SF4681

Purpose

• Modify how data centers undergo the water-usage review process, and extend exemptions for certain data centers related to fees, taxes, and how their electricity use affects solar energy standards.

Key definitions relevant to the bill

• Data center: as defined in state law (data processing/hosting facilities for large-scale computing).
• Net increase in consumptive use: the projected rise in annual water consumption from the data center after subtracting documented reductions from other users that occurred or are planned to occur nearby.
• Qualified large-scale data center: a specific category defined in another section of statute (with certain eligibility criteria and deadlines).

Main Provisions

• Expanded preapplication evaluation for large water-using data centers

  • Applies to data centers with a net increase in consumptive water use exceeding 100 million gallons per year that will require a permit amendment or a new permit.
  • The Department may request preapplication information, including:
  • Project description
  • Estimated water use rates/volumes for maximum day, maximum month, and average year
  • Anticipated water source
  • Water quality or temperature requirements
  • The Department may request additional information as needed to assess the ability of the water source to meet needs.
  • The Department (or relevant commissioner) will evaluate the information and respond in writing with potential water-availability constraints at each proposed site.
  • The commissioner may consult with other state agencies (e.g., health, agriculture, Pollution Control Agency) when assessing impacts on water quality and quantity.

• Data, confidentiality, and process safeguards

  • Communications and information exchanged under this preapplication process are considered nonpublic data.
  • Engaging in this preapplication process does not replace or affect other requirements such as environmental reviews or permit decisions.

• Definition and scope of the review

  • The net increase in consumptive use is measured after subtracting documented reductions by other entities that occurred within a specified prior period or that are planned to occur within a future period.
  • The preapplication evaluation does not apply to all data centers—there is an explicit exemption for certain centers.

• Exemption for certain data centers (preapplication process)

  • Qualified large-scale data centers meeting the conditions in the law are exempt from the preapplication evaluation requirements if:
  • They filed a permit-related application by January 1, 2025, with the relevant local authority (county, town, or municipality) to authorize construction, or
  • They are located in an eligible community as defined by existing statute.

• Additional statutory exemptions and adjustments (effect on costs and energy programs)

  • Data centers may be exempt from paying certain fees that otherwise apply under state law.
  • Data centers may be exempt from paying sales tax on electricity purchases.
  • Data centers may be exempt from counting their electricity purchases when calculating a utility’s solar energy standard.
  • These changes involve amendments to several statutes (specific sections listed in the bill).

Significant Changes to Existing Law

• Adds a threshold-based preapplication evaluation for large data centers with substantial anticipated water use increases.
• Creates nonpublic communications in the preapplication process to protect sensitive information.
• Allows interagency coordination to assess environmental and public-health impacts without delaying other regulatory processes.
• Introduces exemptions for qualified large-scale data centers from both:
  • Certain regulatory fees and sales taxes, and
  • Inclusion of their electricity use in calculating a utility’s solar energy standard.
• Sets criteria for when the preapplication requirement does not apply (the exemption for qualified large-scale data centers with specific filing or location conditions).
• Updates several Minnesota Statutes to implement these changes (amending sections related to water appropriations, data center definitions, solar energy standards, and related fees/taxes).

Implementation Notes and Context

• The preapplication process is advisory and informational, aimed at identifying water availability constraints before proceeding with formal permitting.
• The exemptions are designed to reduce regulatory and tax burdens for certain large-scale data centers, potentially affecting state revenue and energy policy measures (notably solar energy standards).

Relevant Terms - data center - net increase in consumptive use - consumptive water use - preapplication evaluation - water source - water use rates (maximum day, maximum month, average year) - water quality requirements - temperature requirements - permit amendment - new permit - nonpublic data - Health (agency), Agriculture (agency), Pollution Control Agency - eligible community - qualified large-scale data center - 297A.68 subdivision 42 - 116J.55 subdivision 1 - solar energy standard - electricity sales - sales tax on electricity purchases - fees exemptions - Minnesota Statutes (as amended)