LILLEY UNLEASHED: Is Alberta on a winning pattern?

Is Alberta on a winning pattern?Let's see.They had a pipeline deal with Mark Carney announced last week.They had a pipeline deal proposal, at least, announced with Ontario Premier Doug Ford on Monday.And then Wednesday, MEDA, the biggest AI deal, one of the biggest foreign investments in Canadian history, all happening with Alberta Premier Danielle Smith, who joins us now to talk about this.Hi, I'm Brian Lilly, political columnist with the Toronto Sun.

Premier Smith, I'm guessing you're smiling a lot this week.I often talk to politicians and we're talking about your L's, and here we are talking about three major W's for you.

Yeah, it was a good week.I mean, part of why I'm smiling.we're trying to do is get back to where we were 10 years ago.I mean, imagine all of these announcements you're hearing now.These are the kind of things that we could have been doing if we didn't have terrible federal policy that had been suppressing Alberta's economy for so long.I mean, we had pipelines north, east and south, and now we do have pipeline proposals again.

And so I think that that is getting us back to maybe making up for a little bit of lost time.Of course, the new investment in the AI data center could not have happened without us getting rid of the net zero power regs and being able to develop natural gas as the base fuel to underwrite that growth.And so I think that when we signed the MOU with the federal government last November, the two things that immediately had an impact were saying no emissions cap, no net zero power regs, and the kind of announcements we made today would not have been possible without that.

So, yeah, I just want to be clear on that.You're saying that the investment by META, and there's others in the pipeline, pardon the pun, that those wouldn't have been possible if you didn't get the feds to be able to say, OK, we'll get rid of the new laws.regulations.

Yeah, well, let me tell you, I mean, because it may not have had as much impact in other in other provinces, although it certainly had an impact in Saskatchewan and in New Brunswick and Nova Scotia.

I remember speaking to Premier Moe about how he wanted to do a a renewables project in his province, but with baseload power supplied by natural gas.And under the previous government, under the Trudeau liberals, as opposed to the Carney liberals, we can argue about whether it's a new government or not.But under the Trudeau guys, they were saying, no, you can't have baseload power from natural gas because that's burning fossil fuels and we don't want that.And yet without that, they can't go ahead.

It's so true.I mean, part of the reason we have so many renewables on our grid is because when solar comes down and wind comes down, then you have peaker plants fueled by natural gas to be able to take up that power.So that's one part of it.But the natural power regs would have required us to have 95 percent emissions abatement on those natural gas plants by 2035.And the technology is just not there for it.So if you set an arbitrary target and you tell all of your power producers you'll go to jail if you don't reach them, you can well imagine nobody's all that enthusiastic.

about building natural gas power.So the first step, getting rid of the retail carbon tax, the second step, saying that the net zero power ranks wouldn't apply in Alberta.And then this third step that the federal government said is that natural gas is actually going to be a welcome component on our power grid in order to fuel AI data center development.That's a sea change from where we were 18 months ago.And I think that that's a demonstration of why META was able to make their final investment decision that they announced a couple of days ago.

I know that you've got a lot of other companies looking at Alberta, especially northern Alberta, north of Edmonton.That's about as far north as I have gone further north, but that's about as far north as I want to go most of the time.It starts getting colder and I like the heat as I get older.

Brian, I have to tell you, Edmonton is still central Alberta.There's still a lot more Alberta above Edmonton than there is below it.

Talk about this though.Why, why are you drawing in so much attention for AI in Alberta?Is it just because you're open to it?I know that there are some politicians, some jurisdictions where the They hate AI data centers.They don't want them.I've talked to other jurisdictions where they say, well, you know, they create a lot of construction jobs, but once it's up and running, they don't actually have ongoing jobs in significant ways.

So we're not sure.Why is Alberta drawing in so much interest?Is it just your take on AI data centers and why they matter?

There's so many things that you put on the table there.I guess the first thing I'd say is that we know that there have been projects in other jurisdictions that have been implemented badly.And as a result, it created a lot of community pushback.And we've been watching that over the last two years to make sure that didn't happen in this case.META is located on industrial lands, lands that have been zoned for industrial for 40 years.So everyone in the community were prepared that there might be up to 12 refineries built in the area.

So that's the area that they've chosen.

You're not taking over ranch land or cropland.

No, I mean, there's always a possibility that there could be that alternative use, but because they had made a decision as a county that this was going to be where they put their industrial development so that they could preserve farmland outside of it, I think that's well accepted in the community.Second part is the bring your own power.They're going to start with some power from the power grid, which is actually going to have a net benefit because it will reduce transmission costs for all of us.But as they build out, they have to build their own power.And if they build more than they need, then we'll be able to sell it back into the grid, which would also help.our power prices.

