The shaded case for natural gas and data centers

Colorado business group leader’s case for natural gas has to overlook a few awkward facts

 

by Allen Best

If you have chosen to carry the torch for a fossil fuel in Colorado, natural gas would be the easiest.

Coal, it’s clearly on its way out in Colorado and most places. Environmental impacts aside, it’s just too costly.

As for oil, even as the world transitions to electric vehicles, petroleum products are sure to be with us for a long, long time. Yet the evidence has been damning about how the big oil companies, to achieve short-term financial gain, suppressed information about the humongous long-term costs of greenhouse gas emissions.

As for natural gas, even today it plays an important role in keeping our lights on. It was responsible for 36% of Colorado’s electrical generation in the first quarter of 2026. Plus, most of our homes remain heated by burning natural gas. Some in the environmental community have taken to calling it methane. Not to confuse it with body odors, but that is the primary constituent of natural gas, and it is far more powerful than carbon dioxide at trapping heat in the atmosphere in the short term.

Swapping out coal for renewables is easy enough in Colorado’s electrical generation, although we’re still about six years from getting across that finish line. Natural gas will be far harder. I have heard utility directors who have been working fervently to switch power generation to renewables say that natural gas will likely be part of Colorado’s mix in 2050.

Dan Haley has become a leading defender of natural gas in Colorado’s conversation. He oversees an organization called Coloradans for Responsible Energy Development, or CRED. It’s a 501(c)(6), similar to a chamber of commerce, meaning that donations are not tax exempt. ProPublica’s Nonprofit Explorer reports that in 2024, apparently the most recent year available, CRED had total revenue of $12.4 million.

I asked a utility director what to make of CRED. “Typical attempt at bringing a counterbalance to the enviros. Fairly credible,” was the response.

Haley had been a reporter at The Denver Post. He had been a member of the news team that won a Pulitzer Prize for coverage of the Columbine shootings. He eventually served a four-year stint as editorial page editor before moving into the corporate world. For 10 years he was CEO of the Colorado Oil and Gas Association, or COGA, before moving on to CRED.

Overseeing COGA, more than most industry groups, I suspect had challenges. First, there’s a lot of money involved. Second, the oil and gas sector had been unaccustomed to being scrutinized as they have been during the last 20 years in Colorado. Indeed, the explicit mission of the Colorado Oil and Gas Commission was to foster development of fossil fuel resources.

 

Regulations tighten in Colorado

The big pivots began in 2008. Bill Ritter, the governor elected in 2006, had appointed members to the commission to oversee a major regulatory overhaul. Oil and gas operators were angry at this affront to their independence. That was just the start.

Within COGA — the oil and gas association — I suspect vastly different views. I used to go to their annual conventions. Some members are at least mildly accepting of climate science, but others angrily reject it. The official talking line was that natural gas would be a bridge fuel. One year, a speaker protested the bridge idea. Natural gas was the future, period.

Haley, at a forum sponsored by the Arvada Chamber on July 17, didn’t say anything outrageous. I agreed with large parts of what he said.

“All forms of energy have trade-offs,” he said.

Check.

“Everything is viewed through the prism of climate change. Sometimes the federal government doesn’t talk about it as much anymore, but a new administration someday will talk about it. And certainly, here in Colorado, everything is viewed through that prism of climate change.”

Check again.

Other statements were debatable. The central tension Haley posited in his speech was that we need more energy — mostly for data centers — and need to also keep prices affordable. How?

Natural gas, of course!

“We’re in the middle of this clash, this need for energy, more of it, better energy. Yet we sometimes have well-intentioned policies that don’t always make sense. There is a difference between politics, what might make sense under the capitol (dome), and physics, what actually makes sense when you’re trying to produce this power.”

That’s a theme, this duality of politics vs. physics.

In his many books, Vaclav Smil, the Canadian scientist and policy analysist, has been famously skeptical about the speed of energy transitions. It usually takes 50 to 75 years for an energy transition to happen.

An essayist at The Conversation noted in 2023 that the percentage of global energy produced by burning fossil fuels had declined only from 87% at 2000 to 82% in 2022.

Wood – the default fuel during the American Revolution — is still used by two billion people on this planet for cooking. In Colorado, 20% to 25% of people in four counties located in the San Luis Valley get their heat by burning wood, according to Jennifer Gremmert, who runs Energy Outreach Colorado.

