South Dakota lawmakers disagree on how the state should regulate and incentivize large-scale data centers .
Points of contention include targeted tax breaks, utility costs, and local control linked to the industry’s rapid expansion.
Several bills would either limit or preserve long-term tax incentives for data centers—some extending up to 50 years—while others focus on how electricity, water use, and infrastructure costs are allocated when large facilities come online. The debate has sharpened as communities raise concerns about grid capacity, ratepayer impacts, and land use.
Republican House Speaker Jon Hansen framed the issue as a cost-allocation question, saying lawmakers are responding to constituent concerns about whether residents should absorb infrastructure and utility expenses tied to massive facilities.
He cited President Donald Trump’s stand.
“I think one of the things that he said most recently is that data centers should be paying their own way.”
Hansen and other Republicans have emphasized scale, arguing that electricity demand from a single large data center can rival usage across broad rural areas, potentially shifting costs onto existing customers if safeguards are not in place.
Democratic leaders say they share concerns about the duration and scope of tax incentives but caution against sweeping restrictions that could discourage economic development or strip local governments of decision-making authority.
Senate Minority Leader Jamie Smith said extended incentives raise red flags for many constituents.
“When it comes to 50-year tax breaks, I’m not for that at all.”
Smith stated that lawmakers still have unanswered questions about data centers’ effects on electricity demand, water use, noise, and nearby communities, and about whether to scale incentives based on size and impact.
Governor Larry Rhoden has not taken a firm position on whether the state should restrict or preserve incentives, but warned against legislation that limits local authority while claiming to support it.
“Legislators talk a big game about local control a lot of times, and then we’ll bring legislation that completely prohibits local control in some cases.”
Rhoden said South Dakota should allow lawmakers, communities, and industry to weigh in.
“My view is we are going to keep South Dakota open for opportunities and open for business.”
Several data-center-related measures remain active, including proposals addressing utility chargebacks, limits on tax incentives, and the role of local governments in approving large facilities. Lawmakers say those bills are expected to advance through committees and onto the floor later this session.
