of Alsay, told The News in an interview.
Proposals like the Marvin Nichols Reservoir in North Texas were designed in part to address some of those challenges, but the project has gotten bogged down in interregional conflict that’s delaying its completion.
At around 55%, the majority of Texas’ supplies come from groundwater, which rely on a functioning network of aquifers and wells – many of which are old and in need of repair or replacement. They are connected to dozens of water bodies in North Texas, many of them manmade, that help feed regional demand.
With more people and firms flocking to the state, “our existing surface water supplies, the lakes, etc, they’re getting tapped out too.”
According to Slavik, a growing number of Alsay’s well-drilling activities are for replacement or additional units, rather than purely new ones. “It’s maybe a 60/40 mix now…whereas in the past it was a much greater percentage that was simply new.”
Still, private-sector allocation of public resources can come with its own set of problems – especially when big money firms get involved.
It’s something to which Kyle Bass can attest. Recently, the wealthy Dallas hedge fund investor has courted controversy with his market-based approach to conservation management, with a plan to siphon billions of gallons of groundwater in East Texas fueling resistance.
“It’s a way of bringing capital markets in to help solve complex environmental and societal problems. And you don’t have to be altruistic. You can actually make a decent return,” Bass told Texas Monthly in an interview published in June.
Crawford, however, believes that the severity of Texas’ natural resources cliff means that “everybody is going to have to get involved” – including private companies with obvious profit motives.
“I think Dallas has always been a city that’s dreamed big,” he said, citing large-scale public works projects of the past. “This city rises to the occasion, which is really cool to see.”
Solving the region’s water issues is going to require “some long term vision here…and then also, what are the private companies that can come in and help,” he added.