So that's the second part of it.And the third part is water.They have a closed loop and air cooling system.And we also have a cold climate, as you pointed out.And so that also helps with some of the costs associated with cooling that equipment and will also reduce the impact.And so I think they said that the amount of water that they're using, you withdraw once and then you circulate it, is about the amount of a typical golf course in a given year.

And so those are the kinds of things that we knew we had to watch and manage so that we didn't end up not having community buy -in.And that's going to have to be how we approach future data center developments as well.They're going to have to make sure that they're addressing the legitimate concerns of the local community.

I realize I got myself in hot water with that comment about going north of Edmonton.I'm going to hear about it, but it is colder up there and that's part of the draw, isn't it?

It really is.

It's actually putting it in California.Very true.

Or, I mean, the first data center I visited was in UAE.My gosh, those guys get to 55 degrees Celsius in the summer.But they've been able to make their industry work.I think we have a real advantage there.And we're also sitting on a literal ocean of natural gas, 144 trillion cubic feet.So the other part of this, so when you talk about the advantages, when you look at the amount of additional revenues we'll get from royalties because we're using natural gas, in addition to the reduction in our transmission costs because we'll be paying a portion of that in addition to some of the other charges, we expect that we'll get $250 million a year in revenues for various levels of government.

There's not very many projects that can generate that much revenue that goes to help fund roads and hospitals, schools, and I think that's an important factor.The other thing I'd say is if you go into any major industrial site these days, a lot of it is mechanized.You go into the control room and there's just a bank of computers and screens.And so our industry has gotten very, very efficient at being able to run large operations and installations.across the entire range of industrial developments that are able to leverage the skills of a smaller number of people.Everybody's more productive.

They get paid higher wages.So I would look at it through that lens as well, but there's multiple benefits that are coming to the community.

And how many more projects are you looking at?Are you able to say?I mean, every time I turn around, I hear about more AI data centers.I was, um, I'm sure you saw that Financial Times article the other day saying that the UAE is walking away with 70 billion.It didn't say that, but that's how people interpreted.They're walking away from their $70 billion investment promise.

And then I talked to Jean Charest, who's co -chair of the Canada UAE Business Council.He says, No, they're not walking away.They're sniffing around all over Alberta, including in AI data centers.

It's very true.I had a chance again to reconnect with the UAE ambassador.We've spent a lot of time over the last few years building our relationship with the UAE because they're very similar kind of jurisdiction.They're also five million barrels a day of oil production.And they're also aspirationally wanting to be leaders in development of technology.So we think that there's a lot of common cause.

But they also have pretty significant sovereign wealth funds.We're starting to grow our sovereign wealth fund.We've doubled it to $36 billion in the last few years.But partnering with other sovereign wealth on major investments.I think that's one of the things that we're beginning to explore.I'll be at the September investment forum, as I know many of these sovereign wealth funds and others will be as well.

And I hope that there's a few things in the window that they'll be interested in doing an investment in.I think that the UAE, I think their largest investment in Canada is in Alberta, because Nova Chemicals has been owned by one of the wealth funds.It's now being rebranded to Bourouge, but that's also a UAE investment.investment vehicle.They know our province, they know our country, and I think they're looking forward to it.opportunity.

They just bought CI Financial here in Toronto for just under $5 billion recently.And of course, Nova Chemicals, I believe it started out as a crown corporation.You know, there's a few.

We had the Alberta Energy Corporation that started off as a crown corporation and one of the great companies, Synovus, is now the beneficiary of that.We also had pipelines that started off as government projects and they're now in the private sector.Sometimes that happens.If you're going to de -risk a project, if it's got good market potential, you ultimately want it to be in the hands of the private sector.Sometimes you've got to give things a little push.And that's what we're looking at with some of the pipeline development that we're talking about, is that after 10 years of terrible policy, that scared away investment, you got permits and then they were cancelled, cost billions of dollars of investment with no end in sight.

I think that we have a lot of work to do to give confidence to the industry again to attract that private sector dollars back.But that's what we're trying to do in Alberta is we're trying to demonstrate that we are turning a page on those 10 bad years.And we hope that this is a new relationship we can build with Canada so that we can start building again.

You did my segue for me.And that's just proof that, like me, you spent a lot of time in radio.And I think that's why every time you and I talk, I get all these comments of, wow, it's so easy to listen to you guys talk.It's like, yeah, you put two people on that spent years on the radio talking for a living.They're going to talk pretty easily.So the federal pipeline proposal.

My colleague, Lorne Gunter, you know Lorne.He was a complete cynic that this would ever happen.Now he says he's at least moved on to be a cynic, or sorry, a skeptic.And so he's got a little bit of hope, but maybe not a lot.But that's just Lauren on a Friday.Never mind.

