Gabriel Collins, “Prospective Costs and Consequences of Insufficient Water Infrastructure Investment in Texas,” Rice University’s Baker Institute for Public Policy, January 27, 2025.
Water is one of the four cornerstones of the Texas growth story. The $2.5 trillion Texas economy and a workforce adding six figure numbers of new talent each year need water to grow. The Lone Star state’s manufacturing sector now approaches $300 billion in annual economic value generated. Each additional mega-facility Texas attracts or keeps—be it Tesla, Samsung, Texas Instruments, or others—can generate tens or even hundreds of billions of dollars in lifetime economic impacts and support supply chains that incorporate thousands of local small and medium-sized businesses.
But each boardroom making these investment decisions needs confidence that there is enough water for them to operate tomorrow, the next day, and 25 years from now, or they will not locate facilities in Texas. A Texas Legislature that adopts an “invest to grow” approach to water can help materially underwrite water infrastructure investments that bolster confidence.
Water pervades all economic and life activity in Texas. Consider this for perspective: The state consumes about 6.4 million barrels of oil equivalent per day in energy from all sources and for all uses (including chemical and plastics production) but requires nearly 50 times as much water—almost 300 million bpd in 2021.
Accordingly, the direct and opportunity costs of failure to invest are already in the billions per year and could go orders of magnitude higher under the stress of a prolonged drought. Current costs of water infrastructure underinvestment are already likely on the order of $2 billion annually just for revenue water lost from utility systems. Contingent costs could be far higher, especially if a prolonged drought forces mass scale adoption of more expensive alternative water sources.
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This publication was commissioned by Texas 2036 and produced in collaboration with the Baker Institute Center for Energy Studies. Wherever feasible, this material was reviewed by external experts prior to release. It has not undergone editorial review. Any errors are the responsibility of the author(s) alone.
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