Most Americans hate data centers. Recent polls have found that Democrats and Republicans alike oppose the installation in their neighborhoods, and hundreds of communities across the country are protesting, citing concerns about noise, water pollution and utility costs. Many politicians have spent years courting technology companies and now vow to protect voters from their advances. In just the last month, policymakers in New York, Texas, Pennsylvania and Utah have proposed restrictions on facilities. For AI startups and other companies competing to secure more computing power, the question seems not to be which projects will face opposition and which ones will receive no resistance.
A project announced this week in California’s Central Valley suggests a potential answer. California Resources Corp., the state’s largest oil company, wants to build a 600,000-square-foot data center campus in the Elk Hills oil field, about two hours north of Los Angeles. They want to avoid a nationwide backlash from local communities who have seen these large-scale operations swallow up farmland or install diesel generators near residential areas.
This is part of the emerging trend of the AI boom. More developers are proposing to build data centers at or near active oil and gas fields, but these data centers tend to be located far from populated areas and have easier access to electricity. Projects are planned in Texas, an oil-rich state in the Permian Basin, which has abundant natural gas that can be used to generate electricity, and Pennsylvania, which is already a major producer of shale-derived natural gas. The California projects are seen as a way for traditional producers to make money, even though they are underway in a state seeking to phase out fossil fuels.
California Resources Corporation executives framed the deal announced Monday as a “responsible development” approach to ramping up AI, a claim that environmentalists in the state disputed.
“By repurposing existing industrial land, creating jobs and tax revenue in Kern County, utilizing dedicated on-site electricity, and employing one of the most water-efficient cooling systems in the industry, this project is designed to support California’s growing digital infrastructure needs while minimizing impact on local communities,” Chris Gould, the company’s chief sustainability officer and director of carbon capture ventures, said in a statement to Grist.
The Elk Hills location has clear strategic advantages for CRC and Beacon, the data center development companies collaborating on the project. The proposed Golden Valley Technology Hub would sit on 100 acres within tens of thousands of acres of oil fields and more than a mile from the nearest residences. The project will also face a rigorous environmental review, which could take about a year. The CRC has already held a number of community meetings with residents of nearby Taft and Buttonwillow, and has committed to providing financial support for community groups and public infrastructure such as roads.
Gabriel Collins, an energy and water expert and research fellow at Rice University’s Energy Research Center, said building in century-old oil fields could avoid the general uproar over the impact of data centers, which require large amounts of power and water and can also generate large amounts of noise.
“Which way you sit on these things depends on where you sit,” said Collins, who has studied the potential of Texas’ massive Permian Basin to support data centers. “When you’re in the middle of an area that’s seen heavy industrial activity for years, there’s already precedent and people there will probably find it easier to deal with.” CRC included about 150 signatures from nearby residents in support of the data center on its permit application for the project. At least five companies on the list are connected to the local oil industry.
Ready access to power is the most important asset for these operations, and CRC’s fields already have it. The plant is a 550-megawatt natural gas power plant that has been used for many years to produce steam for drilling operations. Elk Hills doesn’t produce as much oil as it once did, so the power plant is operating below capacity. The proposed data center will be able to run almost exclusively on that surplus energy. (As for water, the company says its data center will use a closed-loop cooling system and will consume enough to fill an Olympic swimming pool in 10 years. It also plans to install soundproof walls around the perimeter of the property.)
While many other data centers draw power from wind and solar, the Kern County data center will rely on fossil fuels, but CRC is expanding its operations with a focus on carbon capture. Just this year, the company launched a first-of-its-kind system to capture CO2 emitted by another oilfield and gas plant and store it in a depleted well, and plans to build such a system for a plant that supplies data centers. The existing system absorbs about 7 percent of the plant’s total emissions, but CRC has underground storage space that can capture hundreds of times more carbon.
For Permian oil producers, data centers represent a market for natural gas that can be burned or emitted into the atmosphere as a byproduct of drilling. Chevron signs supply agreement methane It was installed at Microsoft’s data center in West Texas, where oil services companies Schlumberger and Halliburton are helping data center developers with energy and construction. Collins said the model makes even more sense in declining areas like Elk Hills, where production is decreasing and CRC no longer requires as much power.
“In the Permian Basin, the situation is different because oil fields and data centers compete with each other for power,” Collins said. “If you have a declining oil field and you have a large proprietary asset there, it makes a lot of sense to connect it and run digital infrastructure instead.”
Aerial view of the Elk Hills oil field site where California Resources Corporation plans to build a data center. The company expanded into carbon capture and other technologies as oil production declined. California Resource Corporation and Beacon
In California, gasoline demand has fallen by about 15% over the past decade, and crude oil production has fallen by more than half during that time, due in part to strict regulations introduced by Gov. Gavin Newsom. The state Legislature struck a deal last year to stabilize production in the state as part of an effort to head off soaring gas prices, but few experts expect production to reach previous levels.
As a result, CRC is looking beyond oil to the future. The company has invested billions of dollars in carbon capture projects in the state, and executives said they expect revenue from those efforts to be essential as California’s oil demand declines. The company has acquired its biggest competitors, Aera and Berry, in the past two years and now accounts for nearly two-thirds of the state’s production. A senior executive last year likened the company to Equinor, the Norwegian state-owned oil company that produces both oil and wind power.
Data centers may advance this transition. CRC says the project will create at least 1,500 construction union jobs, up to 250 permanent jobs and significant tax revenue. Oil and gas employment in Kern County has fallen from about 12,000 to about 6,000 since 2015, and oil properties account for about 10% of property tax revenue, down from 30% a decade ago. CRC’s previous carbon capture project received a stamp of approval from Newsom, a longtime oil opponent, who called it “proof that innovation and ambition are the California way.” (His office said decisions regarding the data center should be left to Kern County.)
Climate change organizations challenged the CRC’s claims about “responsible development.” Data centers will increase the amount of gas generated electricity, releasing even more carbon dioxide and other pollutants in areas where air quality is already poor, said Nina Robertson, deputy principal attorney and data center representative at environmental law firm Earthjustice.
“It’s a disservice to the people who are breathing that unhealthy air.” He also argued that California developers have no excuse to power data centers with fossil fuels as the state moves rapidly toward solar power and grid-scale batteries. “Every data center in California should be powered by zero-emissions energy…We’re building a clean energy future, and this is holding us back. We can’t hide it with the fact that we’re building it on top of an oil field.”
Earthjustice previously said CRC’s carbon storage project “opens the door to a variety of new polluting facilities that can be built from the ground up.” He also said carbon capture could increase emissions by extending the life of the Elk Hills oil field and leading to increased natural gas generation. Earthjustice, the Center for Biological Diversity, and a number of other groups are suing the county over approval of carbon capture projects, and litigation is ongoing.
But the CRC seems to see technology and oil as natural partners. Last year, the company signed a contract to capture carbon from a nearby gas power plant owned by a Canadian company. The power plant could generate twice as much power as the plant in Elk Hills and could theoretically support another data center.
