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The Amazon logo is seen at the company's logistics centre in Lauwin-Planque, northern France, in 2020. The tech giant announced in November, 2021, that it had broken ground on its second Canadian cloud-computing server hub, located in Calgary.Pascal Rossignol/Reuters

When Alberta Premier Jason Kenney stood at a lectern in Calgary’s Telus Convention Centre in November to announce that Amazon.com Inc. would soon build a new cluster of data centres in the region, he said he believed it was “the single largest investment in the tech sector in Alberta history, with up to a thousand jobs.”

Excitement had been building across Calgary for at least a year. One city official e-mailed colleagues to say she was “so happy” to be working on “this very significant investment opportunity for our city.” Mayor Jyoti Gondek was effusive the day of the announcement, calling the data centres a “significant investment” that “will be contributing to our economy and communities,” and that would create opportunities for Calgarians.

But as celebratory as the announcement was, the city expected Amazon to hire a maximum of just 240 workers for the data centres, according to a confidential slide deck prepared by Calgary officials in February, 2021. That’s a rounding error compared with the 39,500 people the company says it already employs in Canada. The rest of the near-thousand Mr. Kenney described were from an Amazon projection of the number of people the project would be “supporting,” including construction workers and employees at companies that supply Amazon.

The slide deck was prepared by Calgary Economic Development (CED) and obtained by The Globe and Mail through an access-to-information request. On Friday, CED called those numbers “preliminary.” Amazon Web Services (AWS) Canada, meanwhile, declined to say how many people the company would directly hire. Instead, it pointed to a November report that said 409 jobs would be “supported through direct effects.” That figure includes outside jobs, some of them temporary.

Calgary is not the only Canadian jurisdiction that has recently touted the arrival of data centres as an economic win. Dozens of the facilities have been established across Canada over the past decade, with governments – such as those in Quebec – sometimes offering tax credits and other incentives, burdening taxpayers in the name of economic development. But the extent of data centres’ true economic benefits for surrounding communities is increasingly being questioned around the world.

The centres, which generally house thousands of networked computers used for hosting websites, cloud services and other online infrastructure, are rarely hubs for innovation. They’re energy-hungry, water-intensive server farms that companies try to build in the cheapest jurisdictions possible.

In Calgary’s case, Amazon’s supposedly historic investment, which the company said would total about $4.3-billion, comes with many caveats. For one, the company said in its November report that number blends capital and operating expenditures until 2037, including routine utility bills. Some of the money won’t flow into Alberta at all, because the company plans to use it to import proprietary equipment. Other chunks of the investment will be spent on temporary construction costs, as opposed to continuing economic benefits.

Alberta Premier Jason Kenney, in announcing Amazon's new cluster of data centres in the province, said he believed it was 'the single largest investment in the tech sector in Alberta history.'JASON FRANSON/The Canadian Press

AWS, Amazon’s cloud-computing division, is one of the world’s most popular providers of cloud services and infrastructure. AWS Canada spokesperson Candi Jeronimo said in an e-mail that, when the company’s data centres are built, “benefits to the local tech sector are many.”

But experts say data centres aren’t job magnets. “The employment in these infrastructures is very, very low in comparison to the scale of the investment, and the scale of the energy that they use,” said Patrick Brodie, a postdoctoral fellow at McGill University whose research has closely examined the spinoff effects of data centres in Ireland and Quebec. On closer investigation, he said, companies’ promises are “quickly revealed as corporate spin for getting consent for the data centre to be built in the first place.”

Mél Hogan, the director of the University of Calgary’s Environmental Media Lab, who studies the societal consequences of cloud computing and data centres, said data-centre job pledges tend to be “such a small promise, for such a long period of time.”

In an e-mail, Mr. Kenney’s press secretary, Justin Brattinga, said Amazon’s announcement is “a vote of confidence in our province and our tech sector,” and that “we trust their investment and job numbers will match or exceed what they have stated.”

Stephen Ewart, CED’s director of communications, said in an e-mail that “the AWS Data Center is a significant investment for the broader tech sector in Calgary as we work to diversify our economy.”

Although it’s true that companies such as Amazon and Microsoft Corp. spend massive amounts of money building data centres, they also go to great lengths to reduce costs.

One of Dr. Brodie’s recent papers with a Sweden-based researcher examined the telecom company Ericsson AB’s 2013 announcement that it would build a $1.3-billion data centre in Vaudreuil-Dorion, outside Montreal. Quebec offered Ericsson as much as $30-million in incentives, and the city offered it a five-year, $2.7-million tax holiday. Hydro-Québec agreed to build a new direct connection to its power grid and grant Ericsson a discounted rate.

The facility shut down in 2017, less than a year after opening. Despite the original fanfare, Ericsson had decided it didn’t need the data-transmission capacity after all and would rather cut its costs.

Hydro-Québec spent much of the past decade aggressively trying to attract data centres to the province, where energy is largely renewable and relatively cheap. (There were 54 data centres in Quebec as of February.) But the utility now acknowledges that it has changed its strategy.

In a letter to the Journal de Montréal in January, the utility’s distribution and supply chief, Éric Filion, warned that “Quebec’s electricity must generate the best spinoffs,” and that major industrial projects must be prioritized based on factors including “collective wealth.”

