Chevron seeks – Chevron subsidiary Energy Forge One has applied for a Texas state tax abatement to build a gas-fired power plant in West Texas intended to supply electricity directly to a data center—an eventual tenant could be Microsoft. The request flows through the state’s
In West Texas. a proposal for a massive gas-fired power plant is already moving through the state’s incentive pipeline—despite the fact that the electricity would not go to households.. Chevron’s plan is aimed at powering a data center. with Microsoft named as a potential eventual customer. and the company is seeking a state tax abatement worth hundreds of millions of dollars.
Chevron subsidiary Energy Forge One has filed an application with the State Comptroller’s board to obtain a tax abatement for a power plant it’s building in West Texas.. In late January. the comptroller’s office made a recommendation to support the application’s approval—described as the first such approval under the program for a power plant intended solely for data center use.
The timeline has also included fresh attention from the tech sector.. In March. after news reports that Microsoft was looking into 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.. Earlier. in January. Microsoft pledged to be a “good neighbor” in communities where it is building data centers. promising to pay a “full and fair share of local property taxes.”
Chevron spokesperson Paula Beasley said that the incentives under consideration for the Energy Forge project “apply solely to the power generation facility” to “support new energy infrastructure. and do not extend to any future data center facilities that may be served.” She also said there is currently “no definitive agreement” with Microsoft for this power plant.. Microsoft. for its part. said “Microsoft is in discussions with Chevron. ” and that “No commercial terms have been finalized. and there is no definitive agreement at this time. ” with the comment delivered by Rima Alaily. Microsoft’s corporate vice president and general counsel for infrastructure.
The tax break application arrives through Texas’ Jobs, Energy, Technology, and Innovation (JETI) Act, passed in 2023.. The program is designed to incentivize businesses to build large infrastructure projects in exchange for guarantees of jobs and revenue. and accepted projects receive a cap on taxable property value charged through local school district taxes.
That cap has reached the local level. The Pecos-Barstow-Toyah school board approved the project’s application at a meeting in February. Under the structure described for the program, the state pays for the tax abatement, so the school district itself does not lose out on any money.
Documents from the state put the potential savings for the Chevron project at more than $227 million over a 10-year period. depending on the eventual size of the project and investment.. The application says the plant will provide “over 25 permanent. full-time jobs. ” though it also notes there’s no requirement to do so because it’s considered an electricity generation facility.
On paper, the connection to data centers is direct.. The planned gas plant won’t connect to the grid. instead providing “electricity for direct consumption by a data center. ” 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.. Data cited from nonprofit Global Energy Monitor says the U.S.. at the start of the year had nearly 100 gigawatts of gas-fired power in the development pipeline solely to power data centers. with several more massive gas projects announced since.
A Wired analysis of less than a dozen power plants being constructed to explicitly serve data centers—including the Chevron project—found that these power plants are permitted to emit more greenhouse gases than many small- to medium-size countries.. The Energy Forge plant alone could emit more than 11.5 million tons of CO2 equivalent annually—more than the country of Jamaica emitted in 2024.. Beasley told Wired the plant “is being designed to comply with applicable environmental regulations. including all applicable federal and state air quality standards.”
West Texas’s fossil-fuel identity is part of the story too.. The region is described as a major fossil fuel production hub. helping it become a hotspot for both data centers and behind-the-meter gas development.. But Energy Forge’s JETI application says the site is one of six across the U.S.. under consideration.. Without tax incentives. the application says other sites would be “more attractive locations” to build a gas plant. and “Texas would lose the opportunity to attract billions of dollars in new tax revenues.”
It’s not the only incentive channel that could apply. According to county documents, the Energy Forge project could also be eligible for a local incentive that exempts all or part of a property’s value from taxes for up to a decade under another part of the Texas tax code.
The pattern that emerges from the incentive pathway is straightforward: the state comptroller’s office recommended approval in late January. the Pecos-Barstow-Toyah school board approved the application in February. and then attention escalated in March after news coverage about Microsoft considering power from the project—while Chevron insists any incentives are confined to the power plant and Microsoft says no definitive deal is in place.
The stakes around these incentives have been rising in Texas and beyond.. The potential tax abatement comes as large tech companies face growing public fury about data centers and electricity costs. and as lawmakers look more critically at ballooning incentives.. Some incentives have cost states—including Texas—$1 billion or more each year, according to figures cited in the coverage.
A report released in April by Good Jobs First. a corporate watchdog group. found that at least three states—including Texas—are losing more than $1 billion in revenue each year from data center sales tax abatements.. In Texas. a bipartisan group of politicians including Republican lieutenant governor Dan Patrick has expressed concern about impacts to state coffers.. In March. Patrick ordered the legislature to “study the cost and consequences” of the sales tax exemption—which the state projects could balloon to $3 billion by 2029—and “make recommendations providing safeguards to ensure that Texans benefit from data center investment.”
Microsoft’s pledge to “add to the tax base” has become part of the friction.. In January. the company said on its website it would not ask local municipalities to reduce their local property tax rates when it buys land or proposes a data center presence. stating. “We won’t ask local municipalities to reduce their local property tax rates when we buy land or propose a data center presence.” But the company did not answer questions about whether the pledge extends to projects owned by other entities that it intends to use to power its data centers. or to data center developers that may be building data centers where Microsoft will be a tenant.
Greg LeRoy. executive director of Good Jobs First. argued that Microsoft’s pledge doesn’t mention tax abatements—the assessed value a property is charged upon—separating them from tax rates.. “If they don’t say. ‘We will refuse tax abatements. ’ then they’ve got their fingers crossed behind their back. ” LeRoy said.
Tracking the incentives has also proved difficult.. Good Jobs First found that 14 states don’t disclose how much revenue they might be losing on data center abatements.. And while behind-the-meter power is becoming more popular. it is not clear how widespread the practice is of seeking abatements specifically for those facilities.
There is also a boundary around the JETI program itself: there are no other behind-the-meter power plants currently being funded by the Texas JETI program or in the application pipeline. Data centers are specifically excluded from being eligible for the JETI program.
Some of the pushback is turning into proposals for how incentives should be redesigned.. Jane Flegal. a senior fellow at the Searchlight Institute and a climate official under President Biden. is the author of a recent report describing ways to use the AI boom to encourage tech companies to help pay for grid upgrades.. Her report argues that tax abatements should be restructured to ensure data center builders connect power to the grid. making behind-the-meter gas options less attractive. and it also advocates permitting reform to speed the addition of clean energy to the grid.. In a quoted remark. Flegal said. “We should fix our tax code so it’s much more progressive. and we should tax the shit out of these people and use federal money to plan and build a grid that benefits all of us. ” adding. “Alas. that is not where we are.”
Chevron Energy Forge One Texas JETI Act tax abatement data centers behind-the-meter gas Microsoft Pecos-Barstow-Toyah school board greenhouse gas emissions Global Energy Monitor Good Jobs First