This is a production of SDPB.

During this year's legislative session.

South Dakota lawmakers were divided on the best approach to a booming industry.

Hyperscale data centers are massive buildings that house computer servers.

These servers can support everything from generative AI to cloud based file storage.

And they're popping up almost everywhere.

Some South Dakota policymakers hope to invite an industry they say could revitalize rural communities and entice young people to stay close to home.

Others were wary of higher utility bills, straining infrastructure and loss of community identity.

We're reviewing how these policy debates played out in the state Capitol and beyond this session.

We'll start with district four Representative Kent Roe.

He explains why he brought a bill to incentivize data centers.

District four includes six counties in northeast South Dakota.

Deuel County is one of them.

Rural South Dakota's been in decline since, well, since World War II at least.

The 1930 census of Deuel County put the population of the county at around 8,500.

Today, it's about half that.

Deuel County, the reason I use that is because I'm very familiar with those numbers, but that's also a statewide thing.

On top of declining rural populations, Roe says young people are leaving the state to pursue better career opportunities.

There's good opportunities in ag and there's good opportunities in in tourism.

Those are our two base economies in this state.

What potential data centers bring to the equation is a new anchoring industry.

About a year ago, a representative from Applied Digital, a hyperscale data center developer, presented to the Deuel County commissioners.

That's when Representative Roe started learning more about the economic potential the proposed project could bring to the area.

Baseline numbers on sticks and bricks in Deuel County they're proposing to spend roughly I want to say three to four hundred million dollars on bricks and sticks.

Then that goes into the property tax base.

Apply, work it through the formulas and everything, that ends up generating about $5.2 million or more per year in property tax under the current formulas.

That's nearly double Deuel County's current property tax base.

The data center would also pay sales tax on electricity.

Not to mention an estimated 200 new high paying jobs.

But there's a key reason South Dakota is not home to any hyperscale data centers just yet.

The state does not offer sales tax exemptions for servers and other material that make up hyperscale data centers.

These materials are expensive and must be replaced on a regular basis to keep up with technological advances.

That means states with a sales tax exemption are much more financially viable for companies like Applied Digital.

So Roe sponsored House Bill 1005, offering a 50 year sales tax exemption on those items for any data center that breaks ground in the next ten years.

There are already dozens of sales tax exemptions in South Dakota law, many targeted towards the ag industry.

Roe sees this as a responsible step.

My bill is to bring us in alignment with our surrounding states.

It wasn't saying build here or build there, it was just leveling the playing field and bringing South Dakota into alignment with all of our neighbors and about 40 states nationwide.

Roe's bill went before the House State Affairs Committee in early February.

After a nearly two hour hearing, the committee killed the bill on a 9 to 3 vote.

Representative Jon Hansen, who's also Speaker of the House, was among the members who opposed the bill.

I just fundamentally don't think we need to give away tax breaks to big tech.

They are some of the world's largest companies in the world, and I think we should prioritize the people of our state over the world's largest tech companies.

That conflict over offering tax incentives for big corporations colored most of the debate over data center policy this session.

As deadlines approached to move bills to their next chamber, the Senate State Affairs Committee hosted an unofficial "Data Center Day."

The committee considered seven bills related to data centers and set the tone for the industry's future in the state.

The marathon committee hearing began with multiple bills from Senator Taffy Howard of Rapid City.

The bills addressed concerns over noise, water usage, and impacts on local electricity concerns that many people associate with data centers.

But none of Senator Howard's bills survived that committee to the chagrin of citizens who traveled to lend their support.

But the committee did approve another bill looking to put guardrails on the industry.

Senate Bill 135, dubbed the "Data Center Bill of Rights for Citizens" by its authors, Speaker of the House Jon Hansen and Senate Pro Tempore Chris Karr.

It requires data centers to cover their own costs, rather than passing them on to other electric customers, and protects local zoning decisions.

The bill also bans the state from offering sales tax breaks to data centers.

Proponents said there are plenty of existing incentives, like the Reinvestment Payment Program through the Governor's Office of Economic Development.

But Nick Phillips with Applied Digital, the same data center company considering a Deuel County location, tells the committee that sales tax rebate program isn't enough.

The current tool, which is available to GOED, the RPP, is inadequate to convince us to come here because there's not certainty that's needed over a long period of time.

When we look to build one of these facilities, it's a many billions of dollars of investment in that facility.

In order to depreciate that building over a long enough period of time, we look to 30, 50, 100 years, for those costs to be recouped.

And GOED's current tool allows us for three years of exemptions, which is inadequate.

Even though it's cheaper to do business here, we don't have corporate income tax.

We don't have state income tax and stuff.

It's still the delta is more to build in South Dakota?

It's actually more expensive here than in other in other states.

