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The AI data center boom is here. What will it mean for land, water and power in Canada?

It was announced last December that a data center more than 32 times the size of the current largest data center in the world has its sights on a drought-stricken region in Alberta, reports.

Chief Sheldon Sunshine of Sturgeon Lake Cree Nation first heard about the $70-billion data center campus proposed right next door in a .

Sunshine was surprised, as his nation had not been consulted on the proposal. Looking back through his inbox, he found an overlooked email from just a few days before the announcement, bearing a subject line with the name “O’Leary.”

That email referred to Kevin O’Leary, also known as “Mr. Wonderful” of “Shark Tank” and “Dragon’s Den” fame. It was a message detailing O’Leary Venture’s plans for a data center campus called Wonder Valley in the Greenview Industrial Gateway, an industrial development just over 500 kilometres from Edmonton, within Sturgeon Lake Cree Nation’s traditional territory and adjacent to their reserve.

Data centers are what make artificial intelligence (AI) dreams and nightmares come to life. Inside are tall rectangles twinkling with coloured lights — servers piled atop each other like bookshelves. These hardware blocks are the computational machines running complex equations required for AI. The harder they work, the hotter they get. Today, the most common way to cool these centers is by evaporative systems that usher hot air through wet pads, requiring significant water consumption as evaporated moisture is not recycled. Exactly how much water these centers need varies based on climate and size, but a 2021 report estimated a medium-sized data center uses 1.13 million litres of water daily — roughly the amount used by 5,000 Canadians in that same day.

And O’Leary’s data center proposal is far from middling. It seems that, between and flying south to Mar-A-Lago with Alberta Premier Danielle Smith to meet with U.S. President Donald Trump, O’Leary has also planned to build the world’s largest data center. He’s doing it on drought-stricken Treaty 8 territory — and has yet to consult First Nations, according to Sunshine.

Claiming there had been zero notice or consultation from either the province or the municipality, Sturgeon Lake Cree Nation issued an to Smith this past January.

Sturgeon Lake Cree Nation isn’t the only community surprised to find a data center looming on the horizon. Across Canada, many data centers are proposed — and many, like Wonder Valley, are in regions afflicted by drought. As Canada embraces the data center boom, many questions about the planning and impacts of these data centers linger — and answers are hard to come by.

Drought and data centers are on a collision course

The Peace River is at the center of the largest watershed in Alberta, stretching west into British Columbia. At the time of publishing, the Alberta side of the watershed is experiencing 12 water shortage advisories across various basins, while on the B.C. side, the drought levels range from abnormally dry to moderately severe.

These are not new drought conditions, either. The Peace River watershed has experienced drought at varying levels since 2022. Within it, Greenview has faced drought since spring 2024.

This last July, the municipality declared an agricultural disaster for their livestock industry, citing “worsening drought conditions, persistent moisture shortages and significant grasshopper infestations.”

“We urge all levels of government and the public to understand the gravity of the situation and to support the agricultural community through this difficult time,” Tyler Olsen, a reeve from the municipality of Greenview, said at the time. “Our producers are the backbone of not only our local economy, but also Alberta’s and Canada’s, and they need our full support now more than ever.”

Later, in the very same meeting where the agricultural disaster was declared, Counsel Dale Smith brought forth the motion to amend the sale to O’Leary Ventures to include an additional 1,926 acres of municipal land.

O’Leary Ventures CEO Paul Palandjian has said Wonder Valley will need more than 8,000 acres of land.

Olsen told The Narwhal the sale has not gone through just yet, citing that deals of this size take time to complete. He said there’s no concern that a data center of Wonder Valley’s size would worsen the state of the “two, three years ongoing” drought that caused the municipality to issue an agricultural emergency declaration. He believes the drought has more to do with a lack of rainfall.

“It’s two completely different topics,” Olsen said. However, a data center could massively increase the amount of water drawn from that limited supply.

But it’s difficult to definitively say how much water a data center of this magnitude would suck up for two reasons.

One, because it’s never been done before — the world’s largest data center is only roughly 245 acres — and two, AI is developing so fast that by the time you collect the information to contextualize the scale of water use, it will already be outdated, according to experts.

Dr. Tushar Sharma is a computer science professor at Dalhousie University who has been researching the feasibility of sustainable AI and software engineering.

