Chevron subsidiary Energy Forge One has filed an application with the State Board of Comptroller to receive tax breaks for a power plant it is building in West Texas. In late January, the Comptroller’s Office made a recommendation supporting approval of the application – the first such approval under the program for a power plant solely for data center use.
In March, following news reports that Microsoft was considering purchasing power from the Energy Forge project, Chevron said it had entered into an “exclusivity agreement” with Microsoft and Engine 1, an investment fund involved in the project. In January, Microsoft promised to be a “good neighbor” in communities where it is building data centers, including a promise to pay “its full and fair share of local property taxes.”
The potential tax break for the project comes as big tech companies grapple with growing public anger about the cost of data centers and electricity. It also comes as lawmakers have begun to take a more serious look at rising incentives for data centers, which cost some states — including Texas — $1 billion or more each year.
Chevron spokeswoman Paula Beasley told WIRED in an email that all tax incentives under consideration for the Energy Forge project “to support new energy infrastructure” apply solely to the power generation facility, and do not extend to any data center facilities that may be provided in the future. Beasley also said there is currently “no definitive agreement” with Microsoft for the power plant.
“Microsoft is in discussions with Chevron,” Rima Alaili, Microsoft’s corporate vice president and general counsel of infrastructure, said in a statement to WIRED. “No commercial terms have been finalized, and there is no definitive agreement at this time.”
Chevron is applying for tax breaks for the project under Texas’ Jobs, Energy, Technology and Innovation (JETI) Act. The program, to be passed in 2023, aims to encourage businesses to build large infrastructure projects in the state in exchange for a guarantee of bringing jobs and revenue. Approved projects are placed a limit on the amount of taxable property that can be levied through local school district taxes.
The Pecos-Barstow-Toyah School Board approved the project application at a meeting in February. The state pays for the tax exemption, so the school district doesn’t lose any money.
According to state documents, the Chevron project could save more than $227 million for the company over a 10-year period, depending on the project’s final size and investment. The application states that the plant will provide “more than 25 permanent, full-time jobs”, although there is no requirement to do so as it is considered a power generation facility.
According to its application, the planned gas plant will not be connected to the grid, but will instead provide “electricity for direct consumption by the data center.” So-called behind-the-meter gas plants have become increasingly popular with data center developers facing years-long waits to connect to the grid. The U.S. had about 100 gigawatts of gas-fired power in the development pipeline at the beginning of the year, just to power data centers, according to data from the nonprofit Global Energy Monitor, with several more large gas projects announced since the data was published.
A Wired analysis of less than a dozen power plants being built ostensibly to serve data centers, including the Chevron project, found that these power plants are allowed to emit more greenhouse gases than many small to medium-sized countries. The Energy Forge plant alone could emit more than 11.5 million tons of CO2 Annual equivalent – more than the emissions emitted in the country of Jamaica in 2024. Beasley told WIRED that the plant “is being designed to comply with applicable environmental regulations, including all applicable federal and state air quality standards.”
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