In the move-fast-and-break-things world of high tech, Infrakey and Lacy Lakeview have joined a global race to build a hyperscale data center — in two years.
But that race may put them on a collision course with neighboring Waco, which holds power over infrastructure needed for the $10 billion project.
Top Lacy Lakeview officials say there’s good reason for the haste.
Potential investors don’t want to wait. And city officials don’t want to lose the chance to lasso $50 million a year in tax revenue for this suburb of 8,000 just north of Waco. That urgency is creating sparks with Waco officials, who say they have been kept in the dark about the project. It has also fueled the flames of opposition in the Ross area, where the 520-acre data center is proposed.
And on May 2, Lacy Lakeview voters sent a message of their own, electing a data center opponent to the city council. Layering onto those challenges are technical roadblocks that could stall the project before it starts – and that would need Waco’s help to resolve.
Lacy Lakeview would need to annex not only the data center property, but also a three-mile corridor 1,000 feet wide through a mosaic of private property. Those owners would have to agree to be annexed.
Infrakey would need to build miles of new sewer mains and repurpose existing lines to push wastewater uphill to the site. The company would have to build a sewer plant capable of treating up to 2 million gallons of wastewater a day to reuse as cooling water.
Building the elaborate infrastructure for the project would require close collaboration with Waco, which owns the regional sewer system and holds the water service rights to the Infrakey site.
Waco officials are increasingly vocal in their skepticism about the project’s benefits beyond Lacy Lakeview, which stands to benefit from up to $10 billion in new tax base. Their questions come amid a growing state and nationwide backlash against the data center industry, and as state lawmakers discuss regulations to rein them in.
Waco City Manager Ryan Holt learned about the project from a Waco Bridge article in November. Lacy Lakeview officials didn’t meet with his team until January. It was April 22 before engineers met to discuss technical details, and Waco officials say they still are lacking basic information about the project.
“If this is so urgent, wouldn’t you think engineers would have been in the same room by now?” Holt said in an April 8 interview.
Some Waco officials are deadset against the project.
Waco Council Member Darius Ewing said he would have considered a good-faith discussion between Waco and Lacy Lakeview about cooperating on the project. Instead, he said the small city’s approach has been “almost oppositional.”
Ewing is not convinced that data centers pay off for communities in general and said this one seems like a bad bet.
“Even if they had an airtight way to make sure that it was not a drain on resources and they were recycling everything correctly, it was minimally invasive, I think it would still be a poison pill,” Ewing said.
Lacy Lakeview Mayor Chuck Wilson said his city is just now firming up technical details to discuss with Waco.
“I think Waco was brought into the project at about the right time,” Wilson said. “I know that may not seem that way to them, but we brought them in when we were asked to do so.
“I’m very pleased with the effort we have made to include other elected officials. I can’t think of anybody who needs to be informed that hasn’t had several phone calls or lunches. This has been very well coordinated.”
Opposition expands
Rural residents around Ross and Elm Mott in northern McLennan County began organizing to fight the data center almost immediately after learning about it in November.
Now critics of the project are emerging in nearly every quarter of local politics.
Many share the usual concerns about data centers, including their impact on water, electricity and land use. But many are especially critical of the approach Lacy Lakeview and Infrakey are taking.
State Rep. Pat Curry, R-Waco, is open to data centers but deeply critical of the Infrakey proposal. He frequently speaks at Sunday strategy meetings that data center opponents host at the Ross Volunteer Fire Department.
“It’s not the right deal in the right place, with the right use of resources,” Curry said in an interview with the Bridge. “Without the City of Waco agreeing to it, Lacy Lakeview can’t do anything out there and neither can Infrakey. … Those guys don’t know what the hell they’re doing.”
He plans to support legislation creating guardrails on the industry, including local land use powers allowing cities and counties to turn down a bad deal. Many data centers are being developed outside of city limits, and counties have no zoning powers in Texas.
Sujeeth Draksharam, Infrakey spokesman and engineer, dismissed the legislative threat to the project.
“If the Legislature wants to take us to the Stone Age and try to put zoning or something to pander to the political stuff? Come on,” Draksharam said. “This is Texas, where property rights prevail over anything.”
The data center project became a unifying issue in the March primary elections in McLennan County. All three candidates for Texas Senate District 22, which includes this county, pointed to Infrakey’s project as an example of residents being overpowered and left in the dark.
State Rep. David Cook, R-Mansfield, won the primary and is favored in the November election to win the heavily Republican district, which has several data center flashpoints. He has said he wants to allow limited local control over data centers, possibly including special permits that allow public input for approval.
Meanwhile, Rick Tullis, who is unopposed in the November election for county judge, said he would oppose tax abatements for the Infrakey project. As the top county official, he said he would only support data center projects that involve robust communication, and would prefer them to be placed in industrial parks.
