A Case Study in Data Center Development: Minnesota’s Cross-Roads Moment
Sadie Henderson
Last November, S&P Global wrote that “[d]ata centers and related high-tech investment activities have already become a key driver of US [GDP] growth.”[1] The growth in data center investment is inherently intertwined with the rise of artificial intelligence (“AI”). Technology companies are building data centers as quickly as they can to scale their businesses’ AI capabilities. Since November of 2022, “the capital expenditures of Amazon, Microsoft, Meta, and Google have exceeded $600 billion” in scaling their AI efforts, and “much of that spending has gone toward data centers.”[2] Such speed and scale, though, create significant concerns regarding the resources required to operate these facilities and the impact on the communities where these data centers will be located.
In 2024, data centers in the U.S. consumed 183 terawatt-hours (TWh) of energy, accounting for ~4% of U.S. energy consumption.[3] By 2030, data centers are projected to consume 426 TWh annually, a growth of 133% compared to 2024 energy consumption by data centers.[4] This rate is significant not only because it requires increased energy infrastructure development, but also because data centers are not equally distributed across the country. According to data from 2023, fifteen states accounted for 80% of the national energy load for data centers.[5] Virginia houses more data centers than any other state, and in 2023, data centers consumed ~26% of the state’s energy supply.[6] Data center developers cannot continue to concentrate data centers in these fifteen states, given the strain of current data center energy loads on these states’ energy grids.[7]
Today, data center developers aim to diversify where projects are being built.[8] Energy, land, and water costs necessitate development in states beyond the fifteen that have historically housed the vast majority of data centers. However, each state has its own regulatory framework, and the ease of development of data centers is often dependent upon whether a given state has passed its own version of the National Environmental Protection Act (“NEPA”). NEPA “requires federal agencies to assess the environmental effects of their proposed actions prior to making decisions.”[9] State analogues have generally modeled their legislation after NEPA and impose similar requirements with modifications based on a state’s specific needs.
Minnesota is a likely candidate for data center development in the emerging secondary market due to its significant water resources, cooler climate, and reliable energy grid.[10] Minnesota’s analogue to NEPA is the Minnesota Environmental Policy Act (“MEPA”). MEPA requires the Minnesota Environmental Quality Board to determine which types of projects require environmental assessment worksheets (“EAW”), environmental impact statements (“EIS”), or no review at all.[11] MEPA requires an EAW “to determine whether an environmental impact statement is required for a proposed action.”[12]MEPA then requires an EIS “[w]here there is potential for significant environmental effects resulting from any major governmental action,” and further requires that any such “[governmental] action must be preceded by a detailed environmental impact statement prepared by the responsible governmental unit.”[13] However, an EIS is not the only form of review authorized by the statute. MEPA also authorizes an “alternative review” method.[14]
MEPA allows for alternative review when the Environmental Quality Board identifies “alternative forms of environmental review which will address the same issues and utilize similar procedures as an environmental impact statement in a more timely or more efficient manner.”[15] The Alternative Urban Areawide Review (“AUAR”) is one such alternative option. An AUAR provides environmental review for “anticipated residential, commercial, warehousing, and light industrial development and associated infrastructure in a particular geographic area.”[16] AUARs allow the responsible government units to conduct one single review process that will account for a range of scenarios, rather than conducting an EIS for each proposed project.[17] An AUAR effectively bundles multiple projects and could potentially create a layer of obfuscation, thereby limiting the public’s ability to ascertain what types of projects are being considered for development.
As of January 2026, Minnesota has thirteen operating data centers that have 43 megawatts (MW) of capacity and twelve planned projects that are public knowledge.[18] Those twelve projects would add at least 1,120 MW of capacity, representing an exponential increase in capacity compared to the current state of affairs.[19] These new projects are for hyperscale data centers. These hyperscale data centers are capable of more complex computations, but with that complexity comes an increased demand for both energy and water.