But he's saying, OK, this is possible now.Have you turned around a lot of people?Because I am still hearing some say that.will never go ahead or Financial Post had a piece quoting people from Alberta saying there's only a 50 50 chance.Talk to the cynics who the cynics and the skeptics who don't believe this is going to go forward.What do you say to them about the pipeline to the west coast which is currently going to the southern route as opposed to the northwest route?

Again, you've put a lot on the table there, so let me say a couple things.It may have, a year ago, it may have made the most sense to just double down and send everything to the United States, because I think they're going to need more production, which is why I'm glad to see the South Pole Bridger line is also going ahead, and they had their successful open season.There's other expansions being talked about, and that will always be our most important trading partner.But with the disruption in the Strait of Hormuz, the number of international ASEAN country leaders that I'm talking to, ambassadors, who say, you know, if it can be closed once, it can be closed again.And we need to have a secure supply of energy.And so how quickly can you get it to us?

And we'll take everything that you've got.I had a group of seven ambassadors from the ASEAN countries that I met with yesterday.And so if they're telling me that, then they're telling the prime minister that as well, which is why I think he understands that if we are going to exert ourselves internationally in a significant way, you have to sell the world the products that they want.And so when you lead with energy, you're leading with a very high value product.And a lot of those countries, if they're energy insecure, they're also food insecure.And so that also opens up an entire avenue for our agricultural production.

We've got great fiber as well, potentially opens up for that and other manufactured goods.

Sorry, Premier Smith, but you're saying like once we start selling them oil, we have a better chance to sell them, say, beef or pork or canola.

and critical minerals, everything.Yeah, I think we finally got on the radar screen of some.I mean, I've met with various ambassadors who said, you know, we weren't even buying anything.from you a couple of years ago.And now because of Trans Mountain, we're sending barrels to South Korea.It gets upgraded and refined, and then it comes back to California, if you can believe it, in aviation fuel and other products.

And so that relationship is going to only continue to expand.And so when we take trade missions over, yeah, we might be leading with energy.But I think that becomes when you can demonstrate you're a secure supplier of one commodity, then it's starts the conversation, what else can we do together?And so that's what I'm really excited about is that I think the West is obviously the gateway to Asia.I think that Scott Moe has done tremendous work in his trade missions.I know that David Evian has also gone on trade missions to Asia.

And I think they're beginning to understand just what the opportunity could be.It's a massive, massive market.I mean, even if you take China out of the mix.And look at the other ASEAN countries, you're talking about 680 million people.That is a massive market for us to sell directly to.And I think now that conversation has begun, I think energy will lead, but so many other commodities and products will follow.

Well, as I've told Premier Mo and all the canola farmers I know in Sask, it's along the lines of what the ambassador said about the a straight of four moves.If they can close it once, they can close it again.And China has closed off canola by my count four times in the last 15 years.So not a good trading partner.We, you know, look to the rest of the Asian market and that's good.But do you foresee a private sector partner coming on?

to the southern pipeline route?Or as some were speculating, do you just, okay, well, we don't need to make our money back quite as quick and we're going to make money off the royalty.So rather than make our money back in 12 years, the way a private sector company would on a pipeline, we'll make it back over 20 years in terms of the tolls we charge and such.

Yeah, I think the way that we're looking at structuringdeal would be 80 % debt financed.And so that means that the tolls will pay for that debt to be paid down.And that means that the equity partners will take on 20%.And so if it's a $40 billion pipeline, that means $10 billion split four ways at the moment, our share would be $2 .5 billion.We think that we could probably make that money back pretty quickly, not only in the tolls that we would be paid from the dividends, but also in the additional production that we're going to get.

So two and a half billion dollars to unlock what could be a trillion dollars worth of GDP value.That seems like a pretty good tradeoff to us.And it may well be that as we go along, that more and more private sector partners have confidence in this project and maybe will approach us to see if they can take an equity stake.I think that going out of the gate, knowing how much work we had to do to restore investor confidence, I think that we made the decision as we were negotiating at the table for people to see that the federal provincial governments were going to walk step -by -step on this on a project on the same route that Trans Mountain already is very familiar with and knows, and we have their expertise, that was already enough of de -risking to bring in Pembina to start off with a 10 % partner.And so I'm really looking forward to seeing if they want to increase that stake or if others want to come forward.But we've got two major milestones.

We've got to see the Indigenous consultation done now so that October 1st, there could be some conditional approval.And then by September of next year, the final approval.that if we're ready, we can start building.That might turn from critic to skeptic to enthusiast, but I have a few more steps before we get there.

Well, as much as I will congratulate you on what you've accomplished so far, these timelines are still far too long for my liking.Is there still a possibility, though, of another Northwest pipeline?

We can continue conversations with the bands that are in the Prince Rupert area.There has been some really good successes.AltaGas, for instance, that sells natural gas liquids, things like propane.They sell a large amount of that to Japan.Japan gets about 15 percent of its propane from Canada via that route.They're doubling their pipeline right now.