Phillips says South Dakota's sales tax on electricity alone wipes out any other potential savings.

Lawmakers consider existing sales tax breaks for other industries throughout the discussion.

we have about $1.5 billion worth of property, or uh, sales exemptions on the line.

Why?

Why not data centers?

I know that you say they have multiple resources and things like that, but traditionally South Dakota has not been a tax the rich state.

So why do these bump up into something else that wouldn't qualify?

I understand that these things exist.

And that's what we recognize that with this bill to say there are certain economic incentives that already exist.

But I'm not sure that we need to go any further and give away any more of our taxpayer dollars to be attractive to these companies.

Committee and Senate Majority Jim Mehlhaff spoke against the bill, mainly for it's ban on sales tax exemptions to incentivize data centers.

With respect to data centers, I like to quote talented people.

I want to quote Billy Preston: nothing from nothing is nothing.

And you're going to have nothing if we maintain the status quo with our attitude towards economic development in this state.

But the committee advanced SB 135 to the Senate floor with a "Do Pass" recommendation.

The only other bill to survive the day came from Senator Casey Crabtree of Madison.

Senate Bill 239 expanded the Reinvestment Payment Program mentioned earlier in the day.

Instead of the three year period data center lobbyists deemed inadequate, the bill extends the program up to 30 years, pending a two thirds majority approval from the State Board of Economic Development.

The end results from the Senate State Affairs Committee puzzled people like Taffy Howard, who spoke to us the next day.

It is odd that Senator Karr's bill passed because that was a data center bill of rights and said, you can't give them any, any tax refunds or any tax breaks.

But then 239 makes it through and it essentially says the opposite.

So not sure how that's going to play out.

It played out through an amendment on the Senate floor a few days later.

The amendment removed the section banning sales tax incentives from SB 135.

And so until I provide, get provided - am provided with greater clarity on that language, I'm just going to strike it at this time.

As I'm waiting, working with our our fine minds at LRC to provide clarity to that question about the tax exemptions and if they prohibit the rebates.

The Senate handily approved the bill.

That was not the case for Crabtree's bill expanding the Reinvestment Payment Program.

The bill would have applied to any industry, but senators debated for nearly an hour the pros and cons of incentivizing data centers.

Many shared the same opinion that killed representative Roe's sales tax bill.

It was 6:00 in the morning when I took off this morning and the people on the road with me were the guys going to work.

I'm assuming factory workers, plumbers, whoever, everybody who has a white truck like mine with a with a ladder on it.

And that's the key.

Where's their tax break?

In his closing remarks, Senator Crabtree argued those were the very people who stand to benefit from these deals.

Reminder this is negotiated out an each individual project for all industries with two thirds of a board that selects those in an open meeting.

This is far from being some backroom deal.

This is about building opportunities for our future here.

This is about putting more money back in people's pockets.

I'm talking about hardworking South Dakotans, the ones with the ladders on the trucks and the ones with the hammers on the hips.

And I'm telling you, if we don't get with it, we're going to be left behind.

We're going to be driving to go see our kids and our grandkids in some big city that did say yes.

But the Senate ultimately said no by a razor thin margin, killing that last bill to incentivize data centers in South Dakota.

The debates that unfold during session can have immediate impacts around the state.

Applied Digital had planned to host a townhall for Deuel County residents who wanted to learn more about the proposed data center in Toronto.

But the last bill incentivizing data centers died in the Senate the day before that townhall was scheduled.

And a few hours later, we learned the townhall was canceled.

That was a surprise for some of the Deuel County residents we talked to, but it didn't stop them from telling us what they thought of the proposed project.

Michelle and Erik Oftedahl run a farm outside of Toronto not far from the proposed Applied Digital data center site.

The project got their attention in late 2025.

We've had so many projects come in from, you know, wind farms to generators to power lines.

It just felt like we were being completely over industrialized.

And we finally just thought, we need to get all of us together and, you know, do something about this.

Get our voices heard.

They started a group called RURAL, or Residents United for Rural and Agricultural Land.

They started paying close attention to county commission meetings.

And we were really shocked to learn like our county didn't have ordinances for a lot of things.

It was it was very open ended.

Nothing really set up to protect us.

And when we asked for it, they kind of just kept pushing us off like, oh, you'll have time to figure out that later, or we don't want to do it yet.

State law does not require counties to establish zoning ordinances to regulate development.

The Oftedahl's point to how data center developments have exploded in other areas of the country.

They want to prevent industrial encroachment on their farmland.

Some legislators this session have encouraged people to pursue local regulations rather than broad state policies.

But the Oftedahl's say they didn't get very far at the county level.

Originally the county commissioners kind of held off.

They said they're not going to come if they don't get the tax breaks.

So let's just hold off and see how the legislation plays out.

And that didn't feel right.

