For decades, two coal plants in rural Utah supplied power to a customer nearly 500 miles away: the city of Los Angeles. That relationship officially ended in late November, after California’s clean energy mandates made accepting the power illegal — leaving the coal plants without a buyer for the resulting power. They were initially slated for decommissioning, but a Utah law requires that they stay open, despite the high costs (and emissions impact) of doing so.
Buford Ray Conley saw an opportunity in the now-stranded plants. Conley is CEO of Creekstone Energy, which in July announced plans for the world’s largest AI data center campus in Delta, Utah. The new company wants to use a mix of gas engines, coal, and solar to power the campus, then lease space to hyperscalers and other customers requiring significant compute to run artificial intelligence.
“I recognized that there was this massive, 1.8-gigawatt energy resource whose consumer didn’t want it anymore. That was the genesis,” Conley said, referring to the coal plants. He also knew that a gas pipeline connecting Wyoming to Southern California runs through central Utah, where the rural landscape also offers ample space for future solar and wind development. “You’ve got all this energy concentrated in one place.”
For now, though, Creekstone’s project is speculative: essentially a bet that AI companies will prioritize speed-to-power even when it means relying on a fossil fuel that many of the biggest tech companies have pledged to abandon, and potentially at a high cost. And it’s a risky one, especially if fears of an AI bubble are realized.
While Creekstone plans to use fossil gas-powered engines for its initial phase, Conley said the project’s expansion hinges on acquiring the coal plants from the state. Coal plants are dirtier and more expensive to operate than gas or renewable energy, which is mainly why more than nine gigawatts of U.S. coal capacity is expected to close this year alone.
Hyperscalers such as Google, Microsoft, Amazon, and Meta have pledged to reduce their carbon emissions, though those goals are increasingly at odds with their push to build more data centers. In 2023, the first full year of the AI boom, all four companies reported sharp increases in emissions, pegged largely to data center energy use and construction.
While clean energy remains central to their strategy, gas is as well. In October, for instance, Google announced a first-of-a-kind deal for a carbon capture project in Illinois that will store the bulk of emissions from a new gas plant on the regional grid that supports the company’s data centers.
None so far have publicly announced plans to use coal power directly; it’s possible it remains a Rubicon they won’t cross. That said, utilities in the past two years have deferred the retirements of more than 30 coal-fired units to meet surging electricity demand, according to an analysis by the sustainability think tank Frontier Group. Some utilities and grid operators explicitly cited data center growth as the cause for delay.
Given the state of the market today, John McWilliams, head of data center insights at the commercial real estate services firm Cushman & Wakefield, told Latitude Media that any projects that can quickly deliver power will likely attract tenants. “If power is in place, water is in place, zoning is in place, and they can deliver 1 gigawatt of power on a compressed timeline, that’s going to be attractive,” he said.
Costly coal
Creekstone has all of the above. The company bought 1,200 acres for the Utah project, including water rights — a key asset in the drought-stressed state.
How quickly Creekstone can build the power, however, is an open question. Over the next decade, the company said its 10 GW goal will be met with 2 GW of gas, 1.8 GW from the two coal plants, and 6 GW from solar.
The Intermountain Power Agency, which owns the coal plants, initially planned to retire them due to the loss of its contract with LA and rising operating costs. The aging plants would require billions of dollars in retrofits to comply with environmental regulations, including coal ash cleanup and emissions controls.
But Utah Gov. Spencer Cox signed a law last year that complicated things. In a move that foreshadowed the Trump administration’s posture on coal so far this year, it prevented IPA from fully decommissioning the plants and required them to remain operable. The law established the Utah Energy Council to identify buyers or a public-private partnership, which in November requested information from potential buyers on how to initiate a formal bidding process. Fourteen responded, the Utah News Dispatch reported.
Conley said Creekstone participated in the request but expects that finalizing the state process will be long and complex.
“It’s keenly in our focus, but we can’t wait on the state for that,” Conley said. “If it were our decision, we’d go ahead and keep everyone employed and get started right now. But the state has to follow its timeline.”
He isn’t worried about the optics of keeping a coal plant operating. He said the public has “profound ignorance” about coal, and argued that if U.S.-mined coal isn’t burned in Utah, it will be shipped overseas for combustion, which doesn’t reduce emissions but merely shifts them elsewhere.
(That claim is at odds with the reality of the global market. Foreign buyers haven’t absorbed U.S. coal production as hundreds of power plants closed over the past couple of decades; instead, U.S. coal production has been cut in half since 2008, according to data from the U.S. Energy Information Administration. The country’s net coal exports peaked in 2012 and have been generally decreasing since.)
Creekstone is also leasing land from a Utah land trust, known as SITLA, in hopes of developing solar. SITLA manages millions of acres in the state, leasing them to generate revenue for public schools and other state institutions. But “the community is against solar,” Conley said, which is another hurdle to securing power.
Creekstone is among a slew of new companies that are similarly acquiring land in the Southwest and promising to deliver power quickly.
Joule Capital Partners is building an AI data center campus in Utah, in the same county as Creekstone’s project. Fermi, a Texas-based startup backed by former energy secretary Rick Perry that plans to build an 11 GW campus for data centers, went public in October with a $16 billion market cap, even though the company hasn’t begun construction or announced any customers publicly. Fermi said it plans to build the largest fossil gas plant in the U.S., along with solar, battery storage, and large nuclear reactors.
So far, none have publicly announced any hyperscalers as tenants. Creekstone has signed a small company, BluSkyAI, to a 25-acre deal and raised an undisclosed amount of money in a Series B led by Utah-based VC firms.
