EQT, Expand: Gassing Up the AI Power Demand Rush

Gas turbine orders are roaring in and Marcellus producers have delivered a 4.5 gigawatt (GW) natural gas-fired power-for-AI deal, the largest yet in operators’ plans to spin the generative AI revolution into an Appalachian in-basin customer.

Homer City, Pennsylvania, announced in April it will repurpose the site of what was the state’s largest coal-burning power plant (2 GW) to host a newbuild, 4.5 GW gas-fired plant powering a 3,200-acre data center campus.

The approximately 700 MMcf/d will be sourced from the Marcellus Shale.

The boon for the Appalachian gas field’s producers is, in effect, a workaround to political opposition to new pipeline takeaway out of the basin that has capped output at under 40 Bcf/d. Estimates are the shale could economically make up to 60 Bcf/d if unstranded.

Greater in-basin use doesn’t require new interstate pipe.

It also means more net upside for Marcellus producers: There is no toll to pay on long haul pipe.

Marcellus wells often come online with more than 50 MMcf/d in their first 30 days, according to Josh Viets, COO of Expand Energy, which produces 7 Bcf/d net from the Marcellus and Louisiana’s Haynesville Shale.

“In fact, after 15 years of [Marcellus] production, in the past six months we had a well that came on [with] around 87 MMcf/d in [its] first 30 days,” he told institutional investors at a recent Raymond James conference.

Key to participating directly in gas-supply agreements to power large AI data center projects is an investment-grade credit rating.

Expand Energy joined EQT Corp. in the triple investment-grade credit-rating club in mid-April as Moody’s Ratings issued a revised score, following upgrades in October from Fitch Ratings and S&P Global Ratings.

The first two were shortly after Expand was formed from the merger of Chesapeake Energy with fellow Appalachian and Haynesville pureplay gas producer Southwestern Energy.

Deals to power AI are inbound, EQT’s CFO Jeremy Knop said in a February investor call.

“Momentum has picked up in those discussions rapidly,” he said. “We’re having discussions directly with several hyperscalers, other intermediaries, power producers.”

In late 2024, “we were hopeful” power producers would opt for natural gas as their feedstock. “I think you’re now seeing tangible signs of that. There are active negotiations going on on different fronts exploring specific opportunities.”

But a bonus to tech companies and EQT’s negotiating position is that its gas is net zero in Scope 1 and Scope 2 greenhouse gas emissions, he added, as well as that EQT is both a gas producer and midstream operator.

Expand Energy expects to reach net zero in 2035.

EQT’s business unit Equitrans Midstream did gas supply deals with Southeast U.S. utilities in the past couple of years, priced at index-plus.

Pipeline operators Williams Cos., Energy Transfer and others talk about direct supply to power plants, “but what they can’t provide is gas supply,” Knop said.

Part of why EQT rolled its Equitrans spinoff back into corporate is “to provide a holistic solution for these [power and tech] guys.”

The data center operator would rather not piece together the production and the gas delivery. “The beauty of working with someone like EQT is we can take care of all of that upstream of the power plant,” Knop said.

“We’ve seen that be a pretty powerful theme.”

Still, he added, “a lot of it comes down to counterparty credit risk.”

A 1-GW generative AI data center could use 1 million Nvidia H100 chips, for example, which could cost $30 billion based on the current market price.

“If you’re the tech company building that, you’re not going to compromise with a non-investment-grade counterparty. Period,” Knop said. “You just don’t take that risk.”

If it’s a fixed-price deal or index-price-plus, “that creates counterparty margin-posting. You’re not going to do that with a non-investment-grade counterparty.”

EQT President and CEO Toby Rice said, “There was a shift in [deal activity] over the last couple months. The event, if you ask me, was Stargate coming out.”

In Stargate, OpenAI plans to invest $500 billion in the coming four years in building new AI infrastructure in the U.S.

Rice said, “I think a lot of tech companies looked at that announcement and got questioned, ‘Where are you with your power demand and meeting that?’”

Truist Securities analyst Bertrand Donnes asked on the call if data center developers were looking to get a cheaper natural gas price by trying to put together a consortium of gas producers.

For purposes of speed to market, a data center operator would want to work with just one producer, Rice said.

“Speed to market is a critical component. And what’s going to be faster? Dealing with 15, 10, five [producers and] putting those together? Or dealing with one? Dealing with multiple parts of the value chain or dealing with one?”

EQT is presenting its supply and services as a “simple, one-stop shop, best, cleanest, most reliable, most affordable gas on the market.”