Amazon suspends Minnesota data center as lawmakers plan to reduce Big Tech tax breaks

Amazon says it has suspended plans for a massive data center in Becker, an announcement that comes after state lawmakers and Minnesota Gov. Tim Walz said they will reduce tax breaks for these projects.

The Seattle-based tech giant said in a statement that it moved ahead with the project initially based on how quickly it thought it could obtain permits and utility agreements, but believes those timelines are now “more uncertain.”

“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,” the statement says.

Amazon’s project would be an Xcel customer, possibly its biggest. The project likely would cost billions to build, resulting in many construction jobs.

Xcel’s president in Minnesota, Ryan Long, said in an interview Thursday that “due to confidentiality” he couldn’t comment on Amazon suspending the project. Long said he’d follow up after looking into “what exactly our obligations are.”

Becker City Administrator Greg Lerud said Amazon had informed the city it was suspending work in Minnesota. “We are certainly disappointed in their decision to not proceed at this time, and hope the company reconsiders their decision as they continue to evaluate future development sites,” Lerud said.

The decision comes as state lawmakers are negotiating a package of legislation to govern the influx of these large-scale data centers in Minnesota.

Last week, leaders at the Capitol said they agreed to eliminate a sales tax exemption on electricity for data centers. They will keep exemptions for computers, servers, software, cooling and energy equipment.

Together the exemptions have been worth about $100 million a year for data center companies, though they could grow explosively. Minnesota electric utilities expect the industry to multiply nearly 40-fold.

The electricity exemption makes up a small portion of the value of the tax breaks currently but would grow because the data centers use so much energy.

In a statement, Walz spokeswoman Claire Lancaster said that while Amazon “evaluates next steps, we’ll continue to bring construction projects and jobs to Minnesota.”

Some DFLers argue wealthy companies like Amazon don’t need the tax breaks and that it amounts to corporate welfare. They pushed to limit the tax incentives at the Legislature this year. House GOP leaders also agreed to the roll back as part of the larger budget deal.

Sen. Andrew Mathews, a Republican from Princeton who represents the Becker area, said Walz had “rolled out the red carpet for Amazon early in session” and promised to get the project done, but that he and some DFLers in the Legislature then did “nothing but try to stonewall and prolong” the regulatory process.

“It’s just going to put an astronomical tax hit on these hyperscalers in Minnesota that are going to consume a lot of energy and get taxed at an extremely high rate,” Mathews said. “The growth of data centers are definitely coming, they just appear to be going to all of our neighboring states, except Minnesota because the Democrats are trying to drive them out of the state.”

There are small data centers in Minnesota, but none of the scale companies like Amazon have proposed. Facebook’s parent company is building a data center in Rosemount, and developers have proposed at least 10 others.

The Amazon project would have been the largest of the projects for which developers have disclosed public estimates of energy use.

Lawmakers are still debating other issues, such as whether to extend the sales tax breaks that are set to expire in 2042, implement tougher rules to limit energy and water use, or impose new transparency requirements on data center companies.

In February, Minnesota utility regulators said Amazon must prove it needed 250 backup diesel generators at the Becker site. The Minnesota Public Utilities Commission voted 4-0 to reject the tech giant’s request for an exemption from a “Certificate of Need.” It was a first-of-its-kind test of how the state will regulate this wave of giant server farms.

Amazon argued the law did not apply to its emergency generators because they would supply only the data center and not the larger grid. At the time, Becker officials said Amazon had suspended site-preparation work ahead of the ruling and told the city that a permit process could delay the project by two years and limit the size of the data center.

After the ruling, Amazon would not say if the decision had affected its plans in Becker. The company sought to overturn the ruling at the Legislature by easing some requirements for proving a need for backup power.

That legislation has drawn support from Republicans and some Democrats who hope the project will bring jobs and other economic benefits to the state, but opposition from a segment of DFLers who fear Amazon was trying to circumvent state rules and that its generators would pollute.

The PUC declined to comment.

Amazon hasn’t ruled out revisiting the project. It plans to keep 348 acres of land that it purchased in Becker for $73.5 million in 2024. Xcel had sold the land shortly before to a third party for $7.7 million.

The transaction drew criticism from consumer advocates who thought Xcel could have gotten a better return for its ratepayers. Xcel said it would rethink its land sale contracts as a result.

Amazon’s decision is a blow to Becker, which is losing tax revenue and jobs as Xcel’s Sherco coal plant closes in phases by 2030. This is the second large data center to pull out of the city. In 2022, Google abandoned a plan for a $600 million project at the Sherco site.