West Texas gas faces hurdles powering AI’s growing demand
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In the wide expanse of West Texas, natural gas flows from the Permian Basin at record volumes. The region’s wells pump so much gas that producers often struggle to find markets for it. At the same time, a new type of customer is rising across Texas: artificial intelligence data centers that require enormous amounts of electricity to keep algorithms running around the clock. While the Permian has more gas than it can sell, the infrastructure needed to turn that resource into reliable power for AI remains limited.
The scale of AI’s energy appetite in Texas and beyond
Artificial intelligence has become one of the fastest-growing sources of electricity demand in the United States. Analysts project the country will need about 400 terawatt-hours of new generation within the next five years to keep up with AI workloads. To put that in perspective, that is more than the annual electricity consumption of a mid-sized industrial state.
Unlike other digital services that can shift usage to off-peak times, AI models require steady power. Large data centers run clusters of servers at full capacity to process language, video, and scientific applications. Once operational, they draw power continuously, sometimes consuming as much as a small city.
Texas has become a magnet for investment. Major projects in Abilene, Shackelford County, and Reeves County are advancing with price tags in the billions. Each promises jobs and tax revenue, but they also require uninterrupted electricity in regions where the grid is already strained.
West Texas gas supply is abundant but often stranded
Natural gas from the Permian Basin is plentiful. It is often produced as a byproduct of oil drilling, and daily output has climbed past six billion cubic feet. Yet the market is so saturated that prices can fall below zero, leaving producers to pay others to take the fuel.
Transport is the main obstacle. Existing pipelines already run near their limits, and new construction faces long permitting and investment hurdles. That makes it difficult for gas to reach the Gulf Coast or urban centers where demand is concentrated. By contrast, the Eagle Ford and Haynesville formations in East and South Texas are closer to industrial hubs and liquefied natural gas terminals. Their denser infrastructure makes them more attractive to developers seeking a secure supply.
Infrastructure bottlenecks stall growth
Executives and lawmakers acknowledge that energy infrastructure in West Texas lags behind production growth. Transmission lines are another weak point. Even if gas is burned locally to produce electricity, the high-voltage lines that would carry that power to distant data centers are limited.
Texas lawmakers approved the Permian Basin Reliability Plan in 2023 to address some of these issues. The initiative aims to construct new high-voltage transmission lines by 2030, but that timeline may not align with the pace of AI expansion. Data center operators are moving faster, announcing facilities that could be online within three to five years. Until new pipelines and lines are built, much of West Texas gas will remain far from where it is needed.
Energy companies respond with local solutions
Some firms are acting on their own. Vistra plans to build two gas-fired power units in the Permian to convert fuel into electricity close to where it is produced. NRG Energy has partnered with LandBridge to develop a plant in Reeves County that will support a data center directly. The Stargate project in Abilene, linked to OpenAI, blends natural gas with renewable sources to secure a reliable supply while limiting emissions.
These efforts reflect a recognition that co-locating generation with data centers may be the most practical path forward. By bypassing congested pipelines and overloaded lines, developers can build tailored solutions that match supply with demand. The challenge is scale. Building enough localized plants to satisfy the many projects under consideration would require billions of dollars and years of construction.
Balancing growth with environmental and community concerns
The reliance on natural gas comes with trade-offs. A single 10 megawatt data center can emit nearly 38,000 metric tons of carbon dioxide annually if powered entirely by fossil fuels. Local communities also raise concerns about water use, noise, and air quality.
State regulators and grid operators face pressure to ensure that AI growth does not undermine environmental goals. Combining renewables with natural gas, investing in carbon capture, and requiring efficiency standards are among the measures being considered. Communities in West Texas, long accustomed to the oil and gas industry, now weigh the benefits of new jobs against the impacts of nonstop industrial facilities.
West Texas holds an unusual position. It produces more natural gas than it can move, yet it is not guaranteed to power the state’s most advanced industries. Whether AI thrives in Texas will depend less on the hydrocarbons in the ground than on the ability to build the wires, pipes, and plants that connect energy to opportunity.
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