Chevron may delay Texas data center decision to 2027

A statewide environmental permitting halt could push back the Reeves County project, though developers target first power generation by 2028.

Preliminary earthmoving work is underway in West Texas on Project Kilby, a planned three-gigawatt power installation intended to supply a massive Microsoft data center.¹² A statewide regulatory freeze now threatens to postpone the project's primary financial commitment.

The final investment decision, originally expected by the end of 2024, could be pushed to 2027 following a moratorium on new data center permits imposed by Texas Governor Greg Abbott, according to Daniel Droog, Chevron's vice president for power solutions.¹ Permitting and regulatory requirements have created a broader slowdown across the sector, Droog said in an interview.¹ Even with that regulatory friction, Droog said the installation remains on track to produce its first electricity by 2028.¹²

Kilby operates as a 50-50 joint venture named Energy Forge One between Chevron and energy developer Joulent.²¹ Under a 20-year power purchase agreement, the facility will supply dedicated electricity to a Microsoft-operated data center in Reeves County.²¹ Unlike typical hyperscale facilities that draw heavily on public utilities, Kilby is designed to run behind the meter, using natural gas turbines to produce power on site without placing additional strain on the regional transmission network.²¹

Permitting freeze reaches off-grid sites

The regulatory bottleneck stems from a succession of state directives targeting data center expansion. Abbott initially ordered an audit of grid connection requests through the Electric Reliability Council of Texas, which operates the regional power grid.³⁴ In September 2026, Abbott broadened that moratorium by ordering the Texas Commission on Environmental Quality to halt all environmental permits for data center projects until regulators finish reviewing the industry's resource consumption.³⁴

In a directive to Kelly Keel, the environmental commission's executive director, Abbott wrote that the agency must pause approvals while grid operators and the Texas Water Development Board audit facility ownership, power demand, water consumption, and public tax incentives.³⁴ Abbott instructed the water development board to penalize operators that fail to report water consumption, following findings that only 28 percent of data centers responded to a mandatory state water survey.³ The expanded environmental review effectively halted approvals for developers attempting to bypass grid scrutiny through self-generation.³

Water access remains a central tension in West Texas industrial development. To limit freshwater demand, Kilby project documents state the power plant will rely on non-potable, brackish groundwater for cooling operations.² Energy Forge One is also evaluating treated produced water from Permian Basin oilfield operations for future plant use.² Chevron and Joulent project early site execution in 2026, phased power starting in 2028, and full operating capacity by 2031.²

Turbine supply and local gas supply

Project developers hold several operational advantages that could cushion political delays. Joulent was formed out of investment firm Engine No. 1, which acquired natural gas turbines before supply chain crunches limited equipment availability across the sector.¹ Kilby sits directly on the Permian Basin, where natural gas is extracted in high volumes alongside crude oil, providing Chevron with an anchor customer for its regional production.¹²

Joulent also recruited two former senior executives from liquefied natural gas exporter Cheniere for top leadership positions, including Michael Wortley as chief financial officer. Wortley said the finalization of construction contracts was a couple weeks, if not days, away.¹ Wortley expressed confidence that the project would satisfy state prerequisites because its self-contained generation does not burden the public grid.¹

Economic projections published by the joint venture estimate the facility will contribute about $99 billion into the Texas economy over its operational life.² The project is expected to support approximately 1,900 permanent jobs in the surrounding region and 2,000 temporary construction jobs, with full-time power plant employees receiving an average annual wage of $133,577.² Whether those economic commitments satisfy state auditors will determine how long the joint venture waits for final clearance.

What this rests on

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1. 1 TM Tim McDonnell Document · semafor.com · 1 Oct 2026 Exclusive: Texas politics could delay investment decision for huge Chevron data center See the source
2. 2 K kilby.com Third-party reporting · kilby.com Gas-Fired Power Generation for AI Data Centers - Kilby See the source
3. 3 T texastribune.org Third-party reporting · texastribune.org · 21 Sep 2026 Texas pauses environmental permit approval for data centers See the source
4. 4 C CNBC Third-party reporting · cnbc.com · 21 Sep 2026 Texas Gov. Abbott orders data center permit halt weeks after issuing moratorium See the source