Google pulls out of deal to build $600M data center in Becker

Google has backed out of plans to build a $600 million data center in Becker, a blow to the city as well as Sherburne County and Xcel Energy.

The data center, announced in January 2019, was heralded as one of the largest construction projects in recent state history and as a regional economic balm. Google also would have become one of Xcel's five largest customers.

But Google's affiliate, Honeycrisp Power, did not provide Xcel with a notice to proceed with the project by a recent deadline, Xcel said in a filing with Minnesota utility regulators. So, Minneapolis-based Xcel terminated its electric service agreements with Google on Dec. 8.

"We're disappointed that the project is not moving forward at this time," Xcel said in a statement. "But we continue to work with companies interested in the sites and remain committed to partnering with the City of Becker to grow jobs and capital investment in central Minnesota."

When asked by the Star Tribune, Google didn't give a reason for pulling out of the project. "While this project isn't progressing right now, that doesn't rule out engagement on projects in the future," the company said in a statement.

While the data center would have employed only 50 people permanently, it was expected to create up to 2,000 construction jobs. The project was also expected to cushion the blow of the closure of Xcel's three big coal generators in Becker between 2023 and 2030.

Xcel had planned to sell Google about 300 acres to host the new data center, which would host thousands of computer servers — the guts of Google's vast internet presence. The company, based in northern California's Silicon Valley, has several data centers throughout the country.

In early 2019, the cost of Google's Becker data center was estimated at $600 million, but that price tag would likely be higher now due to inflation.

With very little public information disclosed about the Google project, a Minnesota Public Utilities Commission member put Xcel on the spot at a February PUC meeting. Commissioner Joe Sullivan asked the company if it had "great concern" that the project wasn't moving forward.

"I can't say there isn't concern," responded Matt Harris, Xcel's lead assistant general counsel. "I think we are still hopeful," adding that the COVID pandemic had affected the project's timeline.

Still, Google, Xcel executives and Becker and Sherburne County officials continued to meet via Zoom to discuss the project this year, including as recently as this fall.

"We were surprised," Becker City Administrator Greg Lerud said of Google's decision to halt the project. "We expected it to be moving forward. ... Obviously, we are disappointed."

Sherburne County and the city of Becker have both bestowed tax breaks on the project.

The Minnesota Legislature ponied up $20.5 million for infrastructure improvements to a Becker industrial park that would host the data center. Most of the work involves extending water and sewer mains, with construction occurring primarily in 2022 and 2023.

Lerud said the industrial park improvements are still needed; Xcel is marketing several land parcels in the area.

In a September PUC filing, Xcel disclosed a second large data center planned for Becker. It would entail an investment of $500 million to $1 billion and would create 100 full-time jobs and more than 1,200 construction jobs, Xcel told the Star Tribune.

The company behind the second data center, Elk River Technologies, would buy 348 acres of Xcel land in Becker. Very little public information exists about Elk River Technologies, which appears to be a development vehicle for a larger company.

Last month, Xcel said in a PUC filing that another mystery company — Amber Kestral — planned a data center costing at least $700 million. Amber Kestral is affiliated with a Fortune 100 company that "wishes to remain unnamed at this time," Xcel said in the filing.

That project, which would be located somewhere in the Twin Cities, would create 1,000 construction jobs and at least 50 full-time jobs, PUC filings say.

Data centers are prize customers for utilities because they use enormous amounts of power.