At least eight planned hyperscale data center projects in Minnesota have used an AUAR for the project’s environmental review process.[20] The Minnesota Center for Environmental Advocacy (“MCEA”) has filed lawsuits challenging four of those AUARs.[21] One of the projects that used an AUAR is Pine Island’s “Project Skyway.” In February of 2026, Google announced that it is partnering with Xcel Energy to develop the first phase of the data center project.[22] MCEA challenged Pine Island’s AUAR for “failing to describe even the basic components of the proposed data center, including the project’s size and scale.”[23] Additionally, MCEA pointed out that the AUAR “did not study how the spike in water usage could impact groundwater, local aquifers or nearby private wells.”[24]
Critically, MCEA also argues that Pine Island knew it was developing this data center for Google as early as January of 2024, meaning that the AUAR completed was not general, but rather for a specific project and company.[25] Google, on the other hand, has declared that the project is poised to “accelerate clean energy deployment” in Minnesota,[26] and the city of Pine Island asserts that the city did not know Google was officially committed to the project until after the AUAR was approved in September of 2025.[27] MCEA’s challenges to the other three AUARs raise similar concerns.[28]
MCEA’s litigation against the development of hyperscale data center projects using AUARs will set the standard of environmental review required for these projects in Minnesota moving forward. If the AUAR is found to satisfy MEPA’s requirements, then Minnesota could quickly become a hotspot for development. In the meantime, though, the question remains unanswered, and Pine Island’s “Project Skyway” is continuing to submit permitting applications and site plans despite the ongoing litigation.[29] While there is no clear prohibition against Project Skyway taking these steps, this lack of prohibition may be more of an oversight than an intentional aspect of the legislation and agency rules. These circumstances in Minnesota also beg the question of which other states might be similarly well-resourced and have alternative review processes baked into their state version of NEPA that might allow for a broader, vaguer review process that can expedite data center development.[30] Developers racing to get these data center projects off the ground are arguably incentivized to find quirks in the law, like AUARs and the lack of prohibition on pursuing permits and approvals while litigation plays out.
Additionally, litigation alone may not settle this question for Minnesota. State legislation is currently being proposed to both ban non-disclosure agreements between city officials and data center developers[31] and institute a moratorium on data center development so the Legislature can develop new laws to address the impact of data centers.[32] In fact, the city of Eagan, which sits just outside the Twin Cities, has already instituted a one-year moratorium on the development of hyperscale data centers while it drafts responsive legislation.[33]
Minnesota is poised to serve as an example to other states. If the litigation plays out in favor of the hyperscale data center developers, Minnesota might emerge as a leader of the secondary data center market. On the other hand, if the litigation goes against the hyperscale data centers, or if data center-focused legislation gains steam, Minnesota could stand as an example of how to successfully curb expedited development in the face of mounting pressure from developers and big tech companies alike. Minnesota stands at a crossroads familiar to many other states that also find themselves in the midst of this ongoing artificial intelligence boom.
[1] Satyam Panday & Paul Guenwald, Look Forward: Data Center Investments Are Increasingly Moving The Macro Needle, S&P Global (Nov. 4, 2025), (emphasis added), https://www.spglobal.com/en/research-insights/special-reports/look-forward/data-center-frontiers/data-center-investment-moves-macro-needle.
[2] Matteo Wong, Inside the Dirty, Dystopian World of AI Data Centers, The Atlantic (Mar. 13, 2026), https://www.theatlantic.com/magazine/2026/04/ai-data-centers-energy-demands/686064/.
[3] Rebecca Leppert, What We Know About Energy Use At U.S. Data Centers Amid the AI Boom, Pew Research Center (Oct. 24, 2025), https://www.pewresearch.org/short-reads/2025/10/24/what-we-know-about-energy-use-at-us-data-centers-amid-the-ai-boom/.
[4] Id.
[5] EPRI, Powering Intelligence: Analyzing Artificial Intelligence and Data Center Energy Consumption 5 (2024), https://www.epri.com/research/products/3002028905.
[6] Id. at 13.
[7] U.S. Data Centers Strain Local Electricity Supplies, JKempEnergy.com (Apr. 9, 2025), https://jkempenergy.com/2025/04/09/u-s-data-centres-strain-local-electricity-supplies/.
[8] Alex Fitzpatrick, America’s Data Center Growth Hot Spots, Mapped, Axios Business, (Dec. 18, 2025), https://www.axios.com/2025/12/18/data-center-growth-map-states. States like Virginia and Texas, both of which already house a significant portion of the nation’s data centers, are the location of a large portion of proposed data centers. However, states such as Georgia and Pennsylvania account for a sizable portion of proposed projects, 284 and 185 projects respectively.