Sharma explains that eight months ago, ChatGPT was receiving around 10 million prompts per day worldwide. Recently, the amount of prompts per day hasn’t just doubled, tripled or even sextupled. Not even close.

It has multiplied by 250 to 2.5 billion prompts.

“This is crazy,” Sharma said.

And that was two months ago.

As data centers proliferate, impacts are hard to estimate

Calculations of how much water a ChatGPT prompt uses also vary by the size and complexity of the prompt. The greater and more complex the question is, the server running the model must run greater and more complex calculations to determine its answer.

Like anyone who’s ever owned an old laptop knows, the more you ask it to do, the hotter it gets. Sharma explains that when a server heats up, the data center housing it must cool it down to keep it functioning — water is the cheapest way to do so.

South of the border, the (now renamed to Stanton Springs) that soaked up all the water in the area — leaving nothing but orange sludge to run from nearby Newton County residents’ taps — was only around 57 acres.

If Wonder Valley is completed, it will be more than 140 times the size of the Newton data center.

However, the effects of data center resource drainage are not restricted to nearby faucets; their presence can be felt much farther away, in the wallets of everyday folks.

Earlier this year, the that the increased pressure on energy grids from data centers is causing whatever hydro is left to increase in price. Due to this manufactured scarcity, electricity bills for U.S. residents are expected to rise by an average of 8%.

AI regulation is not a popular term in government either.

Evan Solomon originated the role of AI and digital innovation minister last May under Prime Minister Mark Carney.

In his first speech as the new minister, Solomon said the federal government would not “over-index” on AI regulation and would instead be setting its sights on data protection.

Solomon likened AI innovation to a “bucking bronco” that he doesn’t intend to throw a saddle on with regulation, but rather ensure that it “doesn’t kick people in the face” by misusing their data or breaching their privacy.

The federal branch is not the only level of government excited by the new market.

Alberta Technology and Innovation Minister Nate Glubish voiced the province’s intent to become an international leader in data center infrastructure, eyeing this past summer. These centers, Glubish said, could make use of stranded oil and gas assets within the province.

Governments are enthusiastic about data centers, but their long-term costs and benefits are still uncertain

Politicians like and Ontario Energy Minister often say that data centers are job creators. University of Waterloo computer science professor Martin Karsten isn’t convinced.

Karsten says it does not take very many technicians to ensure a data center is running smoothly. If anything, the construction of the data center will be a larger job creator than a fully operational data center, which largely relies on automation.

A on the Stanton Springs data center underscores this reality. The report notes that just over 200 jobs will be “supported once [construction is] completed,” whilst also boasting that 1,300 skilled trade workers will be working on the construction of the facility.

If data centers aren’t huge long-term job creators, are they beneficial for generating tax income?

Ian Mondrow, a partner at law firm Gowling WLG specializing in energy regulation and policy, doesn’t think this is the answer either.

Doug Ford’s government in Ontario is currently trying to pass Bill 40, the , which includes amendments to the Electricity Act that would give the province the power to be picky about which data centers it allows to connect to the power grid. The bill currently states that only projects that cultivate “economic growth” will be allowed access in an effort to keep energy affordable. However, the bill also introduces new provincial power to subsidize the cost of connecting data centers to the power grids.

Mondrow explained that these subsidies could be funded from electricity ratepayers — anyone with a power bill — or through taxes.

Whether Ontarians could see an increase in their hydro bills or their taxes is largely up to a formula to be calculated by the Ontario Energy Board.

The Ontario Energy Board declined to comment for this story.

Mondrow thinks that, other than a fear of missing out on the latest tech boom, the likeliest reason why data centers are pulling focus is because of greater importance being placed on data sovereignty, especially given the current global trade climate.

Data centers are not just the synthetic synapses of AI: They can also be cloud storage facilities.

If the location of the data center is different from where the data was created, this is called data residency. The physical location of the data center determines what laws and regulations the data is subjected to, but so does ownership and operations. This can be problematic because it can leave Canadian data vulnerable to being accessed by foreign governments who invest in Canadian data centers.

A new analysis by the found that 84 of Canada’s 283 total data centers are owned by American companies. Under U.S. laws, American companies can be compelled to hand over data stored in Canada.

What is known is that despite the murky benefits of data centers, they are surely on their way, and not just Kevin O’Leary’s.

has plans to build six new AI data centers in British Columbia in the next couple of years.

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