South Dakota lawmakers seek to maximize benefits, mitigate costs of data center growth Image By EPN Staff Key Points South Dakota passes “Data Center Bill of Rights for Citizens”: The state Senate unanimously approved SB 135, requiring data centers to cover their own electricity costs and preventing those costs from being passed on to residential customers. New transparency and limits on water usage: Data center operators must disclose projected water use to local providers and the Board of Water Management, submit biannual public reports, and cannot exceed approved water limits to protect local water supplies. Balanced approach to data center policy: The bill maintains South Dakota’s business-friendly tax environment while addressing infrastructure concerns, after lawmakers rejected both a moratorium on new data centers and a proposal granting 50-year sales tax exemptions for data center equipment and software. The South Dakota Senate unanimously passed Senate Bill 135, the “Data Center Bill of Rights for Citizens,” to mitigate impacts on local water resources and electricity rates. The original bill would have banned local and state tax exemptions for data centers, but the bill’s sponsor, Sen. Chris Karr, amended the legislation to remove the language. Karr opposes new tax breaks but wants data centers to continue to have access to existing ones, such as the Reinvestment Payment Program sales tax rebate program. “Let's recognize for a second the benefits of South Dakota, and what it's like to do business here,” Karr told the press. “We’ve protected South Dakota and its business landscape. We have no corporate income tax; we have no personal income tax; we have a competitive property tax structure. Historically, we are a business-friendly, regulatory climate. We’re a low-tax environment.” Why it matters South Dakota has seven data centers, which house artificial intelligence and data storage technology. In addition to supporting innovation, data centers create temporary and permanent jobs and contribute property taxes to local communities. Data centers are, however, heavy users of electricity and water. The average data center needs between 30 and 1,000 megawatts of energy per day, the equivalent of 29,000 to 800,000 residential customers. South Dakota’s largest data center uses 30 megawatts. The average data center also needs a lot of water, 300,000 gallons of water each day, equal to the usage of 1,000 homes, and large data centers can use 5 million gallons each day, the usage of 50,000 households. Water use is projected to increase by 870% in the future. To mitigate these costs, SB 135 requires data center operators to pay for electrical costs and prohibits the passing of costs onto residential customers. To protect community water resources, companies would have to notify the local water supply and the Board of Water Management in writing the amount of water the project will use. The water provider will determine whether the use is compatible with the water supply. Once operational, companies will have to submit a public report on water usage to the Board of Water Management twice a year. The center cannot exceed the established limit. The bigger picture SB 135 strikes a middle ground between those who want to increase tax incentives and those who want to place a moratorium on new data centers. Earlier this session, a bill that would have placed a one-year moratorium on large data centers failed in committee. Sponsors of SB 232 wanted to grant local governments and local utilities time to consider projects’ zoning and infrastructure impacts. Another bill that would have granted data centers a 50-year exemption from sales taxes on equipment and software purchases was voted down in committee. SUGGESTED STORIES Report casts doubt on data center growth forecasts A new report by an anti-nuclear and anti-natural gas advocacy group is being promoted to question the nation’s electricity needs. Their primary premise: There aren’t enough computer chips for all of the nation’s planned data centers. “For al Read more Local governments limiting data center growth as public opposition mounts In December 2025, several planned data center projects were rejected or curbed by city councils and other local governments in response to rising opposition among residents. A record number of projects were rejected or delayed in 2025 as companies experienced backla Read more The Data Center divide — can progress be made without draining resources and patience Republican lawmakers in Wisconsin are seeking to maximize data center benefits while mitigating the energy demands and costs. Data centers are large computer complexes that support artificial intelligence programs and other digital services. They’ve come under fire for the amount o Read more
Report casts doubt on data center growth forecasts A new report by an anti-nuclear and anti-natural gas advocacy group is being promoted to question the nation’s electricity needs. Their primary premise: There aren’t enough computer chips for all of the nation’s planned data centers. “For al Read more
Local governments limiting data center growth as public opposition mounts In December 2025, several planned data center projects were rejected or curbed by city councils and other local governments in response to rising opposition among residents. A record number of projects were rejected or delayed in 2025 as companies experienced backla Read more
The Data Center divide — can progress be made without draining resources and patience Republican lawmakers in Wisconsin are seeking to maximize data center benefits while mitigating the energy demands and costs. Data centers are large computer complexes that support artificial intelligence programs and other digital services. They’ve come under fire for the amount o Read more