[9] What is the National Environmental Protection Act?, U.S. Env’t Prot. Agency, https://www.epa.gov/nepa/what-national-environmental-policy-act, (last visited March 28, 2026).
[10] Matt Vincent, 8 Trends That Will Shape the Data Center Industry In 2025, Data Center Frontier (Jan. 6, 2025), https://www.datacenterfrontier.com/cloud/article/55253151/8-trends-that-will-shape-the-data-center-industry-in-2025.
[11] Minn. Stat. § 116D.04, subd. 2a(b) (“The board must by rule establish categories of actions for which environmental impact statements and for which environmental assessment worksheets must be prepared as well as categories of actions for which no environmental review is required under this section.”).
[12] Minn. Stat. § 116D.04, subd. 1a(c).
[13] Minn. Stat. § 116D.04, subd. 2a(a).
[14] Minn. Stat. § 116D.04, subd. 4a.
[15] Id.
[16] Minn. R. 4410.3610 Subp. 1.
[17] Minn. R. 4410.3610 Subp. 3.
[18] Isak Kvam, What’s up with data centers in Minnesota? 1 (2026), https://fresh-energy.org/wp-content/uploads/2026/02/Data-Centers-White-Paper-021226-Final.pdf.
[19] Id. The figure of 1,120 MW only accounts for the projects that have publicized data regarding the capacity of each project. For example, two large projects in Hermantown and Pine Island have yet to publicize the capacity of those respective projects.
[20] Minnesota Data Center Watch, https://speakingtrumpetskier-prog.github.io/mn-data-center-tracker/ (April 2, 2026). Based on the sources provided in this tracker, eight AUARs clearly related to data center development. There are additional AUARs that hint at potentially being for data center developments, but there is no public confirmation whether those AUARs are for specific data center projects.
[21] Press Release, Minnesota Center for Environmental Advocacy, Pine Island Data Center Environmental Study Appealed (Oct. 17, 2025), https://www.mncenter.org/press-release-pine-island-data-center-environmental-study-appealed.
[22] Briana Kober, Google Is Coming To Minnesota And Advancing Clean Energy Goals, (Feb. 24, 2026), https://blog.google/innovation-and-ai/infrastructure-and-cloud/global-network/data-center-pine-island/.
[23] Supra, note 21.
[24] Supra, note 21.
[25] Brian Todd, Flurry Of Filings Come As Court Dates Draw Near For Pine Island Data Center, yahoonews!, https://www.yahoo.com/news/articles/flurry-filings-come-court-dates-172100601.html?guccounter=1 (March 28, 2026 at 1:21 PM EDT).
[26] Supra, note 22.
[27] Supra, note 25.
[28] Supra, note 20.
[29] City Hall: Project Skyway: Submitted Applications and Materials, Pine Island Minnesota, https://pineislandmn.gov/skyway (last visited April 2, 2026). (Final plat application was submitted in December of 2025 despite MCEA’s active lawsuit against the project).
[30] Both New York and Washington have state versions of NEPA, SEPA and SEQRA respectively. New York’s SEQRA has a “Generic EIS” review process that can be used for “broader and more general” review processes that can be based on “conceptual information.” N.Y. Comp. Codes R. & Regs. tit. 6, § 617.10. Washington’s SEPA has a “planned action” option for review that might allow for a more flexible review process depending on the manner of the interpretation of the associated requirements for a “planned action.” Wash. Rev. Code Ann. § 43.21C.440 (West).
[31] Kilat Fitzgerald, Minnesota Data Centers: Bill Proposes Ban On Officials Entering Nondisclosure Agreements, Fox9 KMSP, (March 12, 2026, at 2:49 CDT), https://www.fox9.com/news/minnesota-data-centers-bill-ban-nondisclosure-agreements-march-12.
[32] Kirsti Marohn, Controversy Over Data Centers In Minnesota Leads To Calls For Statewide Moratorium, New Regulations, MPRNews: Politics and Governments News, (February 20, 2026, at 4:00am CDT), https://www.mprnews.org/story/2026/02/20/data-center-opponents-call-for-statewide-moratorium-new-regulations.
[33] Id.