Sen. Chris Karr, R-Sioux Falls, answers questions from the press in his office at the Capitol in Pierre on Jan. 29, 2026. He’s sponsoring legislation this year that would regulate data centers. (Photo by Joshua Haiar/South Dakota Searchlight)

With support Friday from every member present, the South Dakota Senate passed a bill dubbed the “Data Center Bill of Rights for Citizens.”

Senate Bill 135, which now moves to a House committee, requires data center companies to ensure a facility’s water usage will not overburden local resources and to pay for their own electricity costs caused by the facility. It also prohibits the state from overruling local governments’ authority in relation to data center ordinances.

The bill originally banned data center tax exemptions at the state and local levels, but the Senate voted to strike that language, even as the bill’s sponsor said the language is under review and could return later.

Data centers — rooms or buildings full of computer servers — have been storing cellphone pictures, emails and social media accounts for years. What’s new are 100- to 1,000-acre warehouses full of servers for cryptocurrency and artificial intelligence. Those massive data centers, needing 30 to 1,000 megawatts of energy, have electricity consumption equivalent to 29,000 to 800,000 residential customers.

South Dakota’s biggest data center consumes 30 megawatts, and the state has none of the vastly larger data centers that have proliferated elsewhere. Data center legislation introduced this winter during the state’s legislative session attempts to incentivize or regulate those larger data centers in South Dakota.

The bill’s sponsor, Sioux Falls Republican Rep. Chris Karr, amended the bill to remove the ban on tax exemptions. But he hopes to push for amendments again as the bill makes its way through the House.

He told lawmakers that although he opposes new tax exemptions, he intended the bill to allow tax incentives currently used in the state — such as the Reinvestment Payment Program, which is a sales tax rebate program. He does not know if the original wording meets that intention, he said, and is working to clarify that language with the Legislative Research Council.

“I only want to present something to you that I understand and can assure you is happening in this bill,” Karr said.

The bill, as amended, passed the Senate with a 34-0 vote. Sen. Arch Beal, R-Sioux Falls, was excused due to an extended health problem. 

If Karr succeeds in amending the bill again to address tax incentives and the House supports an amended version of the bill, it’ll come back to the Senate for further debate before heading to the governor’s desk.

Two other data center-related bills were stopped on Friday.

A bill introduced by Sen. Casey Crabtree, R-Madison, to exempt large backup generators that are not connected to the grid — which data centers often need — from regulatory and siting review by the state Public Utilities Commission failed. The vote was 17-17, and Lt. Gov. Tony Venhuizen, who was presiding, opted not to cast a tiebreaking vote. Crabtree announced his intent to seek reconsideration of the bill.

Crabtree said local governments could still engage in regulation, but Sen. Joy Hohn, R-Hartford, was among the senators who were hesitant to surrender state oversight.

“Not every county has planning and zoning,” Hohn said. “And so the PUC process is not redundant.”

A bill that would ban government bodies from entering into nondisclosure agreements for data center projects failed in a 30-37 vote on the House floor.

Rep. Kent Roe, R-Hayti, called the bill “well-intended but overbroad.”

“Let’s come back with a narrower bill that protects real transparency without scaring away legitimate projects,” Roe said.

A bill that would expand the Reinvestment Payment Program to require separate regulations and tax incentive approaches for larger companies, such as a data center company, is expected to be debated in the Senate next week.

A bill from Roe that would have granted data centers 50-year exemptions from sales taxes on their equipment and software purchases was rejected by a committee earlier this legislative session.

South Dakota Searchlight’s John Hult and Joshua Haiar contributed to this report.