'Go Where The Gas Is': Data Centers Follow Fracking In Search For Power
Data center developers and the world’s largest tech firms are increasingly looking to natural gas as the fastest way to access the massive quantities of electricity needed to build artificial intelligence megacampuses, and it’s turning the country's fracking hotbeds into digital infrastructure hubs.
From the Permian Basin in Texas to the Appalachian Basin in Pennsylvania, rural regions where the bulk of the country’s natural gas is produced are experiencing a sudden wave of planned data center projects intending to use that gas for power.
High-profile projects powered by behind-the-meter gas generation, like Oracle and OpenAI’s flagship Stargate campus in Abilene, Texas, and Meta’s Hyperion campus in northeast Louisiana, are poised to turn regions near shale fields that were once data center hinterlands into some of the industry's fastest-growing development hot spots.
While gas-rich regions of Texas and Pennsylvania now have data center development pipelines totaling dozens of gigawatts, there remains widespread skepticism about whether most of these projects will ever come to fruition. Industry leaders cite significant hurdles to deploying behind-the-meter gas at scale and concerns about sustained demand away from major markets.
Such solutions account for just a sliver of the industry today. But there is no shortage of data center and energy firms betting on gas generation steering the next wave of the data center building boom toward oil and gas production hubs.
While the data center industry pushed into previously uncharted territory over the past three years in search of power from utilities, developers like Texas-based Mark Calvano say the data center map is about to be redrawn again as providers go where the gas is.
“Go back just six or eight months ago, and everyone was looking for electricity. Now, the landscape has changed to look for gas, particularly gas behind the meter,” Calvano said at Bisnow’s DICE: Dallas event this month. “If you're going to scale up quickly, it's going to be with gas behind the meter, so it's about finding locations with access to available gas.”
Partnering with an energy firm for new gas generation offers a faster path to hundreds of megawatts of electricity than waiting up to seven years for grid connections.
Gas-powered data centers aren't exclusively found in oil and gas production hubs. Last week, Google announced that its first planned campus to utilize behind-the-meter gas generation for a significant share of its power will be in Decatur, Illinois. Other such projects are in development in markets like Memphis, Tennessee, and San Jose, California.
But most of the gas-powered data center capacity planned in the U.S. is close to where that gas comes out of the ground. The largest gas-fueled data center booms are happening in Texas and Pennsylvania, the top two states for production.
From the Permian Basin to other gas-producing regions like the Barnett Shale and Eagle Ford Shale, a drumbeat of new proposals for gigawatt-scale campuses with behind-the-meter gas has emerged across Texas over the past year.
In addition to Oracle’s Stargate site, these include Tract’s planned 2 GW campus on 1,500 acres in Lockhart, Texas, and a collaboration between CloudBurst Data Centers and pipeline firm Energy Transfer to co-develop a data center and 1.2 GW power plant in New Braunfels. Gas from the Permian Basin and Haynesville Shale have also driven massive projects in the neighboring states of Louisiana and New Mexico, which until now had almost no hyperscale data center inventory.
Pennsylvania is also seeing a sudden surge of large-scale, natural gas-powered data center projects like the $10B Homer City Energy Campus, in which the world’s largest gas-fired power station is being built to supply a 3,200-acre data center complex. In Westmoreland County, developer TECfusions is planning a 3 GW campus where power will be produced on-site.
“The quickest route to power is with natural gas, and all the fracking plants that sit in Pennsylvania make it a very sought-after location,” TECfusions Chief Revenue Officer Shawn Novak said.
Pipeline capacity constraints mean developers are often only able to access the substantial gas supply needed for large-sale generation close to major production centers, said Sarp Ozkan, vice president for commercial product at Blackstone-owned energy analytics firm Enverus.
While the U.S. has robust natural gas infrastructure, and there may be enough gas produced in a particular region to serve multiple large-scale data center projects downstream, pipeline bottlenecks are limiting supply to other domestic markets.
“There's takeaway capacity concerns in places like the Permian Basin and the Appalachian Basin where you can't get any new pipelines built out of these areas,” Ozkan said. “You’re trying to site closer to some of these basins or within the basin to jump over those bottlenecks.”
The gas industry is facing similar challenges to utilities and grid operators trying to provide electricity to data center projects. While there is enough generation capacity to keep pace with the demand in some markets, there is insufficient transmission infrastructure to bring it to a data center.
As a result, developers and companies like Amazon have sought to build data centers colocated with nuclear power plants and other generation resources. While Amazon's effort in Luzerne County, Pennsylvania, was derailed by federal regulators, developers are pursuing a similar playbook in pursuit of gas generation by bringing data centers near the source.
Novak said TECfusions’ western Pennsylvania project has a pair of fracking pads on-site, as well as a processing facility that receives gas from 13 nearby wells. The gas extraction, refining and generation all take place on the campus
This vertically integrated gas supply chain avoids infrastructure constraints and lowers costs by not needing to build or upgrade last-mile pipeline to get gas to the site. Novak said he sees this model becoming standard practice across the sector.
“It’s allowing us to deliver a ton of power for the data center industry without having to do massive upgrades upstream because it's all on the campus,” Novak said. “Once people see this in action, this is going to be rinsed and repeated for other campuses.”
Yet several prominent people from across the digital infrastructure ecosystem say the amount of gas-powered data center capacity that actually materializes in these regions will fall well short of bullish expectations and the lofty capacity figures that the firms pursuing the projects are touting.
Some of this doubt is rooted in skepticism surrounding self-powered data centers in general due to hyperscalers’ preference for utility power and reliability concerns with off-grid gas generation.
Gas plants are complex and costly to operate and maintain, and pipelines create a single point of failure that could be catastrophic if the fuel supply is interrupted. The economics of on-site generation can also be prohibitive.
But executives speaking at Bisnow’s DICE: Dallas said questions remain around whether hyperscalers will continue to be interested in deploying in remote locations well beyond the traditional data center hubs.
Tech giants have been willing to lease data center capacity far from population hubs in places like western Pennsylvania and West Texas as they build out AI training clusters. These workloads don’t have the same latency and connectivity requirements as typical data centers.
But there are indicators that Big Tech’s appetite for data center capacity that is only appropriate for training is limited. Even if companies use it for training today, hyperscalers prefer sites that will work for a range of workloads, giving them options as the AI ecosystem evolves.
Many of the gas-driven projects that have been floated in recent months in gas production hotbeds are likely too far from major population centers to meet the latency requirements hyperscalers will demand, Gigabit Fiber CEO Tom Spackman said at DICE: Dallas.
“You say go where the gas is, but latency absolutely matters,” Spackman said. “You can't cheat the speed of light.”