I don't know, in my gut, I still think they have plans to come, whether they get the tax breaks or not, because if they don't get them this year, I'm sure they're going to try next year.

But that would be welcome news for some.

Deb Adkins is the Executive Director of the Clear Lake Area Development Corporation.

She'd worked with Applied Digital to host the townhall later that night.

But with the death of S.B.

239 the day before, she spoke to us as if the project was dead on arrival.

There are a lot of disappointed people in the community and in the county, countywide.

I talked to a lot of people throughout the whole county.

Mainly, you know, a lot of business owners are disappointed.

They were looking at this project as bringing good growth to their business.

But where some saw opportunity, others felt anxiety for the strain that growth could put on existing resources.

Deuel County Sheriff Cory Borg and EMT Sheila Monnier were especially concerned for the construction phase of the project.

Especially when I mean you they're telling us 1200 to 1800 people working, Now, they might be carpooling to work, but you're still adding a lot more traffic to an area that's not used to it.

You have more people, you have more calls.

And that's something that I don't think the developers, county commissioners, you know, other boards look at of what are we going to do to our volunteer first responders, fire departments, EMS, if we have this many people coming in?

And we we rely on the good graces of the employers of the county, because, you know, when you when you are on call and you're at work, they let them leave work to go, come down here and get in the ambulance and and go to the call.

Same thing with our volunteer firefighters.

You know, they leave their jobs, they come out of the fields.

They they do whatever it takes to get on the ambulance, get on the fire truck and respond to the call.

So if we add more calls on to it, that's more time away from work, you know, less productivity at work.

How long before our employers start going, oh, I don't know if we should let you be on call anymore when you when you're at work, Of course, that massive traffic influx only lasts so long.

Residents expected anywhere from 150 to 200 jobs once the data center was up and running with an average wage around $65,000 a year.

But there's still skepticism.

And even if you take that average of $65,000, there's no housing available in Toronto.

I mean, you know, there's 1 or 2 empty houses.

Even if Applied Digital were to fund housing developments to address that issue, Erik Oftedahl isn't convinced.

Do you really want to be a company town?

If something happens and there's a bubble and it bursts or whatever, and they go out of business, then all of a sudden you have a whole bunch of empty houses in town But according to Deb Adkins, Toronto's population was never expected to double with the data center.

You wouldn't have that whole 150 coming into the community.

You know, that 150 would also, you know, went as far as, as Brookings, you know, and supplying people in Brookings with jobs coming this way, you know, and over, you know, probably to Castlewood coming this way and even Watertown coming this way.

The kinds of projects that are needed, you know, are the bigger projects like Applied Digital, for housing and job security and keeping our kids here, you know, wanting the kids to come back home again and stay here and have jobs for them, you know, and it just wouldn't be manual jobs of stuff, you know, it would be also career jobs, you know, with with companies like them to come in and supply those jobs for the area.

She's not the only one concerned about the next generation.

Sheriff Borg thinks of the ambulance volunteers.

You look at our roster, I think our oldest volunteer is around the 70 year old mark and the youngest is 18.

So there's a wide gap in there.

And then you take I think we did awards in January for and a lot of those had 20 years or more in and so you're looking at, you know, what I call the downhill slide of retirement of those.

So who's going to replace those?

Something we hear from the folks that were excited about these development projects saying we want our community to grow.

We want our kids to stay around here closer to home and have those job opportunities.

It almost sounds like if the kids are staying around, maybe a better chance of that next generation joining first responders.

I guess., how do you how do you weigh those two things?

To me, it's more of a struggle on the volunteer side that, you know, when I grew up and Sheila did and a lot of people, you helped out your community by doing that and, you know, knew that you might miss a basketball game or your child's event, but the community needs that help.

And that's what you did.

And you've seen kind of a shift more towards now I'm going to be home with my family I know I've been asked this question too, like, well, they're going to give you a bunch of money.

Well, money is great.

And I've said this before, money is great.

You know, it buys us the things, but it doesn't fill our boots.

You know, it doesn't it doesn't bring us the staff that we need.

The issue has dominated local conversations for months, including lengthy county commission meetings.

The minutes from a Deuel County commissioners meeting in December report 90 local residents arrived for public comment, expressing a range of opinions.

Sheriff Borg was one of them.

Personally, I'm not against the data center.

I come out in December and called the issues for first responders for of 'Hey, what is this going to do?'

It doesn't mean I'm against the data center and it doesn't mean that I'm for it either.

But I want the answers.

Like, I think that's a responsible question to ask.

I really do believe an elected official, whether it be me or a county commissioner, needs to represent their district, or myself, the county.

And myself being the sheriff, I should be representing the people on public safety matters, and the county commissioners should be representing their district on 'What does my district wamt?

Does my district want this project or not?'

