Desert Southwest Project

Energy Transfer, one of the largest pipeline companies in the US, announced last month plans to construct a 42-inch diameter 512-mile natural gas pipeline from the Permian Basin in west Texas to Phoenix. The anchor client is Arizona Public Service (APS), with interest from Salt River Project, City of Mesa, and Tucson Electric Power. The $5.3 billion project is expected to be completed in 2029 and be fully subscribed. 

On July 9th, 2025, APS set a record for power demand at 8.527 Megawatts, up by 300 Megawatts from the 2024 peak. With the population growth, increased industrial demand, and data center development around the valley, power consumption seems to be headed in only one direction...UP. The valley is estimated to use 11.350 megawatts by 2027.  

The current natural gas pipeline is fully subscribed, providing .9 billion cubic feet/ day to Phoenix. The new Desert Southwest pipeline will bring an additional 1.5 billion cu. ft./day of natural gas. In-state electricity generation sources are: fossil fuels 83%, nuclear, 27%, solar 13%, coal, 8%, hydro at 4%, and wind, 2%. APS and the other utilities plan to use most of the natural gas to produce electricity.  

There is now a 30-day 'Open Season'  during which additional customers can reserve or commit to purchasing gas from the pipeline. Large utility and industrial customers can reserve space on the new pipeline. The pipeline could be expanded to 46", reportedly doubling the pipeline capacity. 

Behind the Meter 

Solar panels on a house are an example of 'behind-the-meter' electrical generation. Electrical power is generated and used on-site 'behind the meter'. Large data centers could purchase natural gas directly from the pipeline and generate electricity on-site to meet demand. Data Centers could be customers for the new pipeline.  

The pipeline will transfer gas from an overabundance to a place of need.  50 percent of US oil production comes from the 75,000 square mile Permian Basin, in southeast New Mexico and west Texas. Oil has been drilled here for 100 years. There have been ups and downs, but with the advent of horizontal drilling in the 2010s, the last 15 years have been the largest boom in Permian history. So much oil and natural gas was initially produced that the natural gas was almost free.  Pipelines have been constructed to take the Permian gas to market; 67% goes east to the Gulf Coast, and 13% goes westbound to Arizona and California.  

This new pipeline will secure Arizona's current and future energy needs. With an existing pipeline fully used and future energy needs set to explode in the coming years, the Desert Southwest Project pipeline will come online at just the right time. 

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