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May 15, 2026

Legal updates on MCEA's data center cases

 

Alternative Urban Areawide Review Lawsuits in District Courts

        MCEA currently has four district court lawsuits challenging the adequacy of environmental review processes conducted for proposed data centers. While each of these cases has its own specific facts, they are generally similar. In each of these cases, the city conducted an Alternative Urban Areawide Review (“AUAR”), a type of environmental review used to examine different types of projects that could be developed in a particular area, for a project that the city knew was likely to be a hyperscale data center. MCEA challenged these cities’ approvals of their AUARs, arguing that the AUARs improperly failed to (1) identify the project as a data center and/or provide specifics about the data center planned, (2) adequately study the water, greenhouse gas, noise, light, and other environmental impacts of a hyperscale data center, and (3) include a mitigation plan that would actually address these impacts. MCEA asked the court in each case to order additional environmental review and to halt permitting and construction processes until adequate environmental review was completed. Below is a summary of the current status of each of these four cases: 

  • Lakeville: MCEA v. City of Lakeville and Olam Holdings 1, LLC, No. 19HA-CV-25-5103 (Dakota Co. Dist. Ct.)

In August 2025, MCEA challenged the City of Lakeville’s AUAR for a proposed 1.3 million square foot “light industrial” project, which internal city communications showed was intended to be a data center. Both MCEA and the City and the project proposer moved for summary judgment in late February, asking the court to resolve the case in their favor without a trial. The court has until May 27 to issue its decision, in which the court will determine whether or not the AUAR was adequate. Either side could then appeal to the Minnesota Court of Appeals (and the losing party is quite likely to do so). 

The proposed data center in Lakeville, associated with company called Terawatt, has not advanced to the permitting stage and may be inactive. 

  • Pine Island: MCEA v. City of Pine Island and Ryan Cos. US, Inc., No. 25-CV-25-2298 (Goodhue Co. Dist. Ct.) 

In October 2025, MCEA challenged the City of Pine Island’s AUAR for up to 3 million square feet of “general light industrial” or “technology center” development, which was defined to include a data center.  The developer submitted applications for permits for a data center shortly after the AUAR was approved. The City and the project proposer moved for summary judgment, asking the court to rule in their favor without a trial, and MCEA asked the court to let the case move forward but to halt any construction at the site until the lawsuit was resolved. The court has until July 6 to issue its decision on those motions. The court could (a) grant MCEA a temporary injunction that would stop any construction at the site and allow the case to move forward, (b) allow the case to move forward without stopping any construction, or (c) rule in favor of the City and Ryan Companies and dismiss the lawsuit. If the lawsuit is dismissed, MCEA could appeal to the Minnesota Court of Appeals.

After the lawsuit was filed, the City announced that Google was the company behind the data center proposal and that it would require a massive 2,700 gigawatts of electricity. The project proposer has asserted that it intends to begin construction this summer. As of now, and unless the court issues the injunction MCEA has requested, construction on the project could begin this summer. 

  • Hermantown: MCEA and Stop the Hermantown Data Center v. City of Hermantown and Harmony Group, LLC, No. 69DU-CV-25-3448 (St. Louis Co. Dist. Ct.) 

In November 2025, MCEA and our client Stop the Hermantown Data Center (a group of Hermantown residents) challenged the City of Hermantown’s AUAR for a 1.8 million square foot project of “light industrial development,” which internal city communications showed was intended to be a hyperscale data center. After the lawsuit was filed, in March 2026, the City announced that Google was behind the proposed data center, which would require at least 700 megawatts of new energy. Shortly after, the City also announced that it intended to update the AUAR, which it said would take around seven months to complete (possibly in September or October). MCEA and Stop the Hermantown Data Center  agreed to put the lawsuit on hold while the City completed the updated AUAR. Harmony Group has indicated it does not propose to move forward with the project while the new AUAR is underway. If the updated AUAR is still inadequate, MCEA may file a new lawsuit challenging it. 

  • Monticello: MCEA v. City of Monticello and Monticello Tech, LLC, No. 86-CV-26-1130 (Wright Co. Dist. Ct.) 

