DFL-backed bill takes a harder line on Minnesota’s data center boom

An influential DFL state legislator wants tougher laws on data centers to regulate their water use and require a 65% carbon-free energy supply as the first crop of projects moves into Minnesota to support cloud computing and artificial intelligence.

The bill introduced by Rep. Patty Acomb, DFL-Minnetonka, the top Democrat on the House Energy Committee, would also impose fees on data centers to pay for conservation, and require public disclosure of electricity consumption, water withdrawals and the source of construction metals.

“I just wanted to make sure that we were looking at it in a way that would be able to protect our resources, protect [utility] ratepayers and allow it to be a thriving industry here,” Acomb said in an interview.

The legislation comes as some in the DFL, as well as environmental organizations and liberal advocacy groups, have grown skeptical that data centers will benefit Minnesota and have pressured lawmakers to restrict their development.

Gov. Tim Walz has celebrated the arrival of new data centers, but his administration also praised the bill on Tuesday during its first hearing in a House energy committee.

The measure drew opposition from several electric utilities, business interests and the Data Center Coalition, a national industry trade group that represents major tech companies hoping to build in Minnesota. The data center companies argued that the regulations could stall development and expose their trade secrets to competitors.

Until now, the Minnesota Legislature has mainly debated how to encourage the industry’s growth. Two bills to do so have some bipartisan support: sweetening lucrative sales tax breaks and paring back state oversight of backup diesel generators.

Many Republicans and some Democrats at the Legislature — as well as trade unions — want to entice data center companies into Minnesota as the industry and its supporters promise construction jobs, local tax revenue and lower household electric bills.

It’s not clear if either faction can act alone in the narrowly divided House and Senate, meaning lawmakers may need to compromise to get anything to Walz’s desk.

There are at least 11 large-scale data centers proposed in Minnesota, clustered in the southern Twin Cities metro area and near Xcel Energy’s coal plant in Becker.

Only one is under construction: Facebook parent company Meta’s data center in Rosemount.

Each data center would require enough energy that, taken together, could equal or surpass the electricity use of every household in Minnesota. That has sparked debate over whether utilities will burn more fossil fuels to meet the rising demand even as utilities must comply with the state’s carbon-free standard by 2040.

Sydnie Lieb, an assistant commissioner in Walz’s Department of Commerce, told lawmakers Tuesday that “data centers could significantly derail the state’s monumental progress toward achieving this mandate.”

The industry says it has clean energy goals and will foster the construction of new carbon-free power.

The data centers would also be large water users, though not at the same magnitude as their electricity needs.

Acomb’s bill would require the Department of Natural Resources to ensure that water use the agency permits for data centers is in the public interest and that technology to promote conservation and efficiency are “fully considered.”

The legislation would require an environmental impact statement, which is a lengthy study of the environmental effects of a project, for large-scale data centers and impose a $2 million to $4 million yearly fee on those companies to pay for energy conservation programs for low-income people.

Acomb’s bill would also require data center operators to secure carbon-free energy equal to at least 65% of their energy use. She amended the bill to eliminate a provision to require totally carbon-free energy after 2030.

After a data center is built, the operator would have to report to the state each year about its electricity and water use, what efforts the company took to reduce its energy consumption, the national origin of metals used in construction and the percentage of those metals that were recycled.

Other provisions in the legislation aim at ensuring data center companies bear the costs of joining the grid and are a net benefit for other customers.

Minnesota’s utilities like, Xcel Energy, as well as the data center industry, have argued these major electric customers will reduce prices for everyone by spreading out the fixed costs of running an electric system.

In some parts of the country, bills have reportedly increased because of data centers.

The Minnesota Public Utilities Commission last month ordered Xcel to come up with electric rates for data centers that will ensure new costs fall on the developers, that Xcel will adhere to state clean energy targets and that utility customers will be protected if Xcel builds new power plants to serve data centers that never materialize.

Acomb said she wants to make sure data centers actually are a benefit and that customers are “not left holding the bag.”

On Tuesday, the electric utilities Great River Energy, Dakota Electric Association and Minnesota Power objected to parts of Acomb’s bill, saying the new carbon-free regulations would be difficult to implement or costly and are unnecessary since the state already has a law targeting a clean grid. Xcel did not comment.

The Minnesota Chamber of Commerce opposed the bill, and so did the Data Center Coalition.

Dan Diorio, senior director of state policy for the coalition, testified that the bill would “introduce significant market friction and potentially create unworkable barriers to further data center development.”

Diorio criticized the public disclosure of data center energy and water use, saying competitors can learn trade secrets. He also said the water and energy data could be used to “make facilities targets for bad actors and foreign adversaries looking to disrupt essential infrastructure.”

Amazon and Meta, which are both developing projects in Minnesota, declined to comment individually.

Amazon has pushed the Legislature to limit the environmental review of backup diesel power after the PUC ruled the company must prove it needs a fleet of 250 generators at its data center site in Becker.

The Data Center Coalition has also pressured lawmakers to extend sales tax breaks for the industry and turn a refund on buying equipment like servers into an up-front exemption.

Before Acomb’s bill was introduced, a host of environmental groups and liberal advocacy organizations arranged news conferences and testified at hearings to protest the tax breaks and diesel generator bill, and to pressure DFL allies to be tougher in regulating data centers and block the tax bill.