Two Fossil Fuel Companies Are Betting Big on Data Centers

But the artificial intelligence boom is also giving fossil fuel companies a new industry to sell their gas, pipelines, and power plants to: data centers. Two American oil and gas companies, Williams and Chevron, are presenting that demand to investors as a huge win.

Data centers are becoming “a big driver for both power and gas demand in the US,” says Ashish Sethia, the global head of commodities and energy at BloombergNEF. The group published a report last week that found that increased demand for natural gas by the mid-2030s, driven partly by data centers, means that the US would need to increase production by 36 percent.

The boom could have big climate implications—even when considering projects that aren’t connected to the larger grid. Just five of the seven data-center-connected gas-fired power plants highlighted in these two companies’ second quarter results could emit as much as 21 million tons of greenhouse gases per year, according to their permit applications. That’s an amount roughly on par with the annual emissions of Guatemala, though the actual emissions may be lower than what’s on the permits.

Executives from both Williams and Chevron said on earnings calls that they expect to expand on facilities they are building now for the data center industry for years to come.

“The frightening thing about the tech and oil alliance is that this is a lifeline to an industry that we need to be phasing out,” says Lukas Shankar-Ross, deputy director at Friends of the Earth, an environmental nonprofit.

While it may not be a household name like Chevron or Exxon, Williams is one of biggest oil and gas infrastructure companies in the US—and it has also created a highly profitable data-center services business. Last year, Williams announced that it would build a power plant and associated pipeline infrastructure in Ohio solely for use by a data center. Building islanded infrastructure like this, also referred to as “behind-the-meter” power, has become an increasingly popular option for tech companies that don’t want to deal with long wait times to connect to the electric grid or impact consumer electricity prices.

Williams is now building six behind-the-meter gas plants for data centers across the country, including four projects serving Meta data centers in Ohio. (Meta declined to comment.) In mid-July, Williams announced more than $5 billion in investments for its data center ventures, including money from private equity giant KKR.

Williams’ four power plants that have filed permit applications could, according to those applications, emit up to 9.6 million tons of greenhouse gases per year, which is equivalent to the emissions from more than 22 average natural gas plants, according to the Environmental Protection Agency. Williams spokesperson Alex Schott tells WIRED in an email that the facilities are “designed to operate well below permitted limits” and comply with state air requirements. The company’s modeling, Schott says, puts actual emissions from these plants at “potentially” two-thirds less than what’s on the permits.

The company is also building a 9-mile natural gas pipeline across an Ohio suburb. Williams executives say they envision the pipeline being used not just to serve its power plants for Meta in the area, but also to supply natural gas to the growing number of data centers in that region. In an earnings call in May, Williams president Chad Zamarin said the company “overbuilt the capacity” of a pipeline serving one of its Meta-affiliated power plants to “be an energy artery along which other projects could be developed.”

The largest behind-the-meter gas power plant Williams is building for Meta in Ohio is just under 700 megawatts. But Williams isn’t the only company betting big on providing data centers with power, and that project pales in comparison to the size of the 2.67-gigawatt project Chevron is building for a Microsoft data center in Texas. The oil giant reported its best quarterly profits in six years on Friday, and highlighted the partnership in all of its investor materials.

In June, Chevron confirmed that it had signed an agreement with Microsoft. The companies signed a power purchase agreement—an arrangement to purchase electricity at an agreed-upon price for a set period of time—that lasts for 20 years. (Williams’ agreements with Meta for its data center power are between 10 and 12.5 years.) Chevron says the project is the only “multi-[gigawatt]” project with such a “long-term” contract in place. As WIRED reported in April, the power plant quietly applied for a school district tax break worth millions, which was finalized by the state late last month.

The Chevron and Microsoft plant, according to its permit, could produce more than 11.5 million tons of carbon-dioxide-equivalent emissions per year. Chevron spokesperson Paula Beasley says the power plant is designed to comply with federal and state environmental requirements.

“Kilby's approach focuses on natural gas generation for reliable capacity, with the possibility of adding renewable generation in the future,” she says.

Microsoft did not respond to a request for comment.

Jeff Gustavson, the president of Chevron’s New Energies division, said on the company’s earnings call Friday that the project “provides a repeatable model” and that Chevron is already talking to potential future data center customers.

“The grid cannot keep up with the demand from hyperscalers and others, and we see that persisting for years,” Gustavson said.

While Williams and Chevron are early movers, Sethia thinks that “multiple players” stand to benefit from building pipeline infrastructure for data centers. “One of the patterns we are seeing is a lot of the new data center announcements are starting to cluster around areas which have gas pipelines,” says Sethia.

Building islanded power plants at the scale and speed that the AI industry requires is a relatively new phenomenon. With utility bills rising and helping to f...

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