Hydro-Québec spokesperson Maxence Huard-Lefebvre told The Globe that although the utility believes data centres create quality jobs, it anticipates much greater electricity demand in the next decade as society moves toward renewable energy. As such, he said, “Hydro-Québec is no longer taking steps to attract new data centres, but will remain dedicated to providing high-quality service to this customer base.”

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According to the CED slide deck, Amazon was shopping around for data centre jurisdictions last year, and Vancouver was in the running. But the company eventually settled on Calgary, where provincial corporate taxes are the lowest in Canada – a rate of 8 per cent in Alberta, versus 12 per cent in British Columbia.

This aligns with Amazon’s long-held reputation for aggressively minimizing its taxes and costs. The company has routinely sought tax credits, grants or breaks when it announces new facilities. It famously received offers for billions in tax reductions from jurisdictions that sought to host its second headquarters a few years ago.

This cost-reduction pattern appears to have played out in Quebec. In a January paper, an American policy analysis group called Good Jobs First, which tracks corporate subsidies, calculated that Amazon will receive subsidies there that will be worth $325.6-million over 20 years. “Quebec has been more aggressive in trying to attract firms than a lot of other jurisdictions,” said Kenneth Thomas, the report’s lead writer and the author of two books on government subsidies.

Mr. Huard-Lefebvre declined to confirm this figure, citing client confidentiality, but he said some Quebec data centres benefit not from an electrical subsidy, but rather from a regulated “economic development rate” on the electricity they consume. He challenged the Good Jobs First calculation, saying it “extremely overestimated” client savings, and he noted that the economic development rate is no longer available to new data-centre customers.

In 2017, Hydro-Québec published an economic-impact report by KPMG, which found that the nearly 40 data-centre facilities in the province at the end of 2016 accounted for about 40 megawatts of power demand. The ratio of “economic impact” a megawatt “appears to have increased over the last few years,” the report said. Each data centre employed between four and 30 workers a megawatt.

Ms. Jeronimo said AWS was eligible for the same long-standing incentives Quebec offers to all companies that invest “significantly” in Quebec, and that it also qualified for a tax-holiday incentive for its first data centre in the province. “No other incentives have been given to AWS by the Quebec government,” she said.

In Alberta, she said, “we did not apply for any tax incentives or receive any.” When asked if the company arranged any discounts with suppliers, such as for water, electricity or fibre-optic capacity, she said Amazon considers that information confidential.

Correspondence obtained through an access-to-information request says the effort to encourage Amazon to build data centres in Calgary did not include any incentives from the Opportunity Calgary Investment Fund, the city’s key vehicle for encouraging companies to put down roots there.

Amazon approached the city with great secrecy. Many municipal officials referred to the company only as “Snowball” in their discussions with each other and Amazon. In correspondence, one municipal official said during the investment-luring process that “we have been advised that the fewer the people who are aware the better.”

The CED slide deck reveals much more about Amazon’s intentions for the Calgary region. It says locals did considerable work between September, 2020, and February, 2021, to help Amazon understand Alberta’s power market. Meanwhile, the deck says, Amazon was planning for three sites, each containing 50,000-square-foot buildings, one of which it hoped to build in southeast Calgary. The city provided the location’s water-capacity figures to Amazon at least a year ago. (Water is required to cool the multitudes of servers in data centres, and can create significant upfront and continuing expenses.)

It is still not clear how much capital investment Amazon will make in order to build the data centres, but the slide deck says each one will be worth a maximum of $800-million, excluding construction costs.

At least one of the data-centre facilities is expected to be located in Rocky View County, a municipal district that surrounds much of Calgary. Inside the county is the hamlet of Balzac, which already hosts a 600,000-square-foot distribution building for Amazon’s e-commerce business, with an estimated 750 staff members. In 2020, the company announced that it would build a 300,000-square-foot sorting centre there, too, with hundreds of positions.

An e-commerce facility employs several times the number of staff the deck says Amazon plans to hire for its local data centres. But the data-centre work, which involves overseeing and maintaining sensitive servers, is expected to be more skilled. For its future facilities, Amazon is currently hiring mechanical engineering specialists and cloud technical account managers, each of whom will need to have at least three years of engineering experience.

Amazon said in the November announcement that it would partner with Calgary’s Mount Royal University to establish a 12-week training program for entry-level jobs in cloud computing. But AWS said the program “focuses on unemployed or underemployed individuals looking to make a career change and gain cloud computing skills” and is not designed specifically to train people to work at its own data centres.

The 2017 KPMG report for Hydro-Québec found that data-centre employees made salaries 38 per cent higher than Quebec’s average, but that data-centre jobs paid 3.5 per cent less than the average Quebec IT position.

Setting up shop in Alberta could also let Amazon tap into energy of its own creation. The company announced an 80-megawatt solar energy project in Newell County last April that it says will produce more than 195,000 megawatt-hours of renewable energy. It also plans to build a 375-megawatt solar farm in Alberta that it says will come online sometime this year and bring its total production potential to more than a million megawatt-hours – “enough to power more than 100,000 Canadian homes for a year.”

The data centres have excited many local officials. In Rocky View County, one municipal official e-mailed the company after the November announcement to say that, if Amazon builds a new facility there, “we can make sure the red-carpet stays rolled out for the host of consultation … and contractors that will be in need of our permitting services.”

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