Chevron Wants a School District Tax Break for a Data Center Power Plant in Texas

Energy Forge One, a subsidiary of Chevron, has filed an application with the State Comptroller’s board to obtain a tax abatement worth hundreds of millions of dollars for the construction of a gas-fired power plant in West Texas. According to reporting from WIRED, the facility is designed to provide electricity exclusively for a data center rather than residential customers.

The application marks a significant development in the intersection of energy infrastructure and big tech expansion in Texas. In late January, the office of the State Comptroller issued a recommendation to support the approval of the application. This recommendation represents the first time the program has supported a tax abatement for a power plant intended solely for the purpose of powering a data center.

The project has strong ties to Microsoft, which is identified as a potential eventual tenant for the data center that the plant would serve. In March, Chevron confirmed that it had entered into an exclusivity agreement with Microsoft and Engine 1, an investment fund involved in the project, following reports that Microsoft was exploring the purchase of power from the Energy Forge project.

The pursuit of these tax breaks occurs alongside public commitments from Microsoft regarding its impact on local communities. In January, the company pledged to act as a good neighbor in the areas where it develops data centers, which included a promise to pay a full and fair share of local property taxes.

The request for a school district tax break comes at a time of increasing tension over the environmental and economic costs of data center proliferation. Public frustration has grown regarding the strain these facilities place on electricity costs and local infrastructure. This sentiment has reached the state legislature, where Texas lawmakers have begun to scrutinize the scale of incentives provided to the data center industry.

The financial scale of these incentives is substantial. Some states, including Texas, have seen data center incentives cost the government $1 billion or more annually, leading to calls from lawmakers to rein in the subsidies.

Chevron’s Position on Incentives

Chevron has sought to clarify the scope of the tax breaks requested for the West Texas project. Paula Beasley, a spokesperson for Chevron, stated in an email to WIRED that the incentives currently under consideration are limited in their application.

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.

Paula Beasley, Chevron spokesperson

Beasley further clarified that while the company has an exclusivity agreement with Microsoft and Engine 1, there is currently no definitive agreement with Microsoft specifically for the operation of this power plant.

The distinction made by Chevron suggests that the tax abatement is intended to incentivize the creation of the energy production infrastructure itself, rather than the data center that will utilize the power. However, the fact that the plant is dedicated solely to a data center tenant links the energy project directly to the broader debate over tech industry subsidies.

The outcome of the State Comptroller’s board’s decision will serve as a precedent for how Texas handles the energy requirements of the growing data center sector and whether the state will continue to provide high-value tax abatements for dedicated power infrastructure.