Governor signs data-center protections into state law

Governor Larry Rhoden of South Dakota has signed Senate Bill 135 into law, aiming to protect households and businesses from potential adverse effects of data center development on electricity and water services. The new law, effective July 1, applies to data centers with a peak electricity demand of at least 10 megawatts. A key provision prohibits state government from preempting or limiting the authority of local counties, municipalities, or other political subdivisions to regulate data center construction and operation. The legislation, sponsored by Republican Sen. Chris Karr of Sioux Falls and House Speaker Jon Hansen of Dell Rapids, initially sought to ban state financial incentives for data centers, but this provision was removed. Data centers were a contentious topic during the 2026 legislative session, with lawmakers rejecting sales-tax breaks, a decision that led Applied Digital to reconsider its plans for a data center near Toronto. Concurrently, the Sioux Falls council approved a rezoning request for a data center. Governor Rhoden also signed House Bill 1038, which allows the state Public Utilities Commission to charge electricity utilities for the actual costs of applying for special rates to serve data centers.