In the May 2 local elections, Lacy Lakeview voters elected Amy Gage, a data center opponent, to the council with a strong margin. Richard Lednicky, a council incumbent and the only candidate to come out in support of the Infrakey development, lost his seat.
Gage described the results as a referendum on the project and its city backers. “It’s reassuring but also worrisome that other leaders are experiencing the same level of frustration that residents and community members are feeling when trying to get straight answers from the leadership of Lacy Lakeview,” Gage said on election day.
Power of the pipe
Lacy Lakeview Mayor Wilson said he hoped to reach an understanding with Waco on the issue of recycling wastewater in a matter of weeks. The fate of the Infrakey data center may depend on it.
Infrakey hopes to separate itself from the pack of hyperscale developers by sourcing nearly 100% of the water to cool the data center from sewage flows in Lacy Lakeview and the Waco area.
The “sewer mining” approach could sidestep the usual red-hot debates about the data center industry’s thirst for water. But the planning, infrastructure and intercity partnerships required to build the system by 2027 are substantial.
The project’s first phase would require about 300,000 gallons of wastewater per day, but Lacy Lakeview produces only about 250,000 gallons per day, said Draksharam, the Infrakey spokesman and engineer. Ultimately, the project would need some 2 million gallons per day, he estimated.
For reference, Waco is spending $78 million to expand the Bull Hide Creek wastewater treatment plant’s capacity from 1.5 million to 4 million gallons a day.
To solve the sewage shortfall, Lacy Lakeview wants to tap into Waco’s sewer flows and pump the wastewater miles north to a yet-to-be constructed treatment plant, all of which Infrakey promises to pay for.
“We’re not asking for a dime from Waco,” Wilson said. “Waco gets some deferral of capital expenditure. They get some relief on their existing (sewer) infrastructure, and they don’t have to pay anything for it, (while) Infrakey gets the effluent that they would like to have to cool their plant.”
But basic questions about the plan have not been answered yet, including how the two city’s wastewater systems would connect, how many miles of new pipeline and pumping infrastructure have to be built or what the work would cost.
Environmental Systems Group, or ESG, the engineering company Infrakey tapped for the job, has not completed its feasibility study of the sewer mining project yet. ESG’s engineers only began meeting with Waco engineering staff in late April, months after Waco officials found out about the project.
Water questions
Draksharam, the Infrakey engineer, acknowledged the communication gap in an interview.
“I do take the criticism that we haven’t been engaged,” Draksharam responded in a comment to the Bridge. “That’s a fair comment.”
Infrakey’s site is located in Waco’s water and wastewater service jurisdiction; under maps approved by the state. Waco must provide those services but has power to set the price. Also, it is under no obligation to pump wastewater to a customer, only to take it away.
Waco also owns the regional wastewater system of which Lacy Lakeview is a member. Lacy Lakeview’s 50-page wastewater contract with Waco does not specifically address how a sewer mining operation would be approved.
Additionally, Waco officials believe the filtration technology at the core of the proposal is excessively expensive, raising questions about who would pay to keep the plant operating if Infrakey pulled out.
At full buildout, the sewer mining plant would cost an estimated $1.3 million a year to run, according to an ESG project brief sent to Waco and obtained by the Bridge through an open records request.
If the wastewater reuse plan falls through, the Plan B for supplying water by 2027 is unclear. One option listed in the project brief is a proposed reallocation of Lake Whitney water previously reserved for hydropower.
But the Brazos River Authority and U.S. Army Corps of Engineers have not even begun a study for such a reallocation.
Any reallocation would be at least three to five years away, a BRA spokesperson said in a statement to the Bridge. To list Lake Whitney water as a contingency source for the data center “would have been done without the BRA’s knowledge and without a contract guarantee,” the spokesperson said.
ESG also lists well water as a contingency option. But any new use of groundwater in McLennan County would have to be approved by the Southern Trinity Groundwater District, and Infrakey officials say they are not pursuing groundwater.
Annexation hurdle
Lacy Lakeview will have to annex Infrakey’s 520-acre site to reap the property tax benefits that prompted its partnership with the data center company.
Under state law, the newly annexed area would have to be connected to the remainder of the city by a corridor at least 1,000 feet wide.
Rep. Curry expressed doubt about how easily Lacy Lakeview could annex a distant property.
“You can’t just jump out there and go, ‘Yeah, we’re going to do this. And the land doesn’t even touch our city limits. It doesn’t touch anything we have,” Curry said.
Taking all the challenges into account, Hodde returned to the financial realities facing the city if the data center never materializes. He said Lacy Lakeview would be staring at a backlog of maintenance and infrastructure problems, with little tax revenue to address them.
“If the data center doesn’t happen, we still have to be able to upgrade our capital improvements where we need to,” he said.
