Artificial intelligence data center developer Crusoe has entered into a multi-year framework agreement with natural gas-fired power provider Kalina Distributed Power (KDP) to develop multiple colocated AI data centers powered by natural gas power plants in Alberta, Canada.

Crusoe will develop, own, and operate the data centers and purchase power from three KDP-owned 170MW gas-fired power plants through Power Purchase Agreements (PPA) with a minimum term of 15 years. The companies say this will provide KDP with stable, long-term cash flow to support the project's financing.

Each potential colocated project will be developed under a separate Project Development Agreement (PDA) between the two parties. Each PDA will feature a projected long-term tolling PPA and outline Crusoe's responsibility for financing specific electrical and gas supply interconnection security payments for each project.

Kalina managing director Ross MacLachlan commented on the agreement, stating: “Our team has worked closely with Crusoe to develop a commercial path forward to keep pace with AI data center market demand while capitalizing on the unique characteristics of the Alberta market to deliver reliable, affordable natural gas-fired power configured with CO2 capture and sequestration.”

The three project locations identified are KDP’s 65-acre Myers Energy Park, 160-acre Alsike Energy Park, and the newly secured 320-acre Crossfield Energy Park. In November, the firm announced it was in negotiations to acquire up to 290 acres of additional land at the Myers Energy Center. According to KDP, the extra land will permit the construction of a much larger data center.

KDP claims that all potential sites selected have access to critical infrastructure, including electricity transmission, gas pipelines, and fiber optic cables. In addition, KDP has said that all three plants will incorporate carbon capture and sequestration technology.

Environmental desktop and biophysical studies have already been conducted at the Myers and Alsike locations and are expected to be completed at the Crossfield location in 2025. KDP has also filed self-supply and export system access service requests with the Alberta Electric System Operator at all three sites.

“Our focus now is to establish project development agreements for each site with an initial focus on the Myers, Alsike, and Crossfield projects,” said MacLachlan.

KDP is also exploring the potential of other sites, including the Gilby Power Park and a new location in the Clairmont area. The company said these sites are more suitable for virtual PPAs or natural gas tolling arrangements than colocated power generation.

Each plant represents gross unlevered capex of CAD$1 billion ($699.78m), or approximately CAD$640m ($447.94m) net of cash rebate incentives.

Details concerning the size and construction timeline of the data centers were not disclosed. In addition, KDP has not provided a timeline for when the natural gas power plants will become operational. DCD has reached out to both parties for clarification.

KDP is the wholly owned Canadian subsidiary of Kalina Power Limited, a power producer with operations across Australia, China, Canada, and the US.

Crusoe is a relative newcomer to the AI data center business after its pivot from cryptocurrency mining. Crusoe’s move to more permanent hosting locations began at the end of 2023 when the company announced a deal to locate a number of GPUs in atNorth's ICE02 data center in Iceland. The company has also partnered with Digital Realty.

In October last year, Crusoe entered into a $3.4bn joint venture with asset manager Blue Owl Capital to build a huge data center in Abilene, Texas. The site is now planned to be the initial site of Oracle and OpenAI's Stargate.

Alberta is increasingly becoming a hotbed for AI data centers seeking available and affordable gas power. The province produces more than half of the country’s natural gas, reaching 11.2 billion cubic feet per day in 2023, the highest level since 2010.

As a result, several data center operators have signed agreements to acquire natural gas supply to power their operations. Last month, Pine Cliff Energy announced a 25-year supply agreement with an undisclosed private data center to supply it with behind-the-meter power.

Before this, Gryphon Digital Mining agreed to purchase an 850-acre industrial site in southern Alberta with access to a natural gas supply from Captus Energy. The company plans to develop an on-site AI data center powered by natural gas. The site's initial generation capacity is 100MW, which the company claims can be scaled to 4GW.

In addition, in November, power generator TransAlta reported it was in talks with major data center operators interested in building sites in Alberta, Canada.

However, concerns about grid reliability have led Alberta Premier Danielle Smith to legislate that data centers must "bring their own electricity, bring their own generation, and partner with a generating company" if they wish to set up shop in Alberta.

As a result, data center operators are targeting off-grid agreements with natural gas companies as a faster and more reliable route to market.