Data Center Site Selection in Minnesota

Minnesota has long hosted enterprise and colocation data centers around the Twin Cities, but hyperscale interest is newer. Meta announced an $800 million campus in Rosemount on 280 acres of the University of Minnesota’s UMore Park, saying it would run on renewable energy and planning to open in 2026.⁹ Xcel Energy has also announced an agreement with Google to serve a new 750 MW data center in Pine Island, south of the Twin Cities.¹⁰¹¹ Developers such as Tract have pursued larger multi-building parks, most visibly in Farmington.⁸

Xcel says it has signed electric service agreements for about 2 GW of data center load, expects to reach 3 GW by year-end, and has set a goal of 6 GW of contracts by the end of 2027, with its high-probability pipeline above 20 GW across its territories. It expects much of that load to be energized in 2030 and the early 2030s.¹⁰ Those numbers matter for timing: a Minnesota campus signing today is generally planning for power at the end of the decade, not next year.

The draw is a cool climate that suits economization, large flat agricultural parcels near the metro, an ambitious transmission buildout and a regulated utility willing to build new supply for large customers. The trade-offs are state rules written specifically for data centers, an active public debate over water and rates, and growing local opposition. For how Minnesota fits within the broader footprint, see our guide to MISO data center site selection.

In June 2025, during a one-day special session, the Legislature passed HF 16, sponsored by Rep. Greg Davids, which became Chapter 12 of the 2025 First Special Session.¹ The act sets permitting, water appropriation and energy requirements for certain data centers, imposes an annual fee and changes their sales tax treatment.² Its central definition is the qualified large-scale data center: one or more buildings connected by fiber, totaling at least 25,000 square feet, with at least $250 million of construction, refurbishment, IT equipment and software investment by the facility and its tenants within a 60-month period beginning after June 30, 2025.²

The main provisions that affect site economics are:

• An annual fee based on the peak demand forecast the data center gives its utility, from $2 million to $5 million (see the figure below).¹
• Fee revenue goes to an energy and conservation account and may be used only for utility programs that benefit low-income households.¹
• The Public Utilities Commission may approve, modify or reject a utility’s tariff or energy supply agreement with a data center.²
• Electricity sold to a qualified large-scale data center is excluded from the retail sales used to calculate the solar energy standard, and the costs of meeting that standard may not be charged to the data center.²
• Workers constructing or refurbishing a qualified large-scale data center must be paid the prevailing wage.²

The fee is flat within each tier, so on a per-megawatt basis it is heaviest at the bottom of each band. A 260 MW forecast lands in the $3 million tier while a 250 MW forecast stays in the $2 million tier, which is worth checking when a project’s phasing is being set. Confirm current statutory language with counsel before modeling it.

Minnesota has offered a sales tax exemption for qualified data centers for years. The 2025 changes, made in the tax bill (Chapter 13) alongside the regulatory act, cut both ways.⁷³

For a large campus, losing the electricity exemption is a recurring operating cost that scales with load, while the equipment exemption is a capital benefit that scales with refresh cycles. Both belong in the operating model. Our sales tax exemptions by state guide compares Minnesota with neighbors, and our guide to tax incentives versus power costs explains why the power side usually dominates. A tax advisor should confirm how the rules apply to a specific project.

Water was one of the most debated parts of the 2025 law. For a project likely to consume more than 100 million gallons a year, the Department of Natural Resources may request information to help it assess the impact. When it issues a water permit for that scale of use, the DNR must ensure public health, safety and welfare are protected and that water conservation technologies are reasonably considered.⁷

For perspective, 100 million gallons a year averages about 274,000 gallons a day. A campus designed around closed-loop cooling or air-side economization may stay well below that; one relying on evaporative cooling at hyperscale may not. The practical effect is that cooling design and water source become part of the permitting conversation early.

