Texas Chevron Plant Seeks School District Tax Break

A major oil and gas company is pursuing a state tax break worth hundreds of millions of dollars to build a large power plant in Texas, but the electricity generated won’t serve residential customers. Instead, the proposed gas-fired facility in West Texas is designed to power a data center, with Microsoft emerging as a potential tenant.

Chevron subsidiary Energy Forge One has submitted an application to the State Comptroller’s board seeking a tax abatement for the project. In late January, the comptroller’s office issued a recommendation supporting the application’s approval, marking the first time such a break has been recommended under the program for a power plant dedicated exclusively to data center use.

The situation grew more defined in March, when Chevron confirmed it had signed an “exclusivity agreement” with Microsoft and Engine 1, an investment fund tied to the project. This followed earlier reports that Microsoft was exploring purchasing power from Energy Forge. In January, Microsoft publicly pledged to be a “good neighbor” in communities hosting its data centers, including a promise to pay a “full and fair share of local property taxes.”

The potential tax break arrives as big tech companies face mounting public frustration over data center energy consumption and rising electricity costs. Lawmakers, too, are beginning to scrutinize the growing incentives for data centers, which have cost some states, including Texas, $1 billion or more annually.

Chevron spokesperson Paula Beasley told WIRED that any tax incentives for the Energy Forge project “apply solely to the power generation facility” and are intended to “support new energy infrastructure, and do not extend to any future data center facilities that may be served.” She also emphasized there is currently “no definitive agreement” with Microsoft for this plant.

Microsoft’s corporate vice president and general counsel for infrastructure, Rima Alaily, echoed that sentiment, stating: “Microsoft is in discussions with Chevron. No commercial terms have been finalized, and there is no definitive agreement at this time.”

Chevron is seeking the tax abatement under Texas’ Jobs, Energy, Technology, and Innovation (JETI) Act, passed in 2023. The program is designed to incentivize large infrastructure projects in exchange for commitments to create jobs and generate revenue. Approved projects receive a cap on the amount of taxable property subject to local school district taxes.

The Pecos-Barstow-Toyah school board approved the project’s application in February. Because the state covers the cost of the tax abatement, the school district itself does not lose any funding.

State documents indicate the Chevron project could yield more than $227 million in savings for the company over a decade, depending on the final scale of investment. The application states the plant will create “over 25 permanent, full-time jobs,” though no minimum job creation is required since it qualifies as an electricity generation facility.

The planned gas plant will not connect to the broader electric grid. Instead, it will provide “electricity for direct consumption by a data center,” according to the application. Such behind-the-meter gas plants have grown increasingly popular among data center developers facing multiyear waits to connect to the grid. Data from Global Energy Monitor shows that, as of the start of the year, nearly 100 gigawatts of gas-fired power were in the U. S. development pipeline solely to serve data centers, with several more massive gas projects announced since that data was released.