Data center restrictions signed into South Dakota law after push for incentives failed
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After lawmakers rejected incentives for large data centers, Gov. Larry Rhoden signed a bill that puts new limits on them.
This story was originally published by the South Dakota Searchlight.
After lawmakers rejected proposals to incentivize the construction of large data centers in South Dakota, the governor signed a bill into law Tuesday that will place new limits on the industry.
The law applies to data centers with a peak electrical demand of 10 megawatts or greater. It will require data center companies to ensure their water use does not overburden local resources and to pay for the electrical infrastructure costs attributable to them. It also prohibits the state from overriding local ordinances limiting, prohibiting or otherwise regulating data centers.
Another bill Rhoden signed into law Tuesday allows the state Public Utilities Commission to assess data center companies the costs of regulatory reviews related to their projects.
The laws emerged from a broader fight about data centers during the recently concluded legislative session.
Economic developers and some lawmakers unsuccessfully supported incentives such as a 50-year sales tax exemption on the equipment and software purchases for data centers, or the expansion of an existing sales tax rebate program to accommodate data centers.
Another bill that failed would have exempted large backup generators that are not connected to the grid — such as those used by large data centers — from regulatory and siting review by the state Public Utilities Commission.
Backers of those bills said data centers could bring more jobs to the state and more property tax revenue to local governments. Opponents raised concerns about the amount of water used by data centers for cooling, and the potential effect of data centers’ electrical demands on the rates of everyday electrical customers.
South Dakota’s biggest data center consumes a maximum of 30 megawatts, and the state has none of the vastly larger data centers that have proliferated elsewhere in response to the growth of artificial intelligence, cryptocurrency and other data-intensive industries.
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