SPEARFISH, SD — “America won the battle for web 1.0 and we won the battle for web 2.0. It meant that the internet really grew up with three values and openness at its core. If AI is instead won by China, the value of the Chinese Communist Party will be at the heart of those cutting edge AI applications and processors”. This preposition, which has become popular among the supporters of AI development in America was at the forefront on Wednesday as sitting US Representative for South Dakota, Dusty Johnson spoke to representatives from local utilities providers on his proposed Data Centers Done Right initiative.

The initiative, introduced by Dusty as part of his Governatorial campaign would be introduced upon his election to state governorship, and aims to encourage the construction of Data Centers within South Dakota by elimination of electronics taxation for prospective companies, and in exchange for this, he proposes that Data Center projects must prove that they will not inflict “undue burden” on water or electrical infrastructure or rate payers, as well applicants must prove that well-paying jobs in an area, in his words saying he would advocate for jobs “with an average total compensation greater than the average total compensation of hourly workers in that area”. If adopted, he predicts that state and local governments could expect up to $200 million dollars in accrued property taxes over the next ten years.

While this proposal is an interesting one, splitting a difference, cutting taxes while increasing regulation and giving the burden of proof to tech developers, the Black Hills has long been a region which has unique geographical challenges when it comes to development in the sphere of electronics.

Development Concerns

Utility representatives present within Spearfish Council Chambers appeared somewhat skeptical about the material feasibility of such a proposal. Power was a considerable concern, as utilities stated plainly that current capacity could not handle one data center with current capacity and likely did not have the available resources to expand further quickly enough to meet these demands. A representative from Black Hills Energy stated that they have, in effect, 10% of power generation available, with 90% already allocated to other organizations, and that it would be difficult to expand, and especially difficult to expand without financial aid to do so quickly.

Johnson was fairly assured that federal programs could aid in this increased demand for power, however he was additionally quick to note that over the next 30 years the US is not currently projected to be able to meet its own power needs.

While water has become less of a concern due to the advent of closed-system cooling for such server farms, the initial intake of such a center was unclear and likely variable, with additional water added in daily to account for a natural depletion as a result of imperfections in such systems. Johnson stated that such systems would use around the same amount of water as “The average American home” (82 gallons a day per individual, according to EPA Statistics). This water use statistic was not able to be verified, however within areas with ongoing drought conditions such as the Black Hills, water has become an increasing concern as reservoir replenishment and the need for more water within the coming years looms on the horizon, bringing another issue into the mix within this region.

Concern too was raised by utilities and media representatives present, and while Johnson seemed strong in his conviction to have jobs created be well-paying, he stated he did not particularly want to emphasize the number of operational positions created, saying “in a state with such low unemployment, I’m way more interested in the quality of jobs than the quantity” following this, Johnson laid out a hypothetical in which he stated that “five good jobs” could transform a community like Toronto, South Dakota. In addition, the necessity for technicians and repair persons (such as HVAC and Plumbing) at these facilities was also broached as an additional source of 

Overall much of the discussion featured an idyllic image of taxable income growth within the state. However, as this is an initiative, much of the exchange involved hypotheticals which did not give an exact indication of what constituted undue burden, instead focusing on the image of tax revenue and economic growth within the state, as well as the aforementioned initiative to put forward the AI race as a part of a greater, Cold War-evoking image of a political and technological conflict with China.

After the conclusion of the meeting, Eric Wolff of Black Hills Energy remained wary of the initiative’s effect on the Black Hills region, citing a lack of the serious energy and telecommunications infrastructure which would allow for Data Centers locally, and doubting the ability of utilities to be able to supply necessary energy without affecting users. “Call somebody in Cheyenne.” He said ”Microsoft’s been in Cheyenne for 12 years. Ask them if their prices went up when Microsoft came to Cheyenne, and they’ll tell you they did. And that goes back to my comment on the commission, the commission’s never going to allow us to put those costs on the backs of other rate-payers”.

Economic Outlook

In the first half of 2025, data center spending accounted for 99.9% of GDP growth, outpacing consumer spending for the first time in US history. The remaining 0.1% of growth, which comes from consumer spending is a concerning enough spike downward from the 3.7% in 2024, which was expected to last into 2025, and is likely significantly related to supply line shortages resultant from the trade war at the beginning of 2025– however this comes unfortunately with the difficult statistic that AI companies, though highly valuated are often falling short of profitability expectations.

In spite of conducting $1 Trillion dollars in AI deals this year, OpenAI has projected to earn around $13 Billion in profit, a dramatic difference between investment and valuation, and thus return on investment. While this industry has not left its “boom” yet, and may not for some time, voices warning about a developing economic bubble, comparing current events to the Dotcom Bubble are growing.

This is uncertain as the future always is, but concerning if we take current trends as an indicator. If South Dakota’s economic growth comes from this potentially volatile industry it opens the question to potentially unseen risks. The electronics that such companies use has an obsolescence expiration date which demands the immediate adoption of orphaned facilities by new investment, and while data growth is a significant demand in all technical areas, AI is an especially hungry investor, using vastly more available data than other industries. In the event of a collapse, the organizations who would arrive to take on the vast capacity of AI datacenters is uncertain, warranting a careful look not just at the environmental and infrastructural impact, but at the economic outlook for such companies in the future.