As tech companies pour trillions of dollars into building data centers across the United States, local governments are facing increasing resistance and challenging questions. Do these facilities boost the local economy or pose an environmental hazard? What demands for power, water, land, and workforce do they bring to a community? What ordinances and permits are necessary to effectively protect land use and natural resources?
These are a few of the questions at the center of a collaborative project involving the University of Minnesota Law School, the Humphrey School of Public Affairs, the University of Minnesota Extension, the Freshwater Society, and three municipalities in southeastern Minnesota: Byron, Lewiston, and Stewartville. The project leaders aim to equip Minnesota leaders, especially those in rural areas, with the tools and frameworks needed to make complex decisions about data center siting.
“We are not prescribing a single viewpoint whether a city should say ‘yes’ or ‘no’ to a data center,” says Elise Harrington, assistant professor at the Humphrey School of Public Affairs and the project’s principal investigator. “Rather, we want to prepare city leaders to make the best possible decision for their unique community, and we want to put them in a proactive position to negotiate with data center developers.”
The first phase of the project, supported by a grant from the University of Minnesota Institute on the Environment, focuses on southeastern Minnesota, an area attracting data center developers and home to the three project partners. While these centers may offer opportunities for rural jobs and increases in local tax revenue, they are also sparking concern about energy and natural resource needs.
Data centers come in all sizes, but most of today’s headlines are about the hyperscale data centers that power AI, says Minnesota Law professor James Coleman, whose scholarship focuses on energy law. “The centers typically have 50- to 300-megawatt peak demand,” he says. “If one megawatt is equivalent to about 1,000 people, that means a 50-megawatt center would use roughly the same amount of electricity as a city of 50,000 people. While this isn’t a perfect comparison, you can see that the demands on a grid can be significant, especially for small cities.”
Water usage for cooling these hyperscale data centers is also a significant concern for communities in southeastern Minnesota, where groundwater and surface water are highly connected and sensitive to imbalances in pumping and recharge.
Building Capacity for Decision Making
“City councils, mayors, and administrators are often presented with offers that have significant financial benefits, but they need more information and expertise on a variety of topics to make good decisions,” says Coleman. “For example, most cities don’t regulate their own electricity, but they do control their own water. Some data center designs use less water and more electricity, and others do the opposite. It’s a tradeoff that requires careful deliberation and transparency from utilities that often are outside the control of city administrators.”
The goal of the project is to help local jurisdictions operate in this environment. An interdisciplinary team is working alongside three cities in southeastern Minnesota to evaluate how local jurisdictions can constrain or foster data center development across a range of criteria, including aligning water, sewer, and electricity demands with the infrastructure requirements of projected population growth. These municipalities are also identifying policy mechanisms to assess the short- and long-term environmental impacts of data center development and weighing those impacts against the potential for job creation and an expanded tax base.
An important aspect of the project is helping city leaders develop strategies to improve utility transparency. “Cities don’t typically make decisions about electricity ratemaking, and therefore utility decisions can be somewhat opaque to them,” says Coleman. “Investor-owned utilities and rural electric co-ops have different incentives and procedures. Understanding those differences can help city leaders better address questions about data centers and electricity use.”
Making Valuable Guidance Accessible
This summer, the project team will launch a toolkit for city administrators that includes a guide for proactive data center siting. The toolkit will offer best practices gleaned from extensive research on data center development in Minnesota and other parts of the country, providing places like Byron, Lewiston, and Stewartville with more accessible information on the topic.
To address the lack of publicly available data on the energy use of hyperscale data centers, project researchers will also gather information to better understand how to serve large loads in tandem with community priorities around cost, reliability, and environmental impact.
“We want local governments across the state to have the research they need and to understand the levers that they have,” says Harrington. “Providing city leaders with this toolkit can help address the knowledge and power imbalances commonly found in data center development. We think that offering information without a prescribed outcome can be incredibly helpful.”