The AI boom must not worsen Alberta’s urban-rural divide

Imagine driving through the foothills of the Rocky Mountains, past rolling hay fields and shallow ponds, and coming upon something that looks nothing like the rural Alberta we know: A vast complex of warehouses stretching across the landscape, each the size of a shopping mall. A few dozen workers badge in and out. Transmission towers and pipelines loom over nearby pumpjacks—once the main landmarks of ranch country. Rows of wind turbines spin on the horizon. These are industrial cities made entirely of servers. They are the physical manifestation of the artificial intelligence boom. “It’s a whole new realm of scale,” said Graham Reeder, an environmental lawyer with Gowling WLG. Alberta’s pitch to attract $100 billion in data centre investment is often framed as a dual strategy that leverages both its brain power and the power of the land. Universities, research labs, and startups on one side; abundant energy, open space, and a deregulated electricity market on the other. But far from living in the cloud, these data centres are enormous in size and resource needs. They require thousands of megawatts of continuous power, and in many cases, significant volumes of water for cooling. A hyperscale data centre can use more than 11 million litres of water per day—about half the daily consumption of a mid-sized city like Airdrie. So despite all the talk around “compute,” this is largely a rural story. And if Alberta doesn’t get it right, it risks deepening one of the most entrenched divides of our time. Rural risks, urban rewards In the race to win the AI war, rural communities are the ones absorbing many of the risks, while the economic rewards consolidate in cities like Calgary and Edmonton. “Rural municipalities are in decline. There’s a reduction in tax base, aging infrastructure… A lot of rural municipalities don’t have fiber and broadband,” said Colin Knoll, a business instructor with MacEwan University who in recent months has started calling for a more coordinated approach that takes rural needs more seriously. “I don’t believe that Alberta has created a unified strategy that balances all the perspectives,” he said. “There’s a bit of a one-track mind.” Alberta’s electricity grid operator, AESO, recognizes the expected demand for power from data centres has far outpaced what the system can supply. In response, it has capped and maxed out near-term connections for large-load projects at about 1,200 megawatts—roughly a tenth of the province’s peak demand. Developers outside the allotted lineup must now “bring their own power.” Water adds yet another layer of regulatory complexity. “The likelihood that there are going to be impacts on water courses or waterways, fisheries, potentially endangered species, First Nations on reserve… That’s what brings us into a federal area of jurisdiction, where the impact assessment regime might start applying,” Reeder said. This issue surfaced recently in Rocky View County, where 16 picturesque communities form a horseshoe around Calgary. Councillors rejected the local land-use plan for a relatively small data centre after residents raised concerns about water supply risks and the loss of valuable farmland. Farmers argued that the project’s stormwater and cooling demand would place pressure on irrigation systems that were already strained during drought conditions. For its part, the Alberta government is rewriting its Water Act for the first time in 25 years to accommodate emerging demands and give regulators more flexibility over how water can be shared and transferred. Regardless, proponents of data centres often point to economic trade-offs. They’ll argue data centres create jobs, for example. But beyond the initial construction boom, which requires local labour, the long-term employment prospects of data centres are questionable. “It’s not like a Google park,” Danielle Gifford, managing director of AI with PwC, told The Hub’s Alberta Edge podcast back in September. “It is almost like a storage facility with servers and racks that are specifically in it,” she said. “So you have one or two people maybe maintaining it, but it’s not this hub where people are coming and going all the time.” Meanwhile, the downstream benefits of AI are, for better or worse, mostly urban. It’s not hard to see how this could entrench a familiar discontent among rural folks against what’s sometimes called the “laptop class.” “Both sides are right,” Knoll said about the AI boosters and the rural “NIMBY” opponents. “The first step before we come up with all these grand plans is to start educating people,” he said about the risks and rewards. The potential upside The most obvious benefit is property tax revenue. For years, rural municipalities have been struggling to collect enough taxes as farms consolidate, businesses close down, and oil and gas leases expire. “These data centres create diversified tax revenue,” said Knoll. Another revenue stream is the additional natural gas royalties that come with a new wave of demand. Stranded or underutilized natural gas assets become far more attractive when paired with on-site generation for data centres, potentially triggering an upstream boom that also translates to more jobs. “We need to decarbonize our electricity system, but in the interim, we are using natural gas, which is the cleanest hydrocarbon-based fuel you can use to generate electricity,” said Melanie Bayley, CEO of Energex Partners, an Alberta-based firm that advises investors, developers and utility companies on how to plan for large-scale energy infrastructure. “And so this is a way to increase the natural gas demand inside the province,” she said. “More gas production means more employment for Albertans, more royalties going into government.” The benefits could extend to long-deferred infrastructure fixes as well. Similar to pipeline projects like the Trans Mountain expansion, building data centres will require new access roads and broadband connectivity. The need for these upgrades is significant in rural communities, and without new revenues, the declines in infrastructure and services will only continue. Knoll pointed to Quincy, Washington, where the development of a data centre led to new infrastructure upgrades and even a new hospital in the once quiet farming region. He has also written a separate analysis for The Hub outlining various ways to leverage AI to benefit rural Canadians. Indigenous concerns and opportunities Like other megaprojects, data centres touch on Indigenous rights. “If the data centre is going to have an impact on their hunting or fishing rights, or traditional land uses, that’s a major concern,” Reeder explained. “That’s going to have an impact on constitutionally protected rights.” Sturgeon Lake Cree Nation, for example, has already raised concerns about Wonder Valley in northwestern Alberta. Billed as the “largest AI compute data centre park on Earth,” the $70 billion proposed megaproject from celebrity capitalist Kevin O’Leary is so big, it would require more energy than what the entire province consumes today. Similar tensions have prompted the British Columbia government to restrict high-load data centres and crypto-mining operations from connecting to its provincial grid. New policies now require developers to demonstrate clear local economic benefits, including meaningful Indigenous partnership. These challenges are great, but not insurmountable. Alberta has the chance to lead the country by drawing on decades of experience in resource development. For starters, the province has the benefit of being covered by Numbered Treaties, which outline ongoing nation-to-nation obligations. This gives First Nations, governments, and developers a shared legal framework for negotiating major projects. The Mihta Askiy Data Centre, led by Woodland Cree First Nation, about 500 kilometres northwest of Edmonton, is an early example of what that could look like. The nation is moving to acquire and repurpose a partially completed power plant on its traditional lands, in partnership with Alberta-based firm Sovereign Digital Infrastructure. “As a majority partner, our nation is advancing economic reconciliation through meaningful participation in the energy and digital infrastructure sectors,” Chief Isaac Laboucan-Avirom stated in July. “This initiative exemplifies our role as stewards of the land, and as forward-looking leaders in innovation.” Primed for large-scale industrial development In a sense, Alberta is already ahead on several fronts. Water use, for example, is an issue the province has grappled with for decades in fracking and in-situ extraction. With help from advanced technology, oilsands operations today recycle more than 80 percent of the water they use. New Water Act amendments would formalize and expand that approach. Data centres are new, and with them come unfamiliar pressures. But the underlying challenges—managing water, land, power, taxation, and community impact—are not new to Alberta. Like before, the province and developers must actively bring rural communities and First Nations into the conversation. “Sometimes it’s frustrating to see a new industry come in and think they can avoid learning those lessons,” Reeder said. Rural Alberta helped build this province. If the province wants to seize the AI boom, it must ensure the benefits don’t concentrate only in cities.