Data centers are all over the news, and all over the country. Minnesota already has at least 25 data centers and more are being proposed all the time. The new iterations of these warehouses are huge, typically containing at least 5,000 servers, occupying more than 10,000 square feet, and drawing more than 100 megawatts of power 24/7. That’s about enough to power 65,000 homes. The enormous size and number of proposals is causing concern at the State Capitol.

During the spring 2025 special session, the Minnesota Legislature tried to protect human and ecological communities from the most threatening aspects of data centers with a bill designed to:

The bill doesn’t include setback requirements, height limits or other protections for people living near large data centers, such as one proposed to be built on a former golf course in Farmington.

And it doesn’t stop cities from signing non-disclosure agreements with developers, with the result that citizens find it extremely difficult to figure out what is happening in their own communities.

Many experts say those protections fall short, merely restating the status quo in some respects, and they are hoping the legislature will take up the matter again during the next session.

Non-disclosure agreements

Cities around Minnesota and the rest of the country are signing non-disclosure agreements with hyperscale data center developers. The cities of Farmington, in Dakota County, and Hermantown, outside Duluth, have signed NDAs for projects that residents fear may be data centers. Officials in both cities currently are stonewalling citizens who want to know what is being planned for their neighborhoods.

It’s not unusual for developers to ask for secrecy in the early stages of planning, but by the time they’re undergoing environmental review, full information is needed.

The wrong kind of review?

Cities are handling most of these new data centers under a form of environmental review that was never designed for this type of development. It’s called Alternative Urban Area-wide Review (AUAR) and it is designed to cover suburban development including roads, schools, and other public services. Guidance for proposers makes clear the kind of projects it’s designed to study. For example, “Only domestic wastewater should be considered in an AUAR—industrial wastewater would be coming from industrial uses that are excluded from review through an AUAR process…” The reality is that data centers, with their small staffs, would generate very little domestic wastewater but plenty of industrial wastewater because of their insatiable need to cool computers.

“We’re aware of AUARs and we’re becoming increasingly concerned they’re being misused in this case as way to avoid public disclosure,” says Aaron Klemz, Chief Strategy Officer at the Minnesota Center for Environmental Advocacy (MCEA).  Klemz says that’s the opposite of what environmental review is supposed to do, “which is provide the public with a chance to weigh in on a proposal early on and make it better.”

Klemz says an AUAR review offers developers a special advantage.

“Once you complete an AUAR, you can say anything inside its boundaries are covered and doesn’t need more study,” he says.  “At the same time, many of these AUARs are deliberately obfuscating, hiding the ball, saying the plan is for an office park or a technology park.”

The Hermantown facility is described in its AUAR scoping document as multiple buildings totaling nearly two million square feet. The description of the project is so vague that the Minnesota DNR objects that citizens would have trouble offering any comments because it’s unclear what the proposal is. The DNR and other commenters say the perils posed by the project—including direct threats to the stability of the electricity grid and water sources—should be analyzed not by the city but by a state or regional body such as the DNR or the Environmental Quality Board.

“Please provide more details about the types of light industrial uses planned for the development,” the DNR comments. “For instance, data centers have different environmental impacts, and may require additional environmental review, as compared to manufacturing or warehouse facilities.”

“…data centers have different environmental impacts, and may require additional environmental review…”

In Farmington, citizens formed a group which is suing the city for more information. Nancy Aarestad of the Coalition for Responsible Data Center Development told Public Record Media that the non-disclosure agreement between the city and the developer puts concerned citizens at a disadvantage. “The city had been working with Tract (a data center developer) for months prior to any of us knowing the enormous scope of this project.  They had all the pieces of the puzzle in place long before we even heard a word of it, putting the city staff, officials and Tract at a huge advantage, [and] creating an instant power imbalance. There is a huge learning curve regarding these hyper-scale data centers, and we were at an instant disadvantage,” she said.

Next time around

A coalition of environmental groups worked together last session, and they’re still strategizing about what to try for next year. “We did have some very serious conversations with members to very end of the special session,” says Aaron Klemz of MCEA. “The industry would like certainty, which is understandable. They want to know what they have to do to move forward.”  MCEA filed lawsuits against Lakeville and North Mankato, saying the two cities conducted inadequate environmental reviews of proposed data centers and Klemz hopes that litigation will provide a signal to the industry and its friends in city governments. “Maybe they’re starting to realize that the incomplete and inadequate environmental reviews they’ve doing aren’t going to stand up,” he says.

Klemz says the coalition will push during the coming session for better environmental reviews and more stringent protections for water. Another idea under discussion is to ask the state to conduct a Generic Environmental Impact Statement about data centers collectively. “That could do a good job of sussing out the issues in a general sense, and it could save time and effort for everybody else down the line,” says Klemz. “The problem is, it costs money.”

Data centers can help the grid

Utilities’ typical response to increased demand is to build new power plants. Their profits depend on investing in infrastructure. Many utilities around the country are responding to the huge potential new demand by asking state regulators for permission to build new coal or gas-fired generators. That reaction puts the brakes on the nation’s movement toward cleaner energy.

There are other options. Data centers can invest in modest amounts of clean generation like wind or solar, paired with batteries, that could be deployed during the relatively short periods when grid demand is highest. Having that resource in hand could even help them get onto the grid more quickly.

It’s a form of the demand-response approach that is already widely in use for residential, commercial and some manufacturing consumers. Creating this kind of flexibility can happen much more quickly than building new power plants. And it aligns with the stated goals of big tech companies to use clean energy.

It remains to be seen if regulators and utilities can be nimble enough to make these alternatives work.

Meanwhile, in true capitalist fashion, the markets may be poised to bring all this activity to a screeching halt. Analysts are starting to warn that the AI phenomenon may be a bubble like the dot-com bubble, with too much money chasing unproven business models and projects that may not deliver results soon enough to keep the money flowing. This is especially true for firms like Tract, which don’t have clients lined up for many of their projects but are building them on spec.