As the AI craze spreads across the nation, South Dakota is beginning to catch the eye of AI data center projects.
One was recently talked about at a Deuel County Commission meeting.
Although the cold, frigid winters of South Dakota aren’t typically a positive selling point for most, for data centers they create a door of opportunity.
“We absolutely like very much the cold climate. That’s very beneficial,” said Nick Phillips, the Executive Vice President of External Affairs for a company proposing a multi-billion-dollar data center in Toronto, South Dakota.
He said those temps helped the company identify the location as a real possibility.
“It helps in two regards. So, on the one side we don’t have to consume large amounts of water in order to chill our facility. But, also, because it’s cold it saves a lot of money on the electricity side of things as well,” Phillips said. “Because when it is cold outside, that closed-loop cooling system is running around and we’re not having to use electricity in our chillers to bring that temperature down, you know, as much. Right? So there’s a big amount of savings operationally on not consuming water and not consuming as much electricity to do the cooling.”
Phillips said the colder temperatures help the worries many have about data centers. Other similar projects in the region have raised concerns about water and electricity usage.
Phillips said that’s never been an issue for Applied Digital, whose Ellendale, North Dakota, facility consumes about 10 gallons of water per minute.
“Which is the equivalent of a single-family home in North Dakota,” Phillips said.
Data centers that take millions of gallons of water use evaporative cooling. Applied Digital uses a closed-loop cooling system which reuses the same water “effectively forever.” As for energy rate concerns, Phillips says rates have not been raised in their center’s experiences.
Another concern brought up in regard to data centers is the noise level. That’s due to the operations of the cooling equipment and fans. However, the company’s plan is to have it a half mile away from all other structures.
He added the project’s impact economically can’t be fully projected since the project is in its infancy, but over the next 15 years there are a lot of dollars to be gained for the area.
“I’m anticipating hundreds of millions of dollars of economic benefit to the community and to the state at large,” Phillips said.
He said that comes through property taxes, sales taxes and employment. The project is expected to add around 200 full-time jobs.
It still must pass many state and local steps before it becomes a reality. Among those is pursuing a tax incentive for data centers in the state.
Phillips said currently, 38 states in the U.S. have tax incentives or similar programs. South Dakota had one on the table this past legislative session. However, SB 177 failed in the Senate in a 17-18 vote. That bill would have “provide[d] a sales and use tax refund for goods and services related to data center operations.”
Phillips indicated that for the project to become reality, some incentive programs need to exist for the data center to land in the state.
“The benefit to South Dakota is, while we’re asking for some assistance, there’s a lot of things that we don’t ask for that benefit the community.,” Phillips said. “[For example] in North Dakota…we anticipate being one of the largest property taxpayers in the state here in the next year or two. And that’s within about five or seven years of us existing in the state. We anticipate with South Dakota it would look fairly similar.”
Another setback at the moment is that according to Phillips at the Deuel County Commission meeting, the county doesn’t have zoning regulations that could constitute the scale of the project. So that needs to be addressed before it can move forward.
Phillips said people in the area have questions, but the company is happy to answer all of them and be transparent.
