June 25th Panel Reveals Pro-Data Center Perspectives That Will Be Used In Minneapolis

It is an issue that has attracted a lot of interest and engagement. Roughly 70 people attended a June 25th Community Conversations event on downtown data centers moderated by Minneapolis City Councilmembers Rainville (Ward 3) and Shaffer (Ward 7).

But the majority of the talking was done by 4 panelists who represented these respective backgrounds: Labor (Dan McConnell), Environment (Kathryn Hoffman), Public utilities (John Marshall), and Downtown business development (Don Kohlenberger). 

There is one key highlight for us to share above all: While there were only twenty minutes at the event for audience questions, the first 2 questions the moderators chose were from the six that were listed from the Community Power monthly newsletter sent out earlier the same day, one on meeting renewable power goals and another on energy affordability. According to the Ward 7 Newsletter, they kept the remainder of the questions submitted on note cards and are using them to create an FAQ sheet. 

You can view the official recording of the event on this YouTube video here. 

You can also read a couple of different takes on the same event in this short written summary compiled by both council offices. as well as in the Minneapolis Times article: Minneapolis officials weigh downtown data centers as tax-base tool while drafting new rules 

Both of the hosting council members had just earlier that same day voted against a temporary 6-month moratorium on data center projects outside of downtown, which passed on a divided 7-5 vote. However, rehashing that moratorium vote is not what this panel was about since it specifically focused on prospects for downtown data centers.

While the views most often expressed at this particular panel event did not reflect the full range of opinions in recent city council member meetings, it was still a valuable opportunity for the community to have a conversation. It also helped build understanding on what the pro-data center talking points are. There is one that stands out above all. 

Both of the council members, Shaffer and Rainville mentioned it toward the end of the event on how they see downtown data centers as a way out of a real budget crisis for the city.  

Minneapolis city leaders are currently reckoning with a projected $33 million budget gap, as reported in the Star Tribune. 

Among the panelists, Don Kohlenberger connected the dots on how data centers could reinvigorate the downtown Minneapolis economy and how that addresses the city budget deficit that needs to be filled. 

Locating a data center in the basement of a struggling office building that is currently operating at a deficit is a “financial instrument” that could help save the building from being demolished. That in turn would free up capital for the respective buildings to start making street level investments such as adding in restaurants and retail space and to convert the upper levels to residential. In this way, data centers would increase the valuation of downtown buildings. That in turn would relieve some property tax financial burden off of renters and homeowners in the city after nearly 10 years of property tax increases. 

But this promising narrative exists in a national backdrop of numerous high-profile stories of how the newer AI data centers have disrupted communities, taxed existing city services, and have posed a significant environmental risk opening up questions of any new, unintended costs and consequences. Because data centers operate continuously 24-7 at a high energy demand, that is why the topic is of specific interest to Community Power and other energy democracy/ utility watchdog organizations. In cases around the country, where there is insufficient energy democracy framework in place, new AI data centers would cause polluting, costly, and unreliable coal plants to stay open for longer than intended. 

Source of image: Ben Inskeep on X

In addition to energy, an even bigger concern since it is not a substitutable resource, is water. Modern day data centers can consume millions to hundreds of millions of gallons of water annually, depending on facility size and cooling systems.

The remainder of the pro-data center talking points made at this event were meant to dissuade attendees from jumping to a conclusion that the concerning environmental stories we heard from around the country, including throughout Minnesota, would apply to the types of data centers under consideration in downtown Minneapolis. 

Here is a review of what the panelists stated, who included from left to right in the photo above (with the 2 council members in the center): 

• Don Kohlenberger, President of Hightower Initiatives, a construction industry consultant with over 35 years of experience in complex project development
• Kathryn Hoffman, CEO of the Minnesota Center for Environmental Advocacy
• Dan McConnell, Business Manager of the Minneapolis Building and Construction Trades Council
• John Marshall, Regional Vice President at Xcel Energy and Chair of the Downtown Council & Downtown Improvement District 

Don Kohlenberger, President of Hightower Initiatives 

As shared earlier, one of Kohlenberger’s main contributions to the discussion was echoing what the 2 hosting council members have often shared of new data centers being a way to reverse the sharp decline in downtown commercial property values. 

