Welcome to Economic Insights, your twice-weekly deep dive into the major projects and policy shifts shaping the Canadian economy.

Stories we are following: 

• For months, one of the biggest questions in the major projects space has been how the CARNEY government would deploy public capital to help finance complicated and expensive projects. This week’s launch of the Canada Strong Fund provides an answer. 
• With dozens of data centre proposals totalling billions in potential investment on the table, Alberta faces a difficult balancing act: doubling down on natural gas to fuel the boom, all while negotiating a new carbon pricing agreement with Ottawa.

A ‘sovereign’ fund?

Ottawa shared the broad outlines of a new $25B public fund tasked with making returns on investment this week. 

• Follow the money: Prime Minister MARK CARNEY presented it as a sovereign wealth fund comparable to the one in Norway. But the Scandinavian country uses resource-wealth surpluses for its fund, while the federal government intends on borrowing the cash. 
• Equity arm: A comparison to the Canada Infrastructure Bank would be more accurate, but Carney wants the focus to be on equity, not loans. 
• Retail investors: The federal government will also test how much Canadians want to be involved in the major projects agenda, by giving people an option to buy in directly. It could be a way to access cheap capital, but it’s not clear yet how many people are willing to invest their savings in Canadian projects that may take time to produce returns.
• Which projects? Access to the fund will be limited to projects that have a referral to the Major Projects Office, or that otherwise supported by the federal government, i.e. have received financing backed by the Canada Indigenous Loan Guarantee Program. 

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Natural gas vs. net zero: Will carbon pricing shape Alberta’s AI ambitions? 

Alberta is positioning itself as the preferred destination for energy-hungry data centres, but the roadmap to becoming a tech titan is complicated by the province’s electricity mix and federal climate targets.

• Gas as the power of choice: “Alberta has essentially limitless natural gas that provides a reliable source of power for these data centres, which require 99.9 percent reliability,” a spokesperson for Alberta’s Ministry of Innovation tells iPolitics.
• Federal position unclear: Asked by iPolitics if Ottawa would exclude gas-fired projects in its call for AI data centre proposals, Energy Minister TIM HODGSON said the focus is “on getting to our climate goals, and we will do that with renewable energy…Where we use natural gas we will, to the extent possible, use abated natural gas.” 
• MOU goals: Last fall’s energy deal between Ottawa and Alberta contained language about increasing electrical generation for people and industry, including AI data centers, all while reaching net zero emissions for the electricity sector by 2050.
• Carbon pricing: Natural gas plants that support data centers of more than 30 megawatts – which are most of the proposals currently in the province – are subject to Alberta’s carbon pricing system.
• Many factors: Edmonton-based Capital Power is waiting to see what compliance costs will come out of a new carbon regime before making investment decisions and entering into deals with AI developers. VP PAULINE MCLEAN tells iPolitics there are many factors at play, including carbon cost, tax policy, fiber availability, right of ways, and the opportunity to be part of a sovereign AI project. 

By the numbers

11 million: Carney’s budget for hosting September’s investment summit in Toronto. 

18.75 per cent: The carbon capture tax credit rate for projects that involve using carbon, like enhanced oil recovery. 

0.20: The maximum emissions intensity (tonnes of CO2e per tonne of LNG) an LNG facility must meet to qualify for Ottawa’s accelerated capital cost allowance.

Major projects watch 

— Shell PLC chief executive WAEL SAWAN said improved signals from Ottawa and the British Columbia government over liquefied natural gas projects have boosted the odds of a green light for an expansion at LNG Canada, reports the Financial Post. Industry expects and FDI by the end of the year.

— The comments come on the heels of another deal, with the firm acquiring Canadian natural gas producer ARC Resources Ltd in a $22 billion takeover bid. 

— The Government of B.C. is adding 17 new major projects to the list of priority projects, nearly double the previous number. These include LNG, pipeline, mining, and smelter projects. 

— Ottawa is greenlighting Enbridge’s Sunrise Expansion project in British Columbia less than two years after the company submitted its application to the Canada Energy Regulator (CER).The expansion brings more gas into the area and could eventually help supply the proposed Woodfibre LNG export facility in which Enbridge holds a 30 per cent stake.

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