Alberta towns see AI data centres as ‘second coming of oil’ — but some worry at what cost

Neil Johnson came home from a conference on artificial intelligence with dollar signs in his eyes. At a council meeting in his home of Newell County a few weeks later, Johnson set about convincing everyone else of the riches he’d caught a glimpse of.

“We’ve got an opportunity here that, when you start adding up the dollars … it’s like the second coming of the oilpatch,” Johnson told his fellow municipal councillors in Newell County at a meeting on June 5, 2025.

Johnson’s enthusiasm for data centre development was first ignited at the Inventures conference in Calgary in May, where government officials and business leaders talked “unbelievably positive” about the opportunities AI data centres offer. 

He returned convinced his county, about 190 kilometres southeast of Calgary, should make it “a real priority” to “lure in” investment from data centre developers.

“We all came back with our eyes wide open by the information we got,” 72-year-old Johnson said. 

Alberta is mounting a huge push to attract AI data centre developments, and many communities like Newell County are keen to cash in on this growing industry. The province’s AI data centre strategy pitches Alberta as the “most attractive place to build the data centres in North America” due to its natural resources, cold climate, low corporate tax rate and “business-friendly regulatory environment.”

But some communities, wary of what has happened in parts of the United States and Australia where data centres have sprouted like mushrooms, are concerned about the water and land use impacts. AI data centres use water — or cold air, making the frigid prairie winters a selling point — to avoid overheating. A medium-sized data centre can consume more than 100 million gallons of water per year, evaporating it to cool the servers, and a large data centre could exceed 1.8 billion gallons per year, according to an article published by the US-based Environmental and Energy Study Institute. Another recent study by researchers at UC Riverside found AI is projected to use 4.2 to 6.6 trillion litres of fresh water in 2027 alone. Once that water is pumped out of the ground, much of it is lost.

Data centres appear to be coming regardless. Although the pipeline component of a recently inked agreement between Alberta and Ottawa continues to draw the most attention, the deal also exempts Alberta from federal clean electricity rules, clearing the way for more gas-fired power.

The agreement also telegraphs Alberta’s plan to incentivize AI infrastructure and data centre development. Alberta is introducing new legislation to prioritize data centre applications that can generate their own power, rather than drawing on the existing grid capacity. 

The creation of new natural gas generating stations that would fuel data centre growth fits neatly with existing government priorities. 

“I would say that anywhere that has a nearby natural gas resource is probably going to be the biggest beneficiary of the AI data centre strategy, as well as those that have the ability to develop their own power,” Alberta Premier Danielle Smith said in a press conference on Dec. 4, 2025.

“The Alberta government is looking at attracting data centres because it wants a resource-intensive industry that can consume natural gas, in particular, locally, instead of having to ship it off to somewhere else to create demand for its fossil fuels,” Paris Marx, journalist and technology author, said in a phone interview with Canada’s National Observer. 

Alberta’s deregulated market, incentives and “concierge support” for data centre developers sets it apart from neighbouring British Columbia, which is taking a more cautious approach and promoting its clean hydropower, according to an Innovation, Science and Economic Development briefing note obtained through an access-to-information request by Canada’s National Observer.

One of the biggest differences between these neighbouring provinces lies in their energy sources: while Alberta is willing to quickly add new gas generation to the grid to keep up with AI data centre demands, BC’s electricity is about 98 per cent renewable — mostly hydro — and the government wants to keep it that way, Dugan O’Neil, vice president of research and innovation at Simon Fraser University, told Canada’s National Observer in a phone interview. 

“[This] is really about allowing Alberta to burn more natural gas, to generate more electricity, to feed those data centres,” O’Neil said.

While Alberta is welcoming any and all data centre development, BC is being more selective about the type of projects it will accept: the province recently banned cryptocurrency mining to stymie what could have been a gold rush that sucked up the power supply and drove up rates for British Columbians. 

“If you want data centres, you need a reliable and sufficient supply of electricity, and you can either do that by restricting who can ask, and what they have to do to qualify to be allocated electricity — which is what BC is doing — or you can do it by allowing people more freedom in how the supply is built,” O’Neil said.

In Alberta, the field is wide open and, this past year, a series of business conferences singing the praises of AI data centre development gave local politicians like Johnson lots of enticing details to bring back to their fellow councillors.

‘We’ve got arenas that need to be rebuilt’

Newell County surrounds Brooks, Alta., a town with a population of just under 15,000. The biggest employer is a meat packing plant. And of its 3.7 million hectares, almost every square inch that isn’t growing food or livestock is pumping oil and gas.

For a community like this, the tax revenue a data centre would yield is a huge draw and reason enough for staff to turn their attention to attracting that investment, said Mitchell Iwaasa, economic development officer for the Brooks Newell region, in a phone interview with Canada’s National Observer.
“We’re like any other county community; we’ve got arenas that need to be rebuilt, we’ve got swimming pools, we’ve got billions of dollars’ worth of requests, community halls — you name it, they want it,” Johnson said. 