Haley used somewhat dated material to make his argument on behalf of natural gas. “The fastest growing source of energy on the planet right now is natural gas,” he said. “It’s more than twice as much new energy in the last 15 years than wind, solar and batteries combined.”

Ember, the global energy think tank, offered conflicting evidence in June.

“The share of gas in the global power mix declined for the fifth consecutive year in 2025, despite a small rise in absolute gas generation,” Ember reported. “Strong growth in clean power, led by solar and wind, met around 68% of global electricity demand growth over the last five years (2021-2025), reducing the need for a significant rise in gas power generation.”

To be clear, energy and electricity overlap but are not the same. Electricity constitutes 35% to 38% of total primary energy used in the United States. And also to be clear, all the answers in this energy transition — the big pivot, if you will — are not yet evident.

 

The electrification movement

In Colorado, we aim to make electricity a larger share of the total pie. We want to electrify transportation but also our buildings and other sectors. And now comes this possible game-changer, hyperscale data centers with their giant appetites for electricity.

Xcel Energy in October 2024 said it needed a massive increase in generating capacity. It said it expected more than 60% of the new demand to come from data centers. That included 72% of peak demand.

In Haley’s telling, because the natural gas industry has cleaned up its act, it can be an answer.

Emissions associated with drilling have gone down by more than 50%, he said, while production has grown.

And the industry is on the verge of being over-regulated. From 2010 through 2018, the oil and gas sector had one rule-making a year on average, many of them firsts in the nation. Then, in 2018, with Democrats in control of the statehouse, they announced the largest overhaul of oil and gas regulations in 60 years.

This regulatory microscope now allows Colorado operators to claim they produce the oil and gas in ways that are “cleaner, safer and better than most anywhere on the planet,” said Haley.

What role does natural gas have in Colorado’s stretch to meet carbon reduction goals? Colorado has a net-zero goal for the broader economy by 2050. Gov. Jared Polis set a 2040 goal for 100% net-zero electricity. Short of carbon capture and sequestration, a technology that currently has daunting economics, that would seem to leave no room for natural gas.

Buildings pose a conundrum. We’re still installing natural gas infrastructure in new homes and other buildings even as we make efforts to remove gas stoves from existing buildings.

Colorado voters will have a major decision to make this fall about natural gas — and not just in buildings. Initiative 177, a proposed constitutional amendment, says that “producers and utilities have the right to sell natural gas to homes and businesses.” And consumers have the right to buy natural gas for cooking or heating in homes and businesses.

That’s a sweeping statement — and could get into the issue of how new data centers will be powered. Already, 26 states have similar laws precluding adoption of natural gas bans by local jurisdictions.

Conservation Colorado, a bitter opponent, says the initiative would go beyond what other states have done. “It would enshrine a constitutional right to buy and sell one specific product — methane gas,” said Kelly Nordini, the chief executive, when asked for a statement by Big Pivots. “No other state has such a measure.”

 

The national context

This conversation about burning natural gas in buildings has been underway nationally since 2019. Berkeley that year became the nation’s first jurisdiction to ban natural gas hookups in new buildings. This comported with the California city’s prior resolution to become a “fossil fuel-free city.”

By 2024, some 135 towns, cities and counties in the United States had adopted similar regulations intended to reduce the expansion of natural gas.

That included Crested Butte, which in August 2022 adopted regulations precluding natural gas in new construction, although leaving the door open for natural gas in new restaurants. Denver also adopted a law requiring gas furnaces be replaced by heat pumps whenever a home or commercial building needs a major repair.

Courts later ruled that Berkeley’s ban violated a federal law, the Energy Policy and Conservation Act. That law gives the U.S. government sole authority to set energy efficiency and consumption standards for appliances.

Differently structured bans by other jurisdictions have so far survived judicial scrutiny. In late June, two federal appellate court rulings issued days apart in New York and California upheld restrictions on gas-powered and other fossil fuel appliances in new construction.

“The decisions underscore a split among federal courts over whether federal law preempts state and local gas appliance bans, increasing the chances of Supreme Court review,” said the National Association of Home Builders.

In Colorado, laws passed in recent years attempt to nudge local jurisdictions toward full electrification but have not challenged natural gas directly such as occurred in California and New York.

In Crested Butte, 30 houses have been built under the new code. As to why the town was not sued, Mayor Ian Billick is unsure. Maybe those disagreeing with the policy had no legal standing. Or perhaps Crested Butte was just seen as too-small potatoes.

