Prairie Island has attracted controversy in the early 21st century for its operator Xcel Energy's decision to store nuclear waste in large steel casks on-site.

As this area is a floodplain of the Mississippi, many opponents of the decision fear the risk of water contamination through breach of the casks during seasonal flooding of this important river.

In April 2008, Xcel requested that the U.S. Nuclear Regulatory Commission (NRC) renew the licenses of both reactors, extending them for an additional twenty years.

[8] NSP had initially intended to send radioactive waste from this plant to a storage facility operated by the United States federal government, but no such site is yet open for use.

In 1991, Xcel Energy had requested permission from the Minnesota Public Utilities Commission to eventually store waste in 48 dry casks on the Prairie Island site.

Opposition by environmentalists and the neighboring Prairie Island tribe led the Minnesota Legislature to decrease the number of allowed casks to 17; this was sufficient to keep the plant operating through approximately 2003.

In addition, it was required to pay the adjacent Prairie Island Indian Community up to $2.25 million per year to help with evacuation improvements, and the acquisition and development of new land for their reservation.

[11] The Nuclear Regulatory Commission's estimate of the risk each year of an earthquake intense enough to cause core damage to the reactor at Prairie Island was 1 in 333,333, according to an NRC study published in August 2010.

Xcel energy plant operators declared a “notification of an unusual event,” the lowest of four emergency classifications established by the U.S. Nuclear Regulatory Commission.