Most suburban sites will take water from a city utility rather than drawing it directly, so the city’s own appropriation permit, well capacity and wastewater treatment headroom also matter. The League of Minnesota Cities has flagged the new water provisions for municipal staff, which is a signal that cities will ask.⁷ Our guides to municipal water and sewer capacity and closed-loop and waterless cooling cover the details.

Xcel Energy, operating as Northern States Power Co.–Minnesota, is the utility most large Minnesota campuses will deal with.¹⁰ On May 15, 2026, the Public Utilities Commission approved Xcel’s large load tariff with additional safeguards drawn largely from the Office of the Attorney General and the Citizens Utility Board.⁴

The Incremental Cost Test is meant to show that serving a large customer does not raise costs for others. The commission required Xcel to file clearer assumptions, supporting data and cost estimates when it applies the test.⁴ For a developer, the 15-year term and 80% exit charge are the terms that shape credit support and the decision to sign; our guide to large-load tariffs and electric service agreements explains how such terms usually work.

The Google agreement in Pine Island shows the model Xcel is pursuing. Google committed to procure 1,900 MW of new resources (1,400 MW of wind, 200 MW of solar and a 300 MW, 100-hour Form Energy iron-air battery) and to pay all costs of its service, including transmission and grid upgrades. The resources are expected online in 2028 and 2029, pending PUC approval.¹¹ Outside Xcel territory, cooperatives and municipal utilities set their own terms, so confirm the service territory first.

Minnesota is in MISO, and the state is central to MISO’s long-range plan. Utilities and ITC Midwest are developing the Upper Midwest’s first 765 kV backbone.¹² Two Minnesota pieces filed for certificates of need in 2026:

• PowerOn Midwest, which filed on February 3, 2026, would connect the Lakefield Junction, Pleasant Valley and North Rochester substations in Jackson, Mower and Olmsted counties with a 765 kV line, linking to eastern South Dakota and northwestern Iowa.⁵
• Gopher to Badger Link, filed by Dairyland Power Cooperative and Xcel Energy, would connect infrastructure near Pine Island to lines serving the broader region at 765 kV; the commission’s decision is expected in 2027.¹³

The pattern for site selection is clear: southeastern Minnesota between Rochester and the metro is becoming a transmission hub, which helps explain the Pine Island choice. But lines that are still in certificate-of-need review will not deliver power for years, so treat them as a 2030s advantage. For near-term power, the question is existing substation headroom at 115 kV and 345 kV. Our guide to transmission voltage for data centers explains what each level can carry.

Minnesota cities control zoning, and the contrast between two Dakota County projects is instructive. Rosemount’s Meta site sits on land in a university research park, with a single owner and a clear industrial path.⁹ Farmington’s approval of a final plat and planned unit development for Tract, up to 12 buildings and more than 2.5 million square feet on 340 acres, with a projected value approaching $5 billion at buildout, drew a resident lawsuit.⁸¹⁴

A judge rejected motions by the city and Tract to dismiss the residents’ case. In September 2026 the residents’ coalition withdrew its suit, citing litigation costs, but Castle Rock Township’s separate suit alleging a breach of an orderly annexation agreement continues.⁶ The lesson is less about any one project than about process: where land comes into a city through annexation, agreements with the township can become a second front. Our guides to community engagement and moratoriums and local restrictions cover how to screen for this.

1. 01Confirm the electric utility. In Xcel territory, test the project against the 15-year term, the 80% exit charge and the large customer class.⁴
2. 02Estimate peak demand by phase and map it to the annual fee tiers.¹
3. 03Size water use against the 100-million-gallon review threshold and confirm the city utility’s supply.⁷
4. 04Check distance to existing 345 kV substations and to the planned 765 kV corridors.⁵¹³
5. 05Review city zoning, any annexation agreements and pending litigation before signing an option.⁶
6. 06Model taxable electricity and the equipment exemption together.³

A desktop screen answers most of this before money goes hard. If you want an independent look at a parcel, you can get a site reviewed.