Amazon pulls back on plans for large data center in Becker
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Amazon is pausing plans to build a large data center in the central Minnesota city of Becker.
City Administrator Greg Lerud said Friday the tech giant told the city it is suspending its development activities in Minnesota, including the site it owns in Becker.
Last year, Amazon purchased about 350 acres near the Sherco coal-fired power plant for the proposed data center. Sherco owner Xcel Energy plans to close the plant by 2030 and is building a massive solar project at the site. Lerud said Amazon plans to continue owning the property.
In a statement, Amazon spokesperson Duncan Neasham said the company continues to evaluate the Becker location.
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Neasham said Amazon chooses locations for data centers based on several factors, such as electric grid reliability, the speed it can build to meet customers’ demand and overall economics, including the cost of power and land.
“As a result, due to the uncertainty, we are redirecting more of our resources to focus on other projects that can provide capacity to our customers more quickly,” he said.
Xcel Energy spokesperson Theo Keith said Amazon communicated that it is pausing its data center plans “because of factors independent of our readiness to serve the site’s electricity needs.”
Keith said Xcel is “committed to supporting economic growth and job creation in the Becker area,” and continues to talk with other potential customers about locating their operations in Minnesota.
At least 11 large-scale data centers are proposed for Minnesota, part of a national building boom to keep up with the growth of cloud computing and artificial intelligence. The explosive growth of data centers is sparking concerns about how utilities will meet their enormous demands for electricity and water.
Minnesota has been attractive for data center developers in part because of its cooler climate, geographic location, renewable energy mandates and tax incentives.
Amazon’s move comes as Minnesota lawmakers are debating additional regulations on large-scale data centers and could eliminate a sales tax exemption on the electricity they use.
Legislative leaders and Gov. Tim Walz rolled out the broad strokes of the proposal last week as a mechanism to pay for a research and development tax credit. It’s expected to bring in $16 million in net additional revenues in the first two years.
House DFL Majority Leader Melissa Hortman noted that under current Minnesota law, data centers do not pay sales tax on hardware, software or electricity.
“It is only the electricity portion of the data center tax credit that will be rolled back and will, in part, pay for the R and D tax credit,” Hortman said. “So just want to be clear, the vast majority of the data center tax credit remains unchanged.”
During an interview on MPR News’ Politics Friday, Gov. Tim Walz said Minnesota has one of the most generous tax policies for data centers in the U.S.
“But we have to balance our budget,” Walz said. “And I think a lot of Minnesotans are saying, ‘Well, you couldn't do a tax cut to my sales tax, but you could do a tax cut to (Amazon founder) Jeff Bezos?’”
When asked about Amazon’s announcement regarding Becker, Walz called it “pretty bad lobbying.”
“We're still in the middle of this. This isn't a done deal,” he said.
While Republican House Speaker Lisa Demuth was involved in the broad budget framework, other GOP lawmakers expressed frustration about the proposed change and about the resulting move by Amazon to slow roll its plans in Becker.
“I’m incredibly frustrated that a major economic lifeline for the Becker community has effectively stalled,” Sen. Andrew Mathews, R-Princeton, said in a news release, noting the governor and legislative leaders “stonewalled” the project.
“The governor’s proposal last week to repeal the data center’s sales tax exemption on electricity appears to be the final straw,” Mathews said.
There is some disagreement within a legislative tax working group about how to apply the exemption. Some Democrats raised concerns about big tech corporations like Amazon receiving tax credits and opposed efforts to extend credits decades or longer into the future.
“I won’t ask the people who are here on the dime of the data centers to raise their hands but there’s a lot of them, we’ve all been hearing from them,” Rep. Aisha Gomez, DFL-Minneapolis, said during a tax working group hearing on Friday. “What we’re talking about here is sending hundreds of millions of dollars of your kids’, your grandkids’ and, if they have their way, your grandkids’ money, public dollars, tax dollars to the largest corporations that have ever existed on the face of the earth.”
Rep. Greg Davids, R-Preston, said there are financial benefits that come to the state for bringing the data centers in and the tax credits make the state more competitive. He said he would advocate for keeping the Amazon project in Becker on track.
“We learned yesterday that Amazon is pulling back from Becker, I’m hoping we can do some things here so we decide to come back,” Davids said.
Another possible factor could have been the Minnesota Public Utilities Commission’s recent decision that Amazon must prove it needs 250 backup diesel generators at the Becker site. Amazon had sought an exemption from that requirement under the state’s permitting process.