And sorry, they're doubling their export facilities right now.And so we've seen that with CN, they are able to expand production and export on a number of different commodities.And they have had good relationships with the First Nations in that area.So as they get a little bit more familiar with us, maybe we can have that conversation.I don't know.I mean, what we had talked about was the possibility of a tanker ban cargo.

And I can tell you Prince Rupert, because we've gone and had a look at it, is one of the safest ports that you could possibly imagine being located right on the coast, deep water, very little navigation, straight shot to Asia.So the conversation is paused for now, but maybe not forever.But I think it's going to require the nations in that area to demonstrate that they're open to having the conversation.At the moment, we felt we could get to Asian markets two to three years faster by using the existing right -of -way in the southern route.So that's the decision that we jointly made.it doesn't mean that there isn't an opportunity for more at some future point.

Monday, you spoke with a very exuberant salesman.His name is Doug Ford, Premier of Ontario.You spend time with that man, you realize, yeah, he did spend a lot of time in sales in his career.He's selling what some would call a pipe dream, the idea that there would be a 3 ,300 kilometer pipeline from Hardesty, Alberta to Sarnia, Ontario, home of the original oil patch in Canada, by the way, Petrolia, Ontario.They don't really produce oil.anymore.

But let me ask you this, you know, Ontario is looking at, they're paying for a feasibility study.They're all in on this.They're happy to have partners like Alberta and Saskatchewan because you guys have the oil.Is this possible?Is it feasible?Are we dreaming in technicolor as people used to say?

Well, I think it's so encouraging that Doug Ford has taken the lead on that.We signed an MOU last year, and here we are a year later advancing it.And I think that's really positive.Part of it is it can go a couple of different ways.One is, yes, of course, we could go down to Sarnia, and that provides a backup and some certainty in the event Line 5 ever does get its permits pulled from the United States.Remember, that has been an active litigation for a long time.

It's that's the thing that is so worrisome about the polarized politics that we see in the U .S.is that we did have a pipeline permit pulled on Keystone XL, which cost us a lot of money.And so I always watch that with some nervousness and the impact it would have in Ontario and Quebec if those lines ever became disrupted.So there is a good reason for us to talk about being fully nationally secure in our energy strategy.The other part, though, is that if you're doing a bit of a spur line off to Churchill or to James Bay, then you could potentially, with icebreakers, take that oil out and over to Europe.

And Europe is telling us the same things that our Asian partners are, is that if you can get us some reliable oil and gas, we'd love to buy from you rather than anyone else.So is the opportunity as great as in Asia?I mean, I think we have to do a little bit more work on that one.But I think that they're suffering from the same instability as everyone else because of the war in Ukraine coupled by the disruption in the Strait of Hormuz.And if we can help, we want to.So a little bit early on on that one.

I'm really interested to see what the feasibility looks like, interested to see if a private sector partner would step forward as we start the conversation.But we're now at a point where the politicians are the ones that have to lead.It's not my preference, but when you think about what happened in the past, where a pipeline proponent would go out and they would face nothing but pushback at every level of government, every agency, and then in the end having spent billions of dollars not even get to a yes.So we have to reverse that.We have to say, you know what?politicians are here with you.

We're going to work with you.We're going to walk side by side on identifying a route, solving the local problems.And if we do that, then I think we're going to restore the investor confidence.But these are the kinds of major projects that I think we've demonstrated in this country can't proceed on their own without having a political buy -in at the front end.And I think that's what Doug was prepared to do.And I was glad to sign that agreement with him.

Okay, last question to you.If we get a pipeline from the west to the east, say to Thunder Bay or all the way to Sarnia, can you export any of that oil to Europe or elsewhere through the Great Lakes system in the St. Lawrence Seaway?

Well, we're looking at that.I gather that the Seaway Max is about the same size as a Panamax, but there is a lock that would have to take a smaller ship.I think you could only have about 80 ,000 barrels going through some of those smaller locks.So what you'd have to do is you'd have to lighter it out to a larger tanker and then go overseas.And do the economics work on that?I don't know, but I do have somebody investigating that because we are already taking a product once it gets to Montreal.

We are already using boats to take it up to Quebec City so that it can be refined into product for use in Quebec.Is it such a leap to think that they can continue on to Europe or that they can continue over to help serve our customers on the east coast so that they have another option as well?This may be about national security in a different way.And so all of those conversations are beginning and I'm glad for it.And thehave COFF coming up and PEI in a couple of weeks.

And so I'm sure that we're going to start scoping some of those out, maybe have a few more MOUs.

All right.Premier Smith, thanks so much for the time and congratulations on what appears to be a very good week.

Thanks, Brian.