And then Kohlenberger made a statement claiming that data centers are the only viable industry that could bring millions of dollars into the city: 

“...In my background, I don't see a lot of industries that are bringing in multi-million dollars of assets from outside of this region to help, with the exception of the possibility of data centers.” He later stated, “So, data centers pay the highest rate level with the highest amount of asset value.”

Like others speaking at the event, Kohlenberger clarified that the topic at hand is not the same as the hyperscale 100 MW + data centers in the headlines, and then used that to make the case that the common environmental and resource concerns should not apply.

Don Kohlenberger then stated:

“When we start thinking about data centers that help downtown Minneapolis, we are talking smaller, 40 megawatts, 50 megawatts. And what does that mean? Well, in some of these smaller data centers, we're not talking about facilities that use water. They're using air-cooled systems. So, water is not affected if designed properly. Again, this is time for us to think about what are the right ways of building some of these. Water issues, we've been able to through technology and through innovation, make that not so much a factor.”

The Sleep Number building is what is being used as a gold standard for the type of “small” data center under consideration in downtown Minneapolis as well as the type of data center that has been operating for years unnoticed. That being said, what he said about an energy usage of 40 or 50 megawatts is only small in comparison to the hyperscale data centers. To draw a comparison, 40 MW of electric capacity is roughly equivalent to 35,000 households in Minneapolis. A Star Tribune article reveals that the upcoming data center in the Sleep Number Building is expected to be “only” 21 MW. But that is still 10 times more than what the electrical footprint of the Sleep Number Building had been at just 2 MW. If enough of these 20-40 MW data centers are placed in Minneapolis (or co-located), then it would take a cluster of between 3 and 5 to exceed the load and the resource draws of a 100 MW hyperscale one.

In response to an audience-submitted question, Don K. used environmental reasons to make a case that the basements of some of the downtown office buildings are the best places to locate urban data centers since it would be less noticeable to outside areas.

One frequent environmental problem from AI data centers is that many of them produce a low- pitched – low-frequency droning noise. This infrasound poses an environmental and health risk because it has been connected to elevated cortisol (the stress and anxiety hormone) levels in humans and with impacts on wildlife. Stress and anxiety, of course, are tied to other cardiovascular issues.

We would need some explanation for how the types of data centers in the basements of downtown office buildings would indeed be exempt from this issue. 

Here is a bit more background about the water issue which Don claimed is not that much of a factor. Because AI Data Centers have to be constantly cooled, water cooling systems are commonly used. While there are many sources of energy, there is no substitute for water. One type of system, the open-loop versions, use up massive amounts of what would otherwise be drinkable water. The closed-loop systems cooling would be more environmentally friendly if they don’t rely upon harsh chemical additives. Again, we would need to see a thorough explanation for how air cooling would make the types of data centers in the basements of downtown office buildings exempt from this issue. 

One essential solution is that locating data centers in commercial building basements makes it easier to connect with a district heating and cooling system. Don K. depicted a symbiotic relationship where a data center can buy and sell waste energy and waste heat and help heat the building itself in the wintertime.

Councilmember Rainville later echoed some of these points about converting older buildings toward these mixed uses and using the Cordia district energy system to capture the heat and provide cost savings.

Kathryn Hoffman, CEO of the Minnesota Center for Environmental Advocacy

Kathryn Hoffman, CEO of the Minnesota Center for Environmental Advocacy, was the point person tapped for speaking about environmental concerns related to data centers.

Back on May 27th, Kathryn led a very helpful and informative session with the League of Women Voters on the work that MCEA has done as an environmental law nonprofit giving legal help to communities around the state who are trying to fend off hyperscale data centers.

However, these hyperscale data centers proposed around the state that MCEA is used to fighting are different from the smaller, urban facilities proposed for downtown Minneapolis.

The main point behind MCEA’s work is that suspicion is warranted against policymakers or anyone who is trying to fast track data center projects before we have a chance to get environmental data that could be shown to anyone. 