Paying for it is the hard part. But Iwaasa regularly gets inquiries from developers interested in building data centres.

“In fact, just in the last week or two, I’ve done some proposals for data centre projects,” Iwaasa told Canada’s National Observer in a phone interview in October. An undisclosed developer approached Iwaasa about a project that could range from $500 million to $1 billion, he said.

It’s tricky to calculate the exact value a data centre would create as an economic driver for the region, but it’s clear the main benefit is the tax revenue, Iwaasa said.

Farms have a “gigantic” footprint, but farmland is taxed at a relatively low rate because farmers’ cost inputs are so high, and it’s a key pillar of the economy, Iwaasa said. A farm might yield about $5,000 to $10,000 in tax revenues, Iwaasa ventured, while a solar farm on the same piece of land could net upward of a quarter million. A data centre would take up even less land.

There are a lot of factors when determining tax revenue, but a rough calculation on a $1-billion project could range from $3 to $6 million annually in tax revenue, Iwaasa said. It all depends on the assessed value of the data centre facility. 

Municipalities will only be able to collect taxes on the assessed value of the land and buildings — not the valuable computer hardware, Rural Municipalities of Alberta pointed out in a press release on Alberta’s new data centre levy framework. This “greatly reduces the potential tax revenue for rural municipalities,” it said.

Iwaasa noted many municipalities are also looking at favourable tax rates for large-scale projects such as data centres, and the County of Newell is one of them: it’s offering a 50 per cent reduction in property taxes for five years on new or improved non-residential developments with an assessed value over $750,000. 

“However you calculate it, data centres provide a valuable opportunity for municipalities to generate very significant tax revenue,” Iwaasa wrote in a follow-up email. 

The trade off is that these are not local companies — so taxes aside, the revenue generated by the data centre doesn’t necessarily stay in the community in the way that farm revenues do. So, using prime agricultural land for data centre development is “kind of a no-go for us,” Iwaasa said, regardless of the tax revenue.

But Johnson believes this is a serious opportunity and the county needs to get in on the ground floor. 

The Alberta Electric System Operator currently has about 20 gigawatts of new load requests for data centre facilities — which is nearly equal to the province’s total installed electrical capacity. The majority of that capacity would come from on-site gas generation. 

Among the requests is an application for a 1,200 megawatt data centre in Newell County. Developers want to move quickly, so counties like Newell and Brooks are trying to get as shovel-ready as possible to entice investment, Iwaasa said. 

Iwaasa said their advantages include close proximity to a cluster of transmission lines and fibre optic internet, a large irrigation district for water to cool servers, existing solar production, plus the potential for onsite gas or hydrogen generation.

Other counties are taking a more cautious approach or receiving pushback from residents as they forge ahead.

AI data centres are ‘an ecological disaster’: Parkland resident

On Sept. 9, a crowd gathered at the council meeting for Rocky View County — located northeast of Calgary. On the agenda: Kineticor Asset Management’s proposal for a data centre complex that would have included six data centres, a reservoir for cooling water and power generation facility. 

A vast majority of speakers were against the project, many citing the loss of 1,100 acres of high-quality farmland, concerns about the rushed process and the water it would use up. The council voted 6-1 to reject the proposal.

Johnson is glad Rocky View voted down the proposal because his county is “right next door.” That’s more opportunity for his community, as he sees it.

His only concern with data centres is reclamation: who will pay for cleanup when it reaches the end of its life? What happens if the company goes broke? 

Johnson’s observation that the data centre boom is like the oil patch reborn is right in more ways than one. These unanswered questions are reminiscent of the oil boom that left behind an expensive mess, including 170,000 abandoned or orphaned oil and gas wells with a hefty clean-up cost ranging from $36 billion — if you ask the Alberta Energy Regulator — to at least $60 billion, according to a 2023 research paper from the University of Calgary’s School of Public Policy.

In early September, as neighbouring Rocky View was getting ready to reject the Kineticor proposal, Parkland County, west of Edmonton, made a series of bylaw amendments that would allow for future data centre proposals. But there, too, many residents spoke against the idea of courting data centre investment. 

One speaker at a packed Sept. 3 special council meeting, resident Tammi Lee, called AI data centres “an ecological disaster,” citing the use of potable water, destruction of valuable farmland and “exponential” increases in greenhouse gas emissions from the gas power generation needed to keep up with data centre development. 

Across Alberta, investors are exploring potential locations for data centres and putting out requests for information to municipalities through Invest Alberta. Many, like Brooks, are offering sweeteners to attract that investment and pitching themselves to developers based on existing infrastructure and potential power generation. On Sept. 23, Bonnyville Town Council voted to submit a letter of support to Invest Alberta to be considered as a possible site for a “large scale data centre campus,” signalling they are “open for business.” The briefing said potential project benefits include approximately 120 full-time jobs and up to 500 construction jobs, with construction targeted to start in the third quarter of 2026.

