House OKs legislation to regulate data centers

— UPDATED at 12:36 a.m. June 10 after Senate vote

The big data centers are coming. Is Minnesota ready?

In one of its final acts of the 2025 special session, the House passed a bill setting environmental and energy regulatory requirements for data centers, and modifying their sales and use tax exemptions.

Sponsored by Rep. Greg Davids (R-Preston), SSHF16 was passed 85-43 and sent to the Senate where it was passed 40-26. It now goes to the governor.

Data centers are buildings (or sections of buildings) that house a technology company’s information technology hardware. They are basically the facilities that run the internet and mobile applications. And they are getting bigger and using more electricity and more water as a cooling agent for their equipment.

“Data centers have been one of the most successful programs that there’s ever been in this state,” Davids said. “This is the building trades’ No. 1 issue this year. This is a very important jobs bill. Thousands of jobs will be a result of this bill passing.”

Among the bill’s provisions, it would:

• establish annual fees linked to a large-scale data center’s peak electricity demand of between $2 million and $5 million;
• extend the state’s sales tax exemption for software and information technology equipment to large-scale data centers to 35 years;
• require pre-application evaluation of projects using more than 100 million gallons of water per year and set up permit conditions;
• institute prevailing wage requirements for laborers and mechanics constructing or refurbishing large-scale data centers;
• require data center inquiries to be referred to the Department of Employment and Economic Development’s Minnesota Business First Stop program;
• allow the Public Utilities Commission to approve, modify or reject tariff or energy supply agreement with a data center;
• require each public utility to offer a clean energy and capacity tariff for commercial and industrial customers;
• include large-scale data centers in the state’s solar energy standard;
• exempt large-scale data centers from requirements under an energy conservation optimization plan; and
• establish that large-scale data centers must attain certification under one or more sustainable design or green building standards.

“My concern was that, if we were going to have these large-scale data centers, we darn well needed to have some guardrails on them,” said Rep. Patty Acomb (DFL-Minnetonka). “Some data centers will use over 100 million gallons of water. Some of them will use more energy than the city of Minneapolis. And many of them can have hundreds of backup diesel generators.

“So Minnesota deserves to have strong environmental protections, strong ratepayer protections, and protecting our priorities of reaching 100% clean energy. … This bill doesn’t totally address this, but it makes some important progress.”

“Data centers will use less electricity in Minnesota, because Minnesota is colder,” said Rep. Duane Quam (R-Byron). “That’s why so many would like to put them here.”

“I am against this bill because I am against tax breaks for billionaires,” said Rep. Athena Hollins (DFL-St. Paul). “These people want to come here because of our climate and our clean energy. They are coming here regardless.”