TL;DR · 30-second read
The Short Version
The US military is inviting private companies to build giant computer warehouses for artificial intelligence on at least 12 of its bases, from Texas to Alaska. Two projects, each estimated at about $2 billion, have been tentatively awarded.
The military pays nothing up front. In exchange for the land, it gets to use the computers. The catch is that each project must make its own electricity instead of plugging into local power lines, and must not drain local water. In effect, the builders are being asked to build their own power plant too.
Some proposed sites sit half a mile from family homes, and Congress is still arguing over the rules.
Military.com reported on July 27, 2026 that the Army and the Department of the Air Force have opened at least a dozen military installations to commercial data center developers over the past year and a half. Only two deals have been awarded, and both are conditional. In late March the Army selected Carlyle for roughly 1,384 acres at Fort Bliss, Texas. It selected CyrusOne, a data center operator jointly held by funds managed by KKR and BlackRock, for a roughly 1,201-acre parcel at Dugway Proving Ground, Utah. The Financial Times estimated each project at about $2 billion.
The other sites are still solicitations. The Army is considering Fort Hood, Texas, and Fort Bragg, North Carolina. The Air Force has sought bids at Arnold, Edwards, Joint Base McGuire-Dix-Lakehurst, Davis-Monthan and Robins, and more recently at Joint Base Elmendorf-Richardson, Eielson Air Force Base and Clear Space Force Station in Alaska. Proposals must include net-zero water usage and a power plan that does not draw on the local electrical grid. Initial operating capability is projected for fiscal 2027 at Fort Bliss and fiscal 2029 at Dugway.
Executive Summary
The Pentagon is turning spare base land into a currency for AI computing. Under the Army’s Enhanced Use Lease program, private developers finance, build, operate and eventually decommission hyperscale data centers on military land. Hyperscale refers to the warehouse-sized campuses built for the largest cloud and AI workloads. In return the service gets access to computing power, at what the Army calls “no upfront cost to taxpayers.” Army Secretary Dan Driscoll has described Fort Bliss as “the first hyper-scale data center that the Pentagon has ever done.”
The terms matter more than the land. Unlike commercial projects off base, these bids must bring a power plan that does not rely on the local grid and must achieve net-zero water use. For developers, that changes the job from building a data center to building a data center plus its own utility. For base commanders and the surrounding communities, siting and power have become part of the procurement itself.
The program is also politically unsettled. A House defense bill provision would bar leases unless developers exclude certain components from China, Russia, Iran and North Korea, and the Army has objected that the rule would penalize building on federal land.
The Land Is Free. The Power Plant Is Not.
In the commercial market, the scarcest input for a large AI campus is usually a grid connection, not land. A grid connection is the utility’s commitment to deliver large, steady amounts of electricity, and it often comes only after a long wait in an interconnection queue, the line of projects waiting for approval to plug in. The Army and Air Force solicitations rule that path out. Proposals must include a power plan that does not draw on the local electrical grid, a requirement that does not apply to identical projects built off base.
That changes what is actually being procured. The Army’s side of the bargain, land in exchange for computing access, is accurate in cash terms, but it moves the heaviest capital item onto the bidder. Whoever builds at Fort Bliss or Dugway is committing to finance and run generation as well as the data halls. The Army’s long-term vision, as described by Col. John Oliver, is a campus with a commercial side, a classified military data side and onsite power generation. The roughly $2 billion estimate for each project has not been broken down publicly, so nobody outside the negotiations can yet say how much of it is power plant and how much is computing.
The rule is likely to favor sponsors with deep capital and power-development experience, such as a global investment firm like Carlyle or a KKR- and BlackRock-backed operator like CyrusOne, over developers whose model depends on buying utility power. It also changes the utility relationship. El Paso Electric attended the Army’s spring listening session at Fort Bliss, and the Army says excess power generated on base could potentially be sold back to civilian grids. A would-be large customer could become a supplier instead. For residents, the rule speaks directly to the concern behind a Virginia state-funded study, which found monthly household energy bills there could rise by $14 to $37 by 2040 as data centers grow.
Water Is the Second Utility the Bidder Must Bring
Data centers use water to cool their servers, and the net-zero water requirement is hardest to meet at the Army’s flagship site. Defense Department procurement documents reported by Data Center Dynamics rate the water risk for the El Paso area as “Extremely High.” One option under discussion is having Carlyle drill a new well to feed El Paso’s desalination plant and offset what the data center uses. Oliver was candid that this is unproven: “We don’t know if that’s an engineering solution that we can actually get to yet.”
Water and power are linked. Cooling designs that use less water generally use more electricity. In a desert location, a strict water target therefore adds to the size of the on-site generation the developer must build and pay for. The two requirements compound rather than sit side by side.
A Dozen Sites, Two Awards, Very Different Neighbors
The sites vary widely. Dugway, where the military conducts its primary chemical and biological weapons testing, offers three parcels totaling about 3,466 acres, roughly an hour’s drive from the nearest community. Fort Hood has 207 acres on offer, and Fort Bliss has nearly seven times that. Contracting documents show a Fort Hood parcel within a half-mile of residential and commercial property, and several Fort Bragg locations within a mile of civilian areas and a half-mile of civilian housing. Smaller parcels close to homes leave less room for generation, and less buffer for its noise, than a remote range does.
Opposition near homes is not a hypothetical risk. Data Center Watch counts nearly $156 billion in projects nationwide delayed or canceled after local opposition. The Army has built community engagement into the bid: developers must describe outreach plans and assess “any risks or opposition.” Brookings senior fellow Darrell M. West said communities that accept these facilities tend to be the ones told the details up front, including energy source, water use, cost and noise.
Congress Is Still Writing the Rules
Rep. Cory Mills secured a provision in the House fiscal 2027 defense authorization bill barring data center leases unless developers avoid certain printed circuit boards, advanced semiconductors and chipsets made in China, Russia, Iran or North Korea. The Army objected that it would create a “federal land penalty,” imposing rules on installations that would not apply to identical projects anywhere else. Rep. John Garamendi’s proposal to require evaluation of energy, water, noise, light and security effects before any deal was rejected by House Armed Services Republicans. A Senate amendment to pause leasing until the Pentagon finalizes a data center strategy was also defeated.
Each condition adds to the same balance sheet. Free land has to pay for off-grid generation, net-zero water and possibly a restricted supply chain, and the Army’s own argument shows it knows the margin is not unlimited. Whether the economics still work at scale is the question the two conditional awards will answer first.
Background
AI workloads have pushed demand for hyperscale data centers faster than utilities can connect them, and local opposition has become a real constraint, with Data Center Watch counting nearly $156 billion in projects delayed or canceled. The Pentagon holds large tracts of underused land at remote and secure installations, and a Trump executive order directed agencies to open non-excess federal land to data center development. The Army’s Enhanced Use Lease program, with the U.S. Army Corps of Engineers handling lease negotiations and environmental review, is the vehicle.
Carlyle is a global investment firm. CyrusOne is a data center operator jointly held by funds managed by KKR and BlackRock. Dugway Proving Ground in Utah is where the U.S. military conducts its primary chemical and biological weapons testing, and Fort Bliss in El Paso is home to the Army’s 1st Armored Division. Source: Pentagon Plans AI Data Centers at Military Bases Across Multiple Branches (Military.com), on Army and Air Force plans to lease base land to commercial AI data center developers.Sources