And that's where I think we get into some trouble with elected officials of not always listening to the people that put them in office.

That frustration has extended to state lawmakers.

Representative Kent Roe has faced his share of pushback in local crackerbarrels for supporting tax incentives for data centers.

He respects those concerns, but they aren't the only opinions he's heard.

I've had so much positive contact.

Please keep carrying this forward.

These are necessary things.

Address the concerns.

Address the the need for more law enforcement or more emergency services.

Whatever, whatever you need to do to to provide comfort for these people because that's ultimately what they're seeking.

Behind the scenes, I've had people from Watertown, Milbank, Brookings, Clear Lake, Toronto, Astoria, Estelline, Hayti.

We can't all be farmers, we can't all work in Watertown or Brookings or Sioux Falls or Rapid City.

Some think a hyperscale data center development could inject new life into a stagnating rural population.

But it seems a devotion to a rural way of life, despite its challenges, fuels much of the resistance to the project in Deuel County.

We do have kids that leave, but we have a lot of kids that want to stay and farm, our daughter being one of them.

And that kind of is going to parlay into the next part of this question is she wants to stay and farm and she doesn't want to stay if this is going to turn into you look out our window and it's an industrial park.

We would love to have more ag businesses.

We'd love to have more main street businesses.

A giant corporation coming in with a tech company almost creates more problems than it solves.

So it's not really saving our area.

We're really, really discouraging our young farmers when we let these projects in sometimes because they can barely afford land the way it is.

You know, we really want young farmers.

We want family farms.

We've lost enough in our state.

We lost close to 4000 in the last ten years, based on the census and our state's supposed to be agricultural.

And our county states that it's agricultural.

So why aren't we setting our standards a little higher?

After our visit to Deuel County, we scheduled an interview with the CEO of Applied Digital, Wes Cummins.

He says the hyperscale data center project in Toronto is unlikely to move forward after the tax incentives failed in this year's legislative session.

Here's a portion of our interview where he shares what's at stake for the industry nationwide.

We're seeing more and more kind of a distrust of the data center industry.

What do you suppose is driving that and your strategy in responding to some of the pushback that we've seen in places like Toronto and this issue?

Sure.

It's, in my opinion, it's the same thing that drives distrust in a lot of things in our country, right?

It's it's around the fact that most people get their information from 20 or 30 second clips off of Facebook or TikTok or whatever it might be.

And I think there's, you know, it's just not an understanding of the critical infrastructure role data centers play in your daily life and every single person in the state, most likely in the state of South Dakota and in the country, Almost in the world.

The critical role that data center infrastructure plays in your daily life.

And then the other aspect that I think people are missing here is we are in this, this is just my opinion, but we are in the greatest arms race we've ever been in, in the history of our country.

And AI is revolutionary.

And it is going to be used in, you know, Department of War, Department of Defense.

It is imperative that we win.

This is driven by infrastructure.

If you look, you can go look at a chart of electricity generation capacity and what has happened over the last 30 years and compare the United States to China and see how much more electricity generation capacity, because this is a two country rate and it is us and it is China.

And they're not going to slow down and they're not going to put a lot of bottlenecks on building this type of infrastructure throughout their country.

And it's really what drives the lead in this race.

American, you know, technology is still exceptional, right?

We are still the leaders in the world.

And we need to continue to be the leaders in the world.

And when there's no brakes put on what China does, it becomes much more difficult here in the US to build this largescale infrastructure that we need to drive us forward to maintaining our leadership, both from a technology perspective, a Department of War perspective and economically around the world.

And so I just think that the misinformation around, data centers make your electricity rates go up, like there's just like, that's it.

Electricity rates are going up.

That's a it's an artifact of hyperinflation in the first half of this decade.

Utility rates move slower.

So grocery store inflation happens immediately.

Utility rates happen over years.

If there are no data centers built in the United States.

Zero.

Your electricity rate is going to go up.

Building data centers allows you to build additional generation that allows you to use infrastructure more effectively.

It allows you to make your grid more resilient, and it actually can stabilize energy prices.

And so this demonizing of, you know, X equals Y of data centers making rates go up is, is is really a big amount of misinformation.

But it's gained a huge amount of traction.

It's actually the force that can stabilize electricity rates for South Dakota, for North Dakota.

And we're working really diligently to make sure that we play our part.

You can watch our full interview with Applied Digital CEO Wes Cummins on our YouTube channel.

With every legislative seat and the governor's desk up for grabs in November's election, it's not clear if hyperscale data center developers will wait for a new set of lawmakers to make their case next session.

in the meantime, Governor Larry Rhoden the "Data Center Bill of Rights for Citizens" into law.

You can find all our reporting on this year's legislative session online at SDPB.org/News.

Until next time, I'm Jackie Hendry.

Thank you for watching.