Microsoft and Chevron Plan 2.67GW Gas Plant for Texas Data Center
June 22, 2026
Chevron has announced plans to develop a large natural gas power facility in West Texas to supply electricity to a Microsoft-operated data center, with Microsoft buying the power under a 20-year agreement. The facility is expected to eventually reach 2.67 gigawatts of capacity.
For a company that has positioned itself as a sustainability leader, the deal shows how the surging power demand of AI and cloud computing is testing Microsoft’s own climate targets.
A Planned 2.67-Gigawatt Plant Under a 20-Year Agreement: Project Kilby
According to Chevron, its wholly owned subsidiary Energy Forge One LLC will develop a facility known as Project Kilby in Reeves County, near Pecos in West Texas, on a site of more than 2,000 acres.
Once fully built out, its 2.67-gigawatt output would reportedly be equivalent to the power used by about 2 million homes under average consumption. Most of the electricity will come from GE Vernova gas turbines and related equipment, with additional capacity from Solar Turbines, a Caterpillar subsidiary.
The facility will supply dedicated power to a Microsoft-operated data center serving the company’s AI and cloud workloads, with Microsoft buying the electricity over a 20-year term. Power delivery is expected to begin in 2028, and a final investment decision is due by the end of 2026.
Chevron says the project will generate more than $10 billion in state and local tax revenue and support nearly 2,000 jobs. “AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation,” said Jeff Gustavson, president of Chevron New Energies.
Why a Sustainability-Focused Microsoft Turned to Natural Gas
Microsoft has pledged to become carbon negative by 2030, and leaning on natural gas raises questions about how the move squares with that goal.
The deal reflects a clear trade-off: AI and cloud workloads are driving fast-rising power demand, and Microsoft is seeking large-scale, reliable electricity on a faster timeline. Gas plants deliver large volumes of reliable power and can be built relatively quickly.
The project’s water plan is also notable. Project Kilby will use non-potable, brackish groundwater rather than freshwater, and Chevron is reportedly evaluating the reuse of produced water from oil and gas operations.
Co-locating a plant with a data center and supplying power directly, at least initially without routing it through the public grid, is a growing tactic among AI operators.
What 13 Million Tons of Emissions Reveals About AI’s Energy Cost
According to the Environmental Integrity Project’s Oil and Gas Watch database, Project Kilby could emit more than 13 million tons of greenhouse gases (measured as carbon dioxide equivalent) per year, along with about 3,200 tons of criteria air pollutants and about 278,000 pounds of hazardous air pollutants.
Those figures highlight the gap between Microsoft’s climate commitments and the reality of expanding AI infrastructure.
Discussions of AI’s power use often focus on efficiency inside the data center, yet operational emissions are heavily shaped by how the power that drives those data centers is generated.
Securing a dedicated plant offers stable supply but risks locking in fossil fuel use for the long term. A 20-year contract means emissions will continue well past the 2030 target year.
What to Watch Next
The final investment decision is due by the end of 2026, so it remains uncertain whether the project will proceed as planned. It is also not yet clear how Microsoft will reconcile the plant with its 2030 emissions goal, or whether additional measures to curb emissions will follow. If construction is formally approved, the project will become a concrete test of how AI’s power demand affects corporate climate targets.
Sources
Chevron – Chevron Signs 20-Year Power Agreement with Microsoft for West Texas Data Center
Environmental Integrity Project Oil and Gas Watch – Kilby Power Plant
Reuters – Chevron signs power supply deal with Microsoft for Texas data center
CNBC – Chevron to fuel massive Microsoft data center in Texas using natural gas
TechCrunch – Microsoft and Chevron plan one of the largest gas-powered data center projects in US
