South Dakota Lawmakers Clash Over Legislative Report on Hyperscale Data Centers

A routine legislative briefing in Pierre turned into a sharp confrontation Tuesday as South Dakota lawmakers clashed over a staff-authored report on the rapid expansion of hyperscale data centers.

At the heart of the disagreement is a 17-page memorandum that, while intended to provide a neutral overview of industry impacts, drew a rare public rebuke from a veteran legislator with deep ties to the energy sector.

Sen. Steve Kolbeck, R-Brandon, cast the lone dissenting vote against accepting the document, titled “Hyperscale Data Centers,” after criticizing its tone and sourcing. Kolbeck, who serves as an executive for Xcel Energy and previously sat on the South Dakota Public Utilities Commission, argued that the report felt biased and questioned the validity of its data, according to reporting by South Dakota Searchlight.

The Conflict Over Neutrality

The memorandum was produced by Legislative Research Council (LRC) staff attorney Rachel Hale in response to an April directive from the Legislature’s Executive Board.

The board had tasked staff with summarizing the documented effects of data centers on water and electricity, as well as how other states have responded to the industry’s growth. During Tuesday’s meeting, Kolbeck challenged the report’s objectivity, asking whether Hale had consulted with investor-owned utilities or electric cooperatives before finalizing her findings.

South Dakota Lawmakers Clash Over Legislative Report on Hyperscale Data Centers — Photo: yahoo.com

Hale confirmed that she had not interviewed specific industry stakeholders, noting that her research was built on government publications, academic studies, law review articles, and news reports. Despite Kolbeck’s concerns, other legislative leaders defended the work as meeting its intended goal. State House Speaker Jon Hansen, R-Dell Rapids, who sponsored the state’s recent data center legislation, pushed back against the criticism.

“I read this with sort of the eye of trying to make sure that it was just laying out the facts and presented neutrally, and I did think you did a really good job at that,” Hansen told Hale during the meeting.

House Majority Leader Scott Odenbach, R-Spearfish, echoed this sentiment, describing the document as a “thorough and dispassionate look” at the issue. Legislative Research Council Director Doug Decker also stood by the staff, stating that the memo fulfilled the specific charge given by the board, even if some lawmakers felt additional research was still needed.

The Economic Stakes of Digital Infrastructure

The tension reflects a broader national debate over how to integrate massive data centers—which can consume as much electricity as a small city—into existing utility grids without burdening residential customers.

South Dakota moved to address these concerns earlier this year with the passage of Senate Bill 135. That law mandates that large data centers, defined as those with a peak electrical use of 10 megawatts or greater, must cover the costs of the infrastructure required to meet their energy demands.

The 17-page memorandum highlights the complexity of these projects. It cites research from the Lawrence Berkeley National Laboratory, which suggests that general infrastructure upgrades, rather than the data centers themselves, have been the primary drivers of recent electricity rate increases in some regions. Conversely, the report also acknowledges research warning that the heavy load of hyperscale facilities can strain grids and potentially shift costs onto the public.

For the average ratepayer, the stakes are tangible. If a data center unexpectedly ceases operations, the financial liability for the idle infrastructure could theoretically fall back on the utility provider and its customers. SB 135 was designed to mitigate this risk by requiring developers to cover those potential costs, while also ensuring the state does not override local regulations regarding water usage and zoning.

A Path Forward

While the board ultimately moved forward, the disagreement shows that data center policy is still an active issue in Pierre. As states across the country grapple with the energy demands of the AI boom and cloud computing, the balance between economic development and grid stability remains precarious.

Director Doug Decker suggested that any remaining questions or perceived gaps in the current report should be addressed through a new, separate memorandum, rather than by discounting the current one.

For now, the document stands as the official legislative record on the matter—a snapshot of a state trying to balance high-tech growth and utility regulation. The legislature has not yet decided if it will seek further clarification on potential rate shifts, but the debate suggests that the industry's "dispassionate" facts are becoming harder to separate from the economic interests of the parties involved.