MCEA specializes in helping community members in the very challenging situations of figuring out how to halt data center proposals in places where local government officials sign non-disclosure agreements. These NDAs forbid local officials from saying really anything about a proposed data center project. Since the MN state legislature failed to pass a ban on the use of NDA’s this year, it means that there are powerful behind-the-scenes operatives who want to see a multitude of data center projects move forward under a cloak of secrecy. That might as well be the opposite of energy democracy. There is no real way to do an environmental study if a nondisclosure agreement prevents it from being known that there is even a data center being developed in the first place let alone how much resources it would use. The topic of NDAs was brought up briefly at the June 25th event. Another panelist, Dan McConnell stated that the city of Minneapolis does not do non-disclosure agreements per city policy. Someone in the audience from the city attorney’s office said that prohibiting NDAs would require council approval. At the recent June 16th city council committee meeting that held the public hearing on data centers, Councilmember Rainville said he would be in favor of codifying a local ban on the use of NDAs. 

Of course, the first of the 6 questions about data centers from the Community Power newsletter is whether any new data centers will be powered by 40 or 50 MW of gas, or by making investment in new clean energy equivalent to that.

Katherine gave a stark warning on how that could be loopholed which should give us pause,

“It is possible to comply with our 2040 law by building a gas plant and then buying renewable energy credits elsewhere. Now, I don't think Xcel wants to do that. And I think they'll be a partner with us in avoiding that scenario, very much so. But it is legal.”

John Marshall, Regional Vice President at Xcel Energy and Chair of the Downtown Council & DID

John Marshall serves on the Minneapolis Clean Energy Partnership board as its vice chair. That position gives him an obligation to make good on Xcel's stated commitment to be "good partners" in helping Minneapolis meet ambitious clean energy and carbon reduction goals. Since data centers are energy intensive, we are warranted a discussion from the Clean Energy Partnership on how we could avoid backtracking on our local Climate Equity Plan goals with new data centers locally.

John Marshall is known for having many additional roles outside of Xcel, such as being elected president of the Minneapolis Downtown Council and Improvement District.

Marshall claimed that there is enough strength redundancy of the downtown electrical grid to handle downtown data centers as well as downplaying concerns about the impact that these data centers would have on residential rates and supply.

He said that Xcel is planning in advance for load growth from new large customers many years ahead of time. He also said that these new large customers, such as data centers, will have to pay to interconnect to ensure that the remaining customers will not suffer those costs.

He stated that 

“...we have regulations and tariffs and things in place to ensure that our customers are not subsidizing data centers or other large loads that come in.”

 On the topic of utility economics, Community Power's wheelhouse, he stated:

“The downtown grid has a bunch of fixed asset costs in terms of infrastructure, in terms of the cost to continue to operate that. And when you increase the usage, like a data center or a U.S. bank stadium or anybody, to share in those fixed costs, there are financial benefits for the rest of the customers that can help bring downward pressure on rates going forward.”

So by that logic, when energy usage goes up, then those fixed costs get shared around by more customers, resulting in financial savings for the remaining customers. If that common claim by utility lobbyists is true in this case, then that would put downward pressure on rates for the rest of the customer base. However, as we know from other markets around the country and straight common sense, higher demand tends to raise prices.

John Marshall made an additional remark, one typical for utility government relations staff:

 “We are regulated by the Minnesota Public Utilities Commission to ensure that we have your best protections in mind.”

Then Marshall acknowledged the affordability and reliability concerns about data centers and said:

“...from a utility standpoint, please know that we are looking at these carefully and cautiously in arranging agreements with these data centers to ensure that the grid will be reliable, your lights will stay on, and that there's also opportunity that can benefit the rest of the customers.”

He also implied that it is better to place data centers in Xcel service territory due to the company making clean energy investments in wind, solar, and long-duration battery storage, to meet a goal of ending coal operations company-wide by 2030.

More specifically to Minneapolis, Marshall noted the possibility of the city gaining additional revenue when data center companies pay into the utility franchise fee.

As far as providing assurance that there would be enough clean energy capacity for these data center projects, Marshall stated that Xcel is able to predict where wind energy will be about 24 hours ahead of time with about a 90% accuracy.

In response to the rate impact question from Community Power, he stated 

“Absolutely. Yes, the PUC regulations are very much strong enough to protect customers”. 

