Alberta could spend billions on public gas pipelines to fuel data centre boom, leaked document suggests

The Alberta government is planning to take over the province’s natural gas pipeline system to ensure tech companies and oil majors will have enough natural gas for their operations — even if it makes gas more expensive for Albertans, a leaked document reveals. 

The document, a so-called “cabinet report” the existence of which was first reported by The Narwhal, was presented at a Sept. 10 cabinet meeting by Energy Minister Brian Jean. It lays out an expansive plan to expand the province’s natural gas network by bringing it under public ownership. 

The document bears the provincial government’s seal, and in a Friday email, Josh Aldrich, Brian Jean’s press secretary, did not dispute its authenticity. He wrote that “governments routinely examine a wide range of policy, regulatory and legislative options when considering complex issues, and internal materials do not represent government decisions.” 

The plan acknowledges that financial pain may be in order for Albertans due to the province’s fixation on providing gas for data centres — and prepares options for it to step in to prevent too much backlash. 

Data centre demand spiking

The approach would ensure Alberta can guarantee data centre developers they will have enough gas to power their facilities. Earlier this year, the province’s energy regulator proposed measures to force data centre developers to build gas generators to power their facilities before renewables, even if renewables would be cheaper.  

The province’s oilsands would also benefit from the reliability of a publicly-owned natural gas network because oil producers need natural gas to extract, process and export bitumen, the document states.

If the province fully embraces the scheme and builds pipelines (instead of leaving infrastructure costs to the private sector) it could end up costing taxpayers billions over several years and involve “long-term financial exposure” should gas prices or demand drop.

According to the document, preliminary consultations, technical and legal work conducted in the coming months to set up a publicly owned gas network could cost up to $2 million. An additional $8 million would also be earmarked to fight off lawsuits, including possible constitutional challenges from TC Energy and ATCO (which runs a BC gas network that connects to TC Energy’s). 

Starting in 2027, it would cost the government up to $60 million per year to run the two Crown corporations (one to plan, one to operate). Those costs would include “operating and administrative costs” but do not include the costs of the pipelines themselves. 

If the province decides to build pipelines as part of the scheme instead of leaving construction itself to the private sector, it could end up costing taxpayers billions over several years and involve “long-term financial exposure.”

Albertans’ gas and power bills are poised to increase if the project to provincialize natural gas infrastructure goes ahead and successfully increases gas demand — and prices. Those higher prices could lead to “disproportionate impacts on seniors and rural residents” and be severe enough the province could need to step in with “mitigation measures” for households and small businesses, the document notes. 

Failure to convince private sector

The plan was developed after “extensive” efforts failed to convince TC Energy to expand its existing pipeline network — putting the UCP government’s data centre and oil export plans at risk. TC Energy is the province’s largest gas pipeline operator and the pipeline system it shares with ATCO’s BC network can’t take on more industrial clients or deliver more gas until at least 2030. 

Moreover, Canadian law caps the company’s returns on the system, making it less profitable than TC Energy’s US networks, and prevents Alberta from forcing the company to build more pipelines.  

“Given the extensive discussions with TC Energy since 2024 that have produced no viable solutions to date, and the time-sensitive opportunities available to Alberta, escalatory and direct measures are now required,” it notes. TC Energy did not respond to questions from Canada’s National Observer about the discussions by deadline. 

To break the impasse, Alberta should create two Crown corporations that can take over the planning, expansion and operation of the province’s natural gas pipeline system, the document states. 

The proposal comes amid a bitter battle in Alberta over the UCP’s plan to make the province a hub for gas-powered data centres. Premier Danielle Smith has pitched her government’s plan as a way to eke out more profit from its natural gas reserves, but thousands of Albertans are furious at the UCP’s secrecy in its approach, fuelling dozens of protests in recent months.

“Sturgeon Lake Cree Nation is outraged at the contents of the leaked cabinet report,” said the nation’s chief, Sheldon Sunshine. The nation is suing the provincial government for granting a water licence associated with Kevin O’Leary’s $70 billion Wonder Valley data centre without consultation. 

 “For years, our nation has been fighting for meaningful consultation and effective regulation of hyperscale data centres … now we find the Alberta government is trying to artificially drive up demand for natural gas to draw even more of these data centres to Alberta — all while knowing that this would trample our treaty rights and send electricity costs soaring.”

Sunshine isn’t the only one skeptical of the plan: the province anticipates even data centre investors will question the project. Moving forward with it “may create near-term investor uncertainty at the same time Alberta is actively courting hyper-scale data capital and other investors,” the leaked document notes.