Chevron will power a giant new Microsoft data center in West Texas with natural gas after the oil major announced a new 20-year agreement.
Project Kilby
Project Kilby will be developed in Reeves County, West Texas, pending final investment approval. The facility is expected to use around 2.7 gigawatts (GW) of electricity once operational, around 2028, equivalent to the power required to supply roughly 2 million households.
The electricity used to power the facility will come mainly from large gas turbines delivered by Chevron’s partner, GE Vernova, from its Permian Basin operations, with additional capacity provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc. Power will be produced on site, meaning the data center will not be connected to the main electricity grid.
Chevron’s President, Jeff Gustavson, explained, “There’s really no competition with local electricity consumers… In fact, over time, as we have excess power, we plan to push that into the grid to help stabilize it.”
Kilby is being developed by Microsoft to power artificial intelligence applications, as the tech company looks to rapidly expand its computing power over the coming decade, with $190 billion in capital expenditures planned for 2026.
“This positions Kilby among the largest co-located natural gas power and data center developments in the U.S., supporting the next phase of American AI growth by leveraging America’s natural gas advantage,” Chevron stated in a press release.
Microsoft’s Dependence on Natural Gas
In recent years, Microsoft has emphasized its commitment to a green transition, aiming to use renewable energy to power its operations or offset carbon emissions. In 2020, Microsoft announced its ambitions to be carbon-negative, water-positive, and zero-waste by 2030.
To this end, Microsoft signed several private purchase agreements with renewable energy companies. In 2024, Microsoft also signed a power deal with Constellation Energy to reboot a unit at the Three Mile Island nuclear plant in Pennsylvania to offset its data center electricity use.
In November 2025, Microsoft once again emphasized renewable energy partnerships and sustainability targets. However, since then, the tech major has announced several data center projects that rely heavily on natural gas. For example, Microsoft committed $15.2 billion to data centers in the United Arab Emirates in 2025, most of which will be powered by natural gas. The firm cited the unreliability of combined solar and battery power as the reason for this choice.
Microsoft is also using this model in the United States, demonstrating the firm’s willingness to continue investing in fossil fuels to fulfil its electricity needs. In June, Microsoft’s president of cloud operations and innovation, Noelle Walsh, stated that the rapid growth of AI “requires energy infrastructure that can scale quickly and reliably.”
The tech major may be considering delaying or abandoning its 2030 target of matching its entire hourly electricity use with renewable energy purchases, Bloomberg reported in May. Microsoft committed to the climate targets before it had established such an ambitious data center project pipeline, and the high costs and energy intensity associated with data center development are reshaping the feasibility of Microsoft’s climate commitments.
Kilby’s Impact on the Environment
The Kilby data center is expected to generate significant economic benefits for West Texas, with over $10 billion in state and local tax revenue, and supporting almost 2,000 jobs.
Despite using natural gas rather than renewable energy, Microsoft is developing Kilby with the environment in mind by using non-potable, brackish groundwater instead of freshwater and exploring the potential to reuse water produced by oil and gas operations. The data center will be fitted with advanced air emissions control technologies, and Microsoft plans to implement measures to minimize noise and light impacts on surrounding communities.
Nevertheless, Project Kilby is expected to release over 13 million tons of carbon dioxide, 3,200 tons of criteria air pollutants, and 278,000 pounds of hazardous air pollutants, according to the Environmental Integrity Project. It also marks a clear shift away from Microsoft’s commitments to powering its new data centers using clean energy.
There has been significant backlash against the rapid deployment of large-scale data centers, as consumers grow concerned about energy use amid rising energy bills and the impact of data centers on communities and the environment. According to a Gallup survey conducted in March, seven in 10 participants opposed the construction of data centers for artificial intelligence (AI) in their local area.
Is the Data Center Gas Boom Cause for Concern?
It is not only Microsoft that plans to power more of its data center with natural gas; other tech majors have announced new gas-power agreements in recent months. Both Google and Meta have announced major investments in gas-power data centers.
This is rapidly becoming a major cause for concern among climate scientists who have long been encouraging a shift away from fossil fuels, or at the very least an end to investments in new developments. One postdoctoral researcher at Harvard University, Michael Cork, stressed that the AI industry’s off-the-grid natural-gas generation “is emerging as one of the largest under-examined air-quality risks in the country.
The rapid shift by several tech majors away from their environmental commitments reaffirms the need for the United States government to develop and implement strict regulations on data center development and to focus on monitoring and evaluation as more facilities are deployed.
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