Since the super large load tariff is intended for the hyperscale data centers with loads of over 100 megawatts it doesn't affect the size of the data centers that are being talked about in downtown Minneapolis. Then he stated,

“...But we do have existing rates. We do have existing boundaries that obligate when we work with those customers to ensure they're paying for every last nickel of the infrastructure that they need when they come online. And then again, don't forget the system, balancing to make sure that we have reliable power. Yes, they're paying their fair share. And no, we are not risking reliability for anybody else as there is existing capacity in downtown Minneapolis to bring on a data center right now.”

Xcel's Minnesota Community Relations with Xcel Energy shared similar messaging points about spreading how fixed costs amongst a larger customer base would prevent price spikes being shifted onto ratepayers and assuring that Xcel has the capacity and the experience to bring large customers onto their system without causing service disruptions for others when he spoke at the public hearing at this point in the video here. He did not clearly urge the council to support or oppose the temporary moratorium.     

Dan McConnell, Business Manager of the Minneapolis Building and Construction Trades Council

Dan McConnell also serves as president of the Minnesota State Building Trades Council.

He has a history of speaking in favor of big development projects that create a demand for skilled union labor in construction and maintenance jobs, of which proposed data centers are the latest episode of that.

Dan McConnell shared that in the national AFL-CIO convention that had recently happened in Minneapolis, they did not call for a moratorium.

He stated, “We're absolutely against moratoriums”.

McConnell echoed what the other speakers have said in terms of hyperscale data centers being a non-starter in the city of Minneapolis because there's just not enough room. He opined that a lot of the concerns he heard online about data centers was “alarmist” in his view, in that they weren’t applicable to vacant, underutilized buildings in the city of Minneapolis.

In accordance with what both council members and another panelist said, McConnell echoed that getting hundreds of millions of dollars in tax revenue from new commercial properties would reduce the property tax that modest homeowners, such as himself, would have to pay.

McConnell also echoed a view that John Marshall had shared, that Minnesota is a good place for data centers to be built because we have policy tools to make sure they are built with union labor, and because we require environmental, energy efficiency and water conservation standards, as well as the ratepayers protections to make sure that the data center companies pay their fair share for the cost of the infrastructure upgrades. 

If the data centers were instead built in North Dakota, then he warned that they would be powered by coal, of which the pollution from would enter Minnesota – even though we have a 100% carbon-free electricity standard by 2040. 

Dan McConnell also spoke at the public hearing at this point in the video here and authored an op-ed in the Star Tribune.

Conclusion and what comes next 

One next step is that Councilmember Shaffer is teaming up with Councilmember Chowdhury (Ward 12) to co-lead the effort to craft a local regulatory framework that any new data centers would have to follow. Regulations and zoning to protect the public interest have not yet been updated for 21st century telecommunications infrastructure. Currently, the city doesn't differentiate between the various sizes of data centers and would regulate the newer larger ones as if they were the older, smaller ones and with no specific data center definition in the city zoning code.

State law limits data center regulation to square footage when the actual industry measures projects by megawatts. These current regulatory tools do not match industry realities where facilities that seem small could have vastly different energy footprints in megawatts.   

The city also has some paid researchers in the Legislative Research and Oversight Department who the city council have given a directive to study the landscape of regulations governing data centers as well as economic and environmental impacts to be aware of. They are required to report back to the city council with a presentation no later than August 18th. 

The city council's goal is to have those new regulations, informed by this research, finalized for passage at the November 12th city council meeting. The reason for having a tight schedule for such an ambitious undertaking is because the 6-month temporary moratorium ends (which started on May 21st) ends on November 21, 2026. At that time, the council members will either extend the moratorium or resume reviewing proposals.

While the panelists at this event did make a case for locating new data centers in targeted downtown locations, particularly the basements of underutilized buildings, that however did not explain any opposition to the 6-month pause on data center development outside of downtown. 

If the three huge compromises that we saw, 1) exempting downtown from the temporary moratorium 2) as well as data centers under 350,000 square feet still and 3) cutting the moratorium time period from 12 months to 6 months was still not good enough for some decision makers and speakers at the public hearing, that brings a big questions.  Who is so intent on building data centers outside of downtown that they would want to sneak projects in before the city has a chance to pass an updated regulatory package and which other parts of the city are there plans to build data centers in?

While rehashing the moratorium vote was hardly mentioned at all during the events, those questions are a segue to this regulatory process that comes next.