Originally published for customers January 10, 2025.
What’s the issue?
ExxonMobil and Chevron are jumping into the power sector with plans for off-grid, gas-fired plants paired with carbon capture to meet growing data center demand.
Why does it matter?
If successful, these projects could reshape gas and electric markets in key regions and drive carbon transportation and storage market growth.
What’s our view?
The Gulf Coast, especially Texas and Louisiana, is leading with its established infrastructure and favorable regulations. However, in regions like Virginia, regulatory challenges, such as clean energy mandates and lack of state permitting authority for carbon storage, may hinder progress despite strong market potential.
ExxonMobil and Chevron are jumping into the power sector with plans for off-grid, gas-fired plants paired with carbon capture to meet growing data center demand. If successful, these projects could reshape gas and electric markets in key regions and drive carbon transportation and storage market growth.
The Gulf Coast, especially Texas and Louisiana, is leading with its established infrastructure and favorable regulations. However, in regions like Virginia, regulatory challenges, such as clean energy mandates and lack of state permitting authority for carbon storage, may hinder progress despite strong market potential.
Project Scale and Industry Position
ExxonMobil's proposed 1.5 GW power plant represents a bold entry into power generation. For context, the Palo Verde nuclear power plant, (the largest in the U.S.) has three reactors that can produce 1.4 GW of power each. The ExxonMobil facility would capture over 90% of carbon emissions and operate independently from the power grid, supplying data centers directly. While the specific location remains unannounced, the company has secured land near its extensive CO2 pipeline network.
Finding the Sweet Spot: Geology, Infrastructure and Regulation
Ideal project locations need three primary elements: suitable geology for both gas supply and carbon storage, supportive regulatory frameworks, and data center demand. Additional practical considerations include water supply availability and real estate costs, both crucial for data center operations. The Gulf Coast leads in most of these categories as seen in the map below:
Texas and Louisiana sit on significant natural gas resources and carbon storage geology, leading Carbon Capture, Utilization and Storage (CCUS) development with 49 and 84 Class VI wells (used for carbon sequestration) in process, respectively. ExxonMobil alone operates a 1,500-mile CO2 pipeline network across the Gulf states and recently secured a 270,000-acre offshore lease in Texas for carbon storage. The company's Class VI well development - seven wells in Texas's Jefferson County and four in Louisiana's Allen and Vermillion Parishes - demonstrates the region's potential.
The regulatory environment reinforces these natural advantages. As discussed in Kicking the Tires on Carbon Capture and Sequestration, states can obtain "primacy" from the EPA to manage their own Class VI well programs. Louisiana already has primacy, and Texas appears poised to follow in 2025. Texas submitted its application in December 2022 and final rule amendments to EPA in August 2023. Working closely with EPA Region VI and building on successful models from North Dakota, Wyoming, and Louisiana, Texas regulators believe Louisiana's recent approval could accelerate their timeline, though EPA review timing remains unpredictable.
The Mid-Atlantic shows a different picture. Virginia has experienced extensive data center buildout and offers significant geological potential, with proximity to natural gas supply and suitable carbon storage formations. However, while neighboring West Virginia moves toward primacy, Virginia remains under EPA oversight for all well classes, is not pursuing primacy, and has no Class VI well applications.
Virginia's Clean Economy Act mandating 100% carbon-free electricity by 2050 also creates significant hurdles. The challenges facing Dominion's proposed 1,000 MW Chesterfield facility illustrate the problems. Even with grid reliability justifications and potential for future hydrogen blending, the project faces intense opposition over air permits, local approvals, and its compatibility with state clean energy goals. At roughly two-thirds the size of ExxonMobil's project and without carbon capture, Chesterfield's struggles highlight how Virginia's regulatory environment complicates new gas-fired generation.
Project Execution: Speed and Permitting
ExxonMobil's five-year target demonstrates key advantages over other power sources. Traditional nuclear projects face heavy regulatory burdens and lengthy construction timelines, and small modular reactors remain unproven at commercial scale. Renewable solutions paired with current battery technology often can't match the 24/7 reliability data centers require.
While state permitting requirements vary significantly, the direct supply model eliminates common interconnection delays and offers cost advantages. If ExxonMobil builds in Texas, the permitting footprint for the project would likely be relatively small. Some of the probable permits would include air and water permits from TCEQ. Despite having no grid connection, it would qualify as a “Power Generation Company” — defined as a wholesale electricity generator without transmission facilities or a certificated service area — requiring registration with the Public Utility Commission.
Looking Forward
The oil and gas industry’s culture of innovation brings unique advantages to this challenge. Companies like ExxonMobil have the engineering expertise, infrastructure, and financial resources to advance CCUS technology. Their deep experience managing CO2 for enhanced oil recovery also translates directly to carbon capture and storage.
The market and policymakers are watching the development of ExxonMobil's proposed project closely. While carbon capture and storage paired with natural gas power generation remains unproven at commercial scale in the U.S., success here could demonstrate viability well beyond previous attempts. The proposed timeline and potentially low permitting footprint combined with tech companies' willingness to pay premium prices for reliable, low-carbon power, could accelerate similar projects and potentially create markets for other low carbon products like certified natural gas.
Bypassing the grid also avoids reliability and affordability concerns many states are facing. Expensive infrastructure upgrades are typically triggered by data centers' massive power requirements, which can lead to higher consumer electricity rates. This model avoids those concerns by ensuring dedicated, reliable power supply without the grid connection.