A major oil company is seeking a state tax break in Texas worth hundreds of millions of dollars to build a massive power plant. The energy won\u2019t be going to residential customers, though. Instead, the gas plant will be used to power a data center whose eventual tenant could be Microsoft.<\/p>\n
Chevron subsidiary Energy Forge One has filed an application<\/a> with the State Comptroller\u2019s board to obtain a tax abatement for a power plant it\u2019s building in West Texas. In late January, the comptroller\u2019s office made a recommendation to support the application\u2019s approval\u2014the first such approval under the program for a power plant intended solely for data center use.<\/p>\n In March, following news reports<\/a> that Microsoft was looking into purchasing power from the Energy Forge project, Chevron said<\/a> that it had entered into an \u201cexclusivity agreement\u201d with Microsoft and Engine 1, an investment fund involved in the project. In January, Microsoft pledged to be a \u201cgood neighbor\u201d in communities where it is building data centers, including promising to pay a \u201cfull and fair share of local property taxes.\u201d<\/p>\n The potential tax abatement for the project comes as big tech companies are battling rising public fury about data centers and electricity costs. It also comes as lawmakers start to cast a more critical eye on ballooning incentives for data centers, some of which have cost some states\u2014including Texas\u2014$1 billion or more each year.<\/p>\n Chevron spokesperson Paula Beasley told WIRED in an email that all tax incentives under consideration for the Energy Forge project \u201capply solely to the power generation facility\u201d to \u201csupport new energy infrastructure, and do not extend to any future data center facilities that may be served.\u201d Beasley also said that there is currently \u201cno definitive agreement\u201d with Microsoft for this power plant.<\/p>\n \u201cMicrosoft is in discussions with Chevron,\u201d Rima Alaily, Microsoft\u2019s corporate vice president and general counsel for infrastructure, said in a statement to WIRED. \u201cNo commercial terms have been finalized, and there is no definitive agreement at this time.\u201d<\/p>\n Chevron is applying for a tax abatement for the project under Texas\u2019 Jobs, Energy, Technology, and Innovation (JETI) Act. Passed in 2023, the program is intended to incentivize businesses to build large infrastructure projects in the state in exchange for guarantees to bring jobs and revenue. Accepted projects get a cap set on the amount of taxable property they can be charged through local school district taxes.<\/p>\n The Pecos-Barstow-Toyah school board approved<\/a> the project\u2019s application at a meeting in February. The state pays for the tax abatement, so the school district itself does not lose out on any money.<\/p>\n According to documents from the state, the Chevron project could net more than $227 million in savings for the company over a 10-year period, depending on the eventual size of the project and investment. The application says<\/a> the plant will provide \u201cover 25 permanent, full-time jobs,\u201d though there\u2019s no requirement to do so because it\u2019s considered an electricity generation facility.<\/p>\n The planned gas plant won\u2019t connect to the grid, instead providing \u201celectricity for direct consumption by a data center,\u201d according to its application. So-called behind-the-meter gas plants have become increasingly popular for data center developers facing yearslong waits to connect to the grid. According to data from nonprofit Global Energy Monitor, the US at the start of the year had nearly 100 gigawatts of gas-fired power<\/a> in the development pipeline solely to power data centers, with several more massive gas projects announced since the data was published.<\/p>\n