Alberta pitches cheap natural gas for data centre boom, at odds with Canada’s clean power aims

Danielle Smith, Premier of Alberta, joins BNN Bloomberg to discuss the potential of an oil pipeline to the West Coast and the Western Premiers' Conference.

CALGARY -- Alberta is touting its abundant supply of cheap fossil fuels to entice tech companies to build data centres for the AI boom, a move that would undermine Canada’s plan to link new data centre development with clean energy expansion.

Canada is the world’s fifth-largest producer of natural gas, around 60 per cent of which comes from Alberta. As well as huge fossil fuel reserves, the province boasts a cooler climate that can offset the cooling costs of data centre infrastructure and plenty of available land. All that can make operating data centres more cost-efficient than in the United States, where they are facing pushback from communities and lawmakers.

Tech companies could also create a new market for long-suffering natural gas producers in Western Canada, where drillers face a multi-year supply glut and at times have had to pay customers to take their gas when prices have turned negative.

But a rapid expansion of data centres in Alberta would disrupt Canada’s plans to power the AI boom using clean hydro, renewables and nuclear. While natural gas is a cleaner power source than coal or oil, as a fossil fuel it still contributes to emissions.

Prime Minister Mark Carney has said Canadian data centres will run on “some of the cleanest power in the world.” His government’s June 4 AI strategy — which aims to speed up Canada’s adoption of artificial intelligence — highlighted how more than 83 per cent of the country’s electricity grid comes from renewables and low-emission power sources.

Canada currently has only five functioning data centres at the so-called hyperscale level, demanding at least 50 megawatts of electricity capacity, equivalent to the power needs of a small city.

But nearly 100 more are in the works and 90 per cent of those are planned for Alberta, where the emissions intensity of the province’s electricity grid is almost five times the national average, research from York University shows.

“We’re essentially looking at these data centres as digital pipelines and digital refineries for us to help get the value from our natural gas to global markets, but in a creative modern way,” Alberta’s Technology Minister Nate Glubish said in an interview.

The province aims to attract $100 billion in data centre investment. Glubish said he has made multiple trips to Silicon Valley since 2024 to court energy-hungry tech giants with Alberta’s natural gas pitch.

The 20 existing small- to mid-scale data centres in Alberta already pull from the province’s energy grid, which is 60 per cent powered by natural gas. The provincial government is giving new proponents the option to build their own power sources to avoid limits on power capacity.

Julia Sawatzky, a doctor and member of the advocacy group Canadian Physicians for the Environment, said there was a growing discrepancy between Canada’s stated environmental goals and the reality on the ground.

“There seems to be an idea or a vision that Canada could be a green economy or a place that’s meeting its climate goals,” Sawatzky said. “But the way this AI data strategy might actually roll out, I think, is cause for all of us to really pay attention.”

A spokeswoman for Canada’s federal department of innovation did not comment on how Alberta’s proposed buildout of natural gas-fired data centres fitted with the country’s clean-power AI strategy. She said Canada will align new data centre development with clean energy expansion, strong environmental standards, and benefits for local communities.

An Alberta government spokesperson did not respond to requests for comment.

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Many tech giants have climate and emissions targets, which in theory would put Alberta’s natural gas-based electricity grid at a disadvantage to other Canadian jurisdictions such as Quebec, with its low-carbon hydroelectric grid.

But Glubish said the companies he is in talks with are more concerned with power availability, and the ability to connect to the grid quickly. He declined to name the companies.

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Combining natural gas with carbon capture and storage — a technology which aims to trap emissions from industrial processes and store them underground — could in future help tech companies maintain their climate goals, Glubish said.

Tech companies Amazon, Alphabet and Microsoft already operate data centres in central Canada, but on a smaller scale than in the U.S., which offers hyperscalers better tax incentives and proximity to customers.

Major hyperscalers Meta and Microsoft declined to comment on whether they plan to expand in Alberta, while Alphabet did not respond to a request for comment. An Amazon spokesperson said the company has invested in two solar projects and one wind project in Alberta, which help power its existing data centres.

Alberta-based Pembina Pipeline and partner Kineticor are expected to make a final investment decision by the end of June on a proposed 900 MW natural gas-fired generating facility they are developing for a customer with plans to build a large-scale data centre in the province.

Pembina declined to name the customer, but on a recent conference call, CEO Scott Burrows said the data centre project will create incremental demand for natural gas.

“The whole industry is falling all over ourselves to find a way to draw investment here to increase demand for our energy and to avoid the commodity otherwise being wasted at rock-bottom prices,” said Mike Belenkie, CEO of natural gas producer Advantage Energy.

(Reporting by Amanda Stephenson in Calgary; Editing by Caroline Stauffer and Nia Williams)