Some regions have spent years positioning themselves as industrial hot spots and are now ready to ride the wave of AI investment. The Municipal District of Greenview, on the BC border north of Jasper, spent over $70 million to advance infrastructure projects like roads, and has been developing the region’s natural gas resources for over a decade to set the stage for industrial development, according to Kyle Reiling, executive director of the Greenview Industrial Gateway. Now, Greenview is the proposed site for celebrity investor Kevin O’Leary’s  $70-billion Wonder Valley data centre complex.

“I knew we had a huge competitive advantage,” Reiling told Canada’s National Observer. The Greenview Industrial Gateway has access to the massive Montney gas deposit, making it a perfect site for a power-hungry AI data centre complex designed to run on 7.5 gigawatts of gas-fired power. 

“This is some of the cheapest natural gas on the planet,” Reiling wrote in an email to council’s chief administrative officer, relaying the top 10 reasons the O’Leary investment group should set up shop in the Greenview Industrial Gateway, according to emails Canada’s National Observer obtained through an access-to-information request.

“You’ve got to spend big league money to get your infrastructure ready, because you’re competing on a world scale,” Reiling said. “We’re not competing on a province-to-province scale.”

Compared to other municipal districts and regions, Greenview is miles ahead, but Wonder Valley is still just a concept and rife with unknowns, including big items like land deals and water usage.

The Municipal District of Greenview has struggled with drought for the last year and formally declared an “agricultural disaster” in mid-July, around the same time as council voted unanimously to amend its purchase and sale agreement with O’Leary Ventures to include a 1,926-acre parcel of land owned by the municipality.  

Municipalities in Alberta, in particular, are no stranger to drought and its impacts on agriculture, but the potential property tax revenue of these power- and water-guzzling AI data centres makes it a complicated calculation for communities.

Paris Marx, the journalist who has been watching data centres for years, said this is not an unusual conundrum.

“Municipal governments are quite cash-strapped. They deliver a lot of services with, I would say, not a fair amount of revenue for what they deliver, so they are looking for opportunities to basically get more tax revenue so that they could deliver those services. Unfortunately, sometimes that means buying into big promises that don’t always deliver,” Marx said.

‘Can’t justify being in opposition’: councillor 

This delicate balance between providing services and greenlighting development to pay for it leaves councillors to grapple with how best to serve their communities while also being realistic about the drawbacks of data centres.

Alan Deane, Woodlands County councillor, said his county hasn’t had any industry engagement on AI data centres but did attend the annual Economic Developers of Alberta conference in Kananaskis, Alta., in April, where he learned more about O’Leary’s Wonder Valley project and reported back to his fellow councillors.

Deane told Canada’s National Observer he recognizes the “tremendous value” data centres and associated power generation projects could bring to the region and “can’t justify being in opposition” to such developments for that reason, but still has some nagging questions about the future of AI technology.

“On a global scale, you know, are we going to get to a point where we’re feeding AI data centres at the expense of feeding mankind?” Deane wondered.

The International Energy Agency recently projected that by the end of the decade, global electricity demand from data centres will more than double to around 945 terawatt-hours, which is equivalent to slightly more than Japan’s current electricity consumption.

When Deane looks at the power demands of AI data centres, sometimes he wonders: “Is the cost-benefit worth it? Is our way of life and our society going to improve that much? When we’re driving so much of our natural resources and our GDP through AI centres at the end of the day, are we that much further ahead?”

Councillors like Johnson, however, see nothing but opportunity. 

“When the oil patch first came into Alberta, nobody really wanted them. All the farmers fought them. Turns out it’s the biggest cash cow you could ever stumble upon. It was unreal, but it’s dwindling more in our area,” Johnson said.

To Marx, the oilpatch-AI comparison doesn’t quite fit — but he said there are some similarities.

“There are moments where oil prices are really high. Everyone’s making a ton of money. Everything looks great. You’re ignoring the climate consequences and just rolling in the cash,” he said. “And then, there are other moments where the oil price drops for whatever reason, international events, oversupply, what have you, and then the bust comes, and you’re dealing with that for however long it takes.”

He sees a similar boom-bust cycle playing out in the AI sphere. There is over $105 billion in the investment pipeline for AI data centres in Canada, the majority of which is in Alberta, according to an Innovation, Science and Economic Development briefing note Canada’s National Observer obtained through an access-to-information request.

“It’s really not clear that it’s going to have all of the use cases that the companies are trying to sell us,” he said. “If they’re building out all these data centres, come two or three years, or maybe even less than that when the bubble bursts and the valuations on these companies decline, there might be communities that thought they were getting this great golden goose that ends up not laying eggs.”

— This story was originally published by Canada’s National Observer