Dakotas discuss data centers

With the city of Sioux Falls annexing land into its city limits for a “hyperscale” data center and South Dakota governor candidate Dusty Johnson announcing a “data centers done right” initiative, the mysterious concept is inspiring a lot of questions.

To a rancher “AI” means artificial insemination. To the rest of the world, “AI” or artificial intelligence is becoming a more-often used tool to gather and organize data, research topics and even create images. This all requires significant electricity.

According to IBM: up until recent years, data centers were privately owned, on premise housing for hardware, software and networking components (information technology or IT infrastructure). This is changing. Many of the newer proposed data centers are in “remote” or rural locations. They are owned by cloud service providers and can service multiple companies and customers.

Andy Buntrock with Basin Electric Power Cooperative, based in Bismarck, North Dakota, says his company has developed a strategy to meet the needs of data centers while keeping the lights on for their established customers.

“Everyone seems to be wondering the same thing – how will these datacenters affect ‘me,'” said Buntrock.

Basin Electric generates and provides electricity to sub-contracting electric cooperatives in nine states including Montana, Wyoming, Colorado, North Dakota, South Dakota, Nebraska, Minnesota, Iowa and New Mexico. With a mixture of coal, natural gas, wind and solar generation, most of their electricity comes from facilities in Montana, Wyoming and the Dakotas.

Buntrock said the Basin Electric board of directors decided in June of 2025 to offer data centers and other commercial facilities that require significant amounts of electricity a different system than their regular users. Basin Electric offers the “large load commercial program” which requires bigger commercial users such as data centers to help finance a generation system that will be dedicated solely to that datacenter. In this way, Basin is hoping to insulate existing users from any effects of the large demands of data centers. These large load projects would go through local cooperatives such as Grand Electric, West Central or whichever co-op services the area that hosts the datacenter.

Datacenters are showing significant interest in building in Basin Electric territory. Buntrock said that since they approved the large load commercial program in June of 2025, over a dozen applications have come into their office with the requested amount of power totaling over 11,000 megawatts. For reference, currently, Basin Electric produces around 5,000 megawatts of power with its dispatchable energy sources (coal, natural gas hydroelectricity and oil) and 3,000 with wind and solar which is less reliable. This meets the demands of all of their consumers.

According to Applied Digital, the company that owns the datacenter in Ellendale, North Dakota, AI factories require 15-30 times the power density of traditional data centers, driving the need for new power and cooling strategies.

“Abundant, low-cost power and favorable cooling conditions” in areas like North Dakota are optimum, says Applied Digital.

Buntrock explained that the current electricity generation for their current users costs about $800 per kw. But because the cost of all goods has risen drastically, a new natural gas system they are building is going to cost $2,700 per kw.

South Dakota’s governor candidates have shared their thoughts about the effect datacenters will have on local communities.

In addition to the recent annexation of land for a data center near Sioux Falls, rumors of a datacenter being built in Deuel County, South Dakota have brought the issue forward. Dakota News Now and others report that Applied Digital (the same company that owns the Ellendale facility) has proposed a $16 billion investment east of Toronto that the company says would provide 200 jobs.

Deuel County commissioner Scott Fieber, a welder and farmer spoke to TSLN about a month ago.

At that time, there was no official movement on the potential facility. Fieber said that because some states offer a sales tax exemption on the equipment needed for the datacenters, they are more competitive than South Dakota in attracting them.

Fieber, who has toured the Ellendale facility, said he is neutral to the idea of eliminating sales tax on equipment in order to draw data centers to his area and his state.

“Ninety percent of the people I talk to in my county say they don’t care to see it. They don’t want it,” he said. One possible benefit, he said, would be the potential to use housing built by Applied Digital for an assisted living facility after Applied Digital is finished with the housing.

Republican Congressman Dusty Johnson who has announced his plans to run for governor in South Dakota spoke to TSLN about this issue. He also introduced his “Data Centers Done Right Initiative.”

He said that “we have some of the highest taxes in the country on datacenters, and that’s why they’re not coming here.”

He says his initiative would protect South Dakotans’ water, electricity and communities. To qualify for an exemption on the sales tax on electronics that go into these data centers (a tax almost nobody in the country has according to Johnson) they will have to prove they won’t cause an undue burden on existing electric users or water users, they will prove that they will pay substantial taxes to school and county government and that they will provide jobs with higher total compensation than the average total compensation of hourly workers in the area.

“That way we make sure we protect South Dakotans first but that we also grow this economy and keep taxes low. Once my plan is implemented, I expect we will have data centers paying $200 million in property taxes to local governments over a five-year period,” he said in an X post on Oct. 16, 2025.

Johnson also reported that a datacenter being talked about in Deuel County would pay $5 million in property taxes to a county that currently collects about $11 million in property taxes.

Current South Dakota Speaker of the House and governor candidate from Dell Rapids, Jon Hansen, also addressed this topic X. He also talked to TSLN in an interview.

“There have been a couple of bills that would give data centers massive sales tax breaks and I’ve opposed those bills. I don’t think South Dakota needs to give tax breaks to tech millionaires from coastal states. They say this is lucrative business. If that’s the case, why would they need massive tax breaks? Why should South Dakota subsidize them?” said Hansen, a Republican.

On the property tax topic he said “We’ve got people in South Dakota who are literally being run out of their homes because of high property tax bills that they can’t afford. I don’t know how on earth we can justify giving Mark Zuckerberg tax breaks when our very own citizens are being taxed out of their homes.”

“One of the biggest conversations in Pierre right now is, when the government gets involved in subsidizing the latest and greatest thing that wants to come along, we always hear the same refrain that this will create this number of jobs but the reality is there have been a lot of swings and misses,” he said.

“I’m not for the government picking winners and losers. I think we should have a fair system of taxation. If they want to come to South Dakota, that’s great. We welcome their business, but this whole business of government taking South Dakota’s tax money and redistributing it to massive out of state companies, I don’t think that’s fair and that needs to stop,” he said.

According to the Dakota Scout, Gemini Data Center SD LLC purchased property on the edge of Sioux Falls from Xcel Energy in 2024. This is the site that was recently annexed into city limits. The story reports that the inclusion into the city borders will provide the option for the project to tap into city utilities. However, it does mean higher tax burdens.