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’t be going to residential customers, though. Instead, the gas plant will be used to power a data center whose eventual tenant could be Microsoft.
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—the first such approval under the program for a power plant intended solely for data center use.
In March, following news reports that Microsoft was looking into purchasing power from the Energy Forge project, Chevron said that it had entered into an “exclusivity agreement” with Microsoft and Engine 1, an investment fund involved in the project. In January, Microsoft pledged to be a “good neighbor” in communities where it is building data centers, including promising to pay a “full and fair share of local property taxes.”
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—including Texas—$1 billion or more each year.
Chevron spokesperson Paula Beasley told WIRED in an email that all tax 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.” Beasley also said that there is currently “no definitive agreement” with Microsoft for this power plant.
“Microsoft is in discussions with Chevron,” Rima Alaily, Microsoft’s corporate vice president and general counsel for 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 a tax abatement for the project under Texas’ 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.
The Pecos-Barstow-Toyah school board approved the project’s 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.
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 the plant will provide “over 25 permanent, full-time jobs,” though there’s no requirement to do so because it’s considered an electricity generation facility.
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. According to data from nonprofit Global Energy Monitor, the US 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 the data was published.
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 that the plant “is being designed to comply with applicable environmental regulations, including all applicable federal and state air quality standards.”