Initiative 177 stands a very good chance of passing, according to a source in the Polis administration privy to polling data. In a July 13th story, Inside Climate News reported that more than $1 million was spent this year on collecting signatures to get the initiative on the ballot.

Conservation Colorado’s Nordini says this “unprecedented and vague constitutional change would open the door for oil and gas companies — or even private individuals to sue the state and local governments over current and future public health, worker safety, and consumer regulations, claiming those regulations infringe on this new ‘right.’”

Regarding data centers specifically, the proposed constitutional amendment “could place utility customers on the hook for new methane gas infrastructure required by this proposed ‘right’ — even if those customers never use the new service.”

Conservation Colorado vows that, if necessary, it might “pursue related policies in future years, either through the Legislature or via the ballot.”

Denver’s Bell Policy Center has a page of useful information and a distillation of the arguments.

 

As for data centers

In Arvada, Haley said nothing of Initiative 177, although he did speak about the “new regulatory frontier” focused on data centers. Colorado has yet to define that border. Legislators have offered countervailing proposals for carrots and sticks. Neither has carried the day.

Attorney General Phil Weiser, likely the next governor, has given indications he intends to help legislators figure this out. He sees a role for data centers in at least limited applications, such as Craig and Hayden, where coal plants are to be shut down. He has not, however, articulated clearly the guardrails he sees.

Haley describes data centers as a business opportunity for Colorado. “Businesses are poised across the country to spend billions of dollars, but we need the infrastructure there,” he said.

National security is part of the argument. Haley quoted Energy Secretary Chris Wright, one of his former members at COGA, when Wright ran Liberty, the Denver-based hydro-fracturing company.

 

Wright had likened the creation of infrastructure necessary for data centers to what was done in the Manhattan Project. Unlike building an atomic bomb, he said, “the risk this time is being second place.”

“AI has a huge impact on national security, both offensive and defense. We cannot be in second place,” said Haley, quoting Wright. “We need government to get out of the way and allow the building of energy infrastructure that China has been doing for 20 years — they’ve more than doubled their electricity production, and we’ve barely grown ours.”

In citing China, though, Haley was again selective in his facts. Part of China’s success has been its investment in renewable energy. The Global Energy Monitor in 2024 reported that China was cementing its position as the global leader in renewables development, building twice as much wind and solar as the rest of the world combined.

And, of course, the Trump administration seems determined to make it difficult to build wind infrastructure anywhere.

“Natural gas is an absolute workhorse when it comes to electricity,” said Haley, citing the available-anytime nature of the fuel — unlike, of course, wind and solar (but overlooking batteries).

As for data centers, he cited the behind-the-meter alternatives for natural gas to power data centers. But Colorado has a problem, he said. “I just read this week that for an air permit in Colorado, the average time is 840 days,” he said. “In Texas, a permit can be secured in about five days.

No time was allotted for Q&A, but an obvious question was about supply chains. United Power, the Brighton-based electrical cooperative, was able to get a natural gas plant built about 35 miles northeast of downtown Denver in just two years. It went online last year.

Now supply chains have extended to four years. That begs the question of what those natural gas builders in Texas will do with the permits they obtained in five days?

 

The counter argument

In a report called “The Misguided Stampede to Build Gas Power Plants,” the Institute for Energy Economics and Financial Analysis said developers of gas-fired power plants are preoccupied with what they see as an insatiable electricity demand driven by data center growth.

The institute challenges many assumptions of natural gas proponents. It also details several financial risks of investing too heavily in natural gas infrastructure. Not least is the cost of gas. Unlike wind and sunshine, it could get pricey again.

As for Texas, it notes that wind and solar accounted for 94.5% of the capacity in meeting growth in electrical demand in ERCOT, the electric grid for Texas.

In Arvada, Haley left his listeners with a couple take-aways. One was about affordability. That was an insinuation that natural gas provides that sturdy, affordable bridge. That simple statement provokes a simple question: How can Holy Cross Energy get to 85% renewable energy while still having some of Colorado’s lowest electricity rates?

The other was that Colorado needs to “have conversations that are rooted in reality, that they understand the difference between politics and physics.”

That sounds good but consider that 25 years ago that same argument was used to dismiss renewable energy. Now, renewables provide more than half of Colorado’s electricity.

In reality, politics and physics are not mutually exclusive.