SF5100

Purpose

• Change how data centers are evaluated for water use.
• Create exemptions for some data centers from certain fees and from paying sales tax on electricity.
• Allow or require data centers to have energy generation redundancy.
• Make related updates to several Minnesota statutes.

Main Provisions at a Glance

• Preapplication evaluation for data centers with large water use:

  • Applies to data centers whose proposed net increase in consumptive water use is over 100,000,000 gallons per year and that need a new or amended permit.
  • The state department may request basic information about the project (description, estimated water use for peak and typical periods, expected water source, water quality/temperature).
  • The department can ask for more information as needed and must respond in writing with potential water availability constraints for each proposed site.
  • The department may consult other state agencies (health, agriculture, Pollution Control Agency) when assessing water impact.
  • Communications between the data center and government entities are considered nonpublic data.
  • These discussions or evaluations do not replace or bypass other required reviews or permits under state or federal law.
  • Net increase in consumptive use is defined as the estimated annual water use increase after subtracting documented reductions from other users of the same source that occurred in the past or will occur in the near future.
  • There is a grandfathering provision: a “qualified large-scale data center” that files an application by January 1, 2035 for a permit in an eligible community is not subject to this subsection.

• Exemptions for data centers (finances and electricity):

  • Some data centers may be exempt from paying certain fees.
  • Some data centers may be exempt from paying sales tax on electricity purchases.
  • Data centers may be treated differently when calculating a utility’s solar energy standard (some centers may be excluded from the calculation).

• Data center energy reliability:

  • The bill provides for energy generation redundancy for data centers, aiming to improve reliability of power supply.

• Definitions and scope:

  • Data center is defined according to an existing Minnesota statute (as data centers are currently defined in law).
  • The provision applies to data centers and references specific other statutes that set related rules.

Significant Changes to Existing Law

• Adds a formal preapplication evaluation step for water use by data centers with large anticipated consumptive use.
• Creates and clarifies when communications about water supply are confidential/nonpublic.
• Allows exemptions for certain data centers from fees and from sales tax on electricity.
• Alters how data centers are counted in calculating solar energy standards.
• Introduces or clarifies requirements for energy generation redundancy for data centers.
• Updates several statutes to incorporate these data-center-specific provisions.

Practical Effect and What It Means in Plain Terms

• For large data centers, state agencies will review potential water impacts before projects move forward, using a structured information request and written responses.
• Some data centers could pay no or reduced fees and avoid sales tax on electricity, depending on eligibility.
• Data centers may not count toward solar standard calculations in some cases, depending on the exemption rules.
• Data centers may need backup energy systems to ensure steady power.
• Data centers that file early and are in certain communities may avoid these new water-use review requirements.

Important Details to Note

• The definition of “net increase in consumptive use” relies on a lookback/look-ahead window for reductions by others using the same water source (the exact number of years in the definition is not specified in the excerpt).
• The preapplication evaluation is advisory and does not replace environmental reviews or other required permitting processes.
• The data sharing in this process is protected as nonpublic data.
• There are specific grandfathering provisions for large data centers that act by certain dates.

Effective Dates and Grandfathering

• Grandfathering for qualified large-scale data centers: those that file an application by January 1, 2035 for construction or approval in an eligible community may be exempt from certain new requirements.
• Many of the changes reference statutes that were amended or added in 2024 or 2025, with targeted sections noted in the bill.

Considerations for Stakeholders

• Data center developers: may face new upfront information requests and potential water-availability concerns; may qualify for exemptions from certain fees and electricity taxes.
• Local governments and communities: may see changes in how large data centers are approved, including eligibility criteria for exemptions.
• Environmental and public health agencies: may participate in interagency consultations to assess water supply implications.

Related Statutory Areas Affected

• Water use and preapplication processes (103G.265, 116D.04, 216B.02, 216I.02, 216I.07).
• Data center definitions and eligibility (data center criteria and large-scale exemptions).
• Energy standards and electricity-related provisions (solar energy standard calculations, sales tax on electricity, energy generation redundancy).
• Other miscellaneous amendments to Minnesota statutes listed in the bill.

Relevant Terms - data center - water appropriations - preapplication evaluation - consumptive use - net increase in consumptive use - maximum day/month/year water use - water source - water quality - temperature - nonpublic data - environment review - permit amendment - new permit - qualified large-scale data center - eligible community - solar energy standard - electricity sales tax - exemptions - energy generation redundancy - interagency consultation - health, agriculture, Pollution Control Agency - 103G.265; 116D.04; 216B.02; 216B.1623; 216B.1691; 216B.72; 216I.02; 216I.07; 297A.68 - Grandfathering (2035 date)