An emerging data center industry along the Colorado and Wyoming Front Range should spell good news for producers in Rocky Mountain basins. Yet local operators may gain little thanks to Tallgrass Energy’s plan to pipe Permian gas to the region.
Infrastructure developer Crusoe announced plans on July 24 to build a 1.8 GW AI-focused data center campus in partnership with Tallgrass. The facility will be located in southeastern Wyoming, just south of Cheyenne near the Colorado border (see figure from East Daley Analytics’ Data Center Demand Monitor). Designed to scale to 10 GW, the campus will primarily use natural gas and future renewable resources. In the Macro Supply & Demand Report, we estimate the first phase for 1.8 GW could require up to 400 MMcf/d of natural gas when fully operational.
This announcement follows Tallgrass’ plan to build a new pipeline linking the Permian Basin to the Rockies Express Pipeline (REX). The company has designed the project to carry up to 2.4 Bcf/d from multiple receipt points including the Waha hub, and expects it to enter service by late 2028. Tallgrass launched a binding open season for the line on July 21 after securing anchor shipper agreements in May.
REX is one of the largest US gas pipelines, stretching 1,679 miles from the Meeker hub in Colorado to Clarington, OH. East Daley has speculated on the route for the proposed pipeline, and Tallgrass provides key information in the open season documents. The pipeline, known as Transporter, will connect into REX Zone 2, according to the documents. Zone 2 covers the REX route from the Cheyenne hub through Nebraska and Kansas to the Mexico compressor station in northern Missouri.
Based on this disclosure, we expect Transporter will connect into or near the Cheyenne hub. Zone 2 interconnects with several major systems, including ANR, Northern Natural Gas, and Natural Gas Pipeline of America. But none of these are true trading hubs, nor provide the liquidity that Permian shippers will need to offload over 2 Bcf/d of gas. The Cheyenne hub is the logical place to build along the Zone 2 route.
The partnership with Crusoe is another tell. Tallgrass has not disclosed shippers participating in the open season, but the close timing of the announcements suggests Denver-based Crusoe is among those securing capacity on the new line. If so, the Cheyenne data center will be committing to supply from the Permian.
While a boon for Permian producers, we have noted the new Tallgrass pipeline could affect existing flows on REX. The bidirectional pipeline has contracts with shippers in many of the largest US basins, including 0.9 Bcf/d from Rockies interconnects. Adding a new connection into the system can influence flow patterns and shift the null point where the line ties in.
The new Permian-to-REX connection could allow more Rockies gas to remain in the region. This change is more likely after the recent retirement of the Trailblazer Pipeline, which historically moved Rockies gas east. Since the retirement, REX flows have shifted eastward to compensate, making in-basin demand such as the Crusoe campus critical to keeping more Rockies gas in the region.
Transporter could also prove critical to moving more gas west on REX. Tallgrass acquired the Ruby Pipeline out of bankruptcy in 2022. Ruby connects from the Opal hub in southwestern Wyoming to Malin, OR in the Pacific Northwest, but runs only partially full due to limited supply. The influx of Permian gas, combined with new pipeline infrastructure, could transform REX into a major supplier to the West Coast. – Kritika Gaikwad.
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