$5.6B Texas-to-Arizona gas pipeline upsized to meet demand

(The Center Square) – A natural gas pipeline from Permian Basin in west Texas to the Phoenix, Arizona area will get a capacity boost 50% larger than originally planned to meet strong market demand, oil and gas transportation company Energy Transfer announced.

A 48-inch diameter pipe will be used in the construction of the Transwestern Desert Southwest pipeline instead of the 42-inch pipe previously announced in August, Energy Transfer said in a statement. The change will expand the pipeline’s maximum capacity from 1.5 billion cubic feet per day of natural gas to 2.3 billion cubic feet a day.

The increase follows strong interest from Arizona utilities to secure additional long-term supplies of natural gas to power artificial intelligence data centers and advanced industrial operations, which prompted Energy Transfer to commit to an investment of $5.6 billion, up $300 million from the $5.3 billion announced in August. 

“Transwestern’s Desert Southwest pipeline expansion is an important critical source of natural gas,” said Ted Geisler, president of Arizona Public Service, the state's largest electric utility. “We look forward to Energy Transfer enhancing this project to enable greater resources across the region."

Most of the additional gas supplies will go to the Phoenix area and central Arizona to power the fast-growing AI data center market and industrial users. Arizona is home to 164 data centers, ranking seventh among all states, according to the online tracking platform Data Center Map.

Arizona Public Service, the pipelines’ anchor customer in Arizona, will use additional gas to power electricity plants serving data centers and industrial users, Geisler said in an Aug. 6 earnings call.

Arizona Public Service has almost 4.5 gigawatts of committed high-load customer demand in its interconnection queue and an additional 20 gigawatts of uncommitted, potential large-load customers, Geisler said in an interview with Utility Dive in August. For perspective, Geisler said, consider that Arizona Public Service set a peak demand record of about 8.5 gigawatts on July 9, up 300 megawatts from the previous year’s peak.

According to the U.S. Department of Energy, generating 20 gigawatts of electricity at gas-fired electricity plants would consume about 1.482 billion feet of natural gas in 2023, the last year for which data is available.

Arizona Public Service announced in November it plans to build a new 2-gigawatt natural gas power plant in Gila Bend, southwest of Phoenix, designed in part to supply Arizona’s data center market. The Desert Sun Power plant is expected to come online in 2030 or 2031, following the completion of the Transwestern Pipeline in late 2029.

Arizona Public Service plans to pay for the second phase of plant construction by requiring large-load customers to sign long-term contracts at rates that cover the capital costs associated with building the additional power generation.

Patrick Ledger, CEO of Arizona G&T Cooperatives, a nonprofit wholesale power and transmission provider that primarily serves rural Arizona, welcomed Energy Transfer’s decision to upsize the pipeline.

“We applaud the announcement of additional pipeline capacity along the Desert Southwest expansion project,” said Ledger. “This infrastructure is urgently needed to power the growth and business development taking place in rural Arizona.”

Energy Transfer estimates 5,000 workers will be employed during the construction of the 516-mile-long pipeline expansion project, and only American-made steel will be used.  In 2006, when Energy Transfer bought the Transwestern Pipeline from CCE Holdings, maximum capacity was at about 0.7 billion cubic feet per day.

In 2024, 45% of Arizona's total in-state electricity generation came from natural gas, 27% from nuclear power, 13% solar energy, 8% from coal and 4% from hydroelectric power while wind was at 2%.

“Natural gas generation is an important part of SRP’s all-of-the-above approach to ensuring reliability and affordability for our customers,” said Bobby Olsen, associate general manager and chief power system executive of the Salt River Project, a not-for-profit public utility serving approximately 1.1 million electric customers in the Phoenix metropolitan area.

“The Transwestern Desert Southwest Pipeline expansion will help enable us to meet the region’s growing power needs and strengthen Arizona’s energy infrastructure,” said Olsen.