Data center power supply and server racks. (Getty Images)
South Dakota has enacted new regulations for large data centers following the rejection of incentive proposals by lawmakers. Governor Kristi Noem signed a bill placing limits on data centers with over 10 megawatts of electrical demand. These data centers must ensure water use does not strain local resources and cover their own electrical infrastructure costs. The law also prevents state interference with local ordinances regulating these facilities.
The legislation, intended to balance local concerns with data center growth, also empowers the state Public Utilities Commission to charge data centers for regulatory review costs. This move stems from broader debates over the data center industry during the recent legislative session.
Efforts to introduce incentives—like a 50-year sales tax exemption on equipment and software for data centers—failed to gain approval. Another proposal aiming to waive regulatory reviews for large backup generators used by data centers did not pass. While proponents argued that data centers could boost employment and property tax revenue, critics worried about excessive water usage and potential electric rate hikes for residents.
Currently, South Dakota’s largest data center, consuming up to 30 megawatts, contrasts with much larger centers elsewhere, driven by the rise of AI, cryptocurrency, and data-heavy sectors. For more information, the legislative details can be found on the official legislature site.