In February 2026, MCEA challenged the City of Monticello’s AUAR, which studied two options: a 3 million square-foot data center and a 5 million square-foot “light industrial development.” In this case, the project proposer was open about its intent to build a data center, but the AUAR did not provide specifics about the project, including its energy usage. This case is at an earlier stage than the others, and the parties are still in the process of exchanging information. Currently, the court’s order setting a schedule for the case calls for motions to be heard by late September 2026. The City has been working on an ordinance regulating data centers, which it approved in late April. The developer will accordingly have to work through the requirements of the ordinance before it receives any permits. We expect that process will take at least several months, meaning that construction likely is not imminent.

Minnesota Court of Appeals Case

        MCEA also has one case in the Minnesota Court of Appeals. Because of a difference in the law applying to AUARs and the law applying to other kinds of environmental review, this case started in the Court of Appeals. Some of the AUAR cases may later advance to the Court of Appeals, but for now they are in regular county trial courts. 

  • Faribault: In re Archer Datacenters Environmental Assessment Worksheet, No. A-25-1617 (Minn. Ct. App.)

        In September 2025, MCEA appealed the City of Faribault’s decision that a proposed 500,000 square foot data center did not have to conduct a detailed Environmental Impact Statement (“EIS”) but could instead rely on the less detailed Environmental Assessment Worksheet (“EAW”) completed by the City. The case involves slightly different issues but generally also argues that the environmental review conducted by the City did not sufficiently study the potential environmental impacts of a hyperscale data center. Oral argument has been held on this case, and the court has until June 9 to make its decision. If MCEA wins, the City will have to conduct an EIS or supplement its EAW with additional information and make a new decision about whether it needs to complete an EIS. 

        The project has remained on hold during litigation. 

Dismissed Case

        MCEA also filed one case that it has since voluntarily dismissed. 

  • North Mankato: MCEA v. City of North Mankato and Project Dean, No. 52-CV-25-568 (Nicollet Co. Dist. Ct.)

        Like several other cities, North Mankato conducted an AUAR for a proposed development without mentioning data centers, but internal city documents MCEA obtained suggested that the project proposer intended to build a data center at the site. However, after the lawsuit was filed in August 2025, the City informed MCEA that although two companies had considered developing a data center at the site, neither had moved forward with an actual proposal and no data center was proposed. 

        Accordingly, MCEA agreed to “voluntarily dismiss” the lawsuit. The parties’ agreement specifies that (1) the lawsuit was dismissed without prejudice, meaning that MCEA could bring a similar lawsuit later if the facts changed, and (2) the dismissal did not adjudicate the merits of the lawsuit, meaning that the Court did not decide in favor of one party or the other. The lawsuit was not dismissed because of a legal flaw, or because any court determined that the City’s environmental review was adequate. Instead, MCEA decided not to move forward simply because there was no data center proposed at the site. 

What site work is allowed during data center lawsuits? 

        Filing a lawsuit challenging environmental review does not, by itself, stop a data center proposer from obtaining permits or moving forward with site preparation or construction. Once a city determines that environmental review is complete, a project may apply for local and state permits (what these are depends on the location and the specifics of the project). When it has obtained key permits—in particular, usually a conditional use permit and building permits from the city—it may start construction. 

        To stop work during the lawsuit, the court needs to issue an order barring permitting or construction. MCEA can obtain such an order in two ways: (1) by winning the case and getting the court to prohibit permitting or construction until adequate environmental review is completed, or (2) by asking the court for a temporary injunction that would halt permitting or construction while the lawsuit is ongoing. Temporary injunction orders can be difficult to obtain, as they require that the requester shows (among other things) that (1) the requester is likely to win the case, and (2) the requester will suffer irreparable harm (which cannot be remedied with only money) if the injunction is not granted. In addition, as a condition of the injunction, the court can order the requester to post a bond, which can be significant. So far, MCEA has asked for a temporary injunction only in the Pine Island case, and the court has not yet reached a decision on that motion. In the Hermantown case, MCEA and the project proposer have an agreement that the proposer will not start any construction without notifying MCEA with enough time for MCEA to seek an injunction. However, some site preparation work that could be required for any type of development, whether or not it is a data center, could potentially go forward despite the agreement.