Rep. Anna Novak, R-Hazen, presented the framework of proposed legislation this week aimed at state-level regulation of data centers in North Dakota. Her bill focuses on three primary areas: the cost of electricity, water use, and requirements for facility decommissioning, issues Novak identified as "major concerns of the North Dakota citizens" and areas where locals are seeking state assistance.
The first core tenet of Novak’s bill is to formally prohibit any data center-related electricity costs from being transferred to ratepayers, enshrining a "bring your own power" principle in state law. Novak emphasized the need to "codify that rate shifting to residential customers cannot occur" due to large loads or data centers, ensuring electricity bills for residents do not increase because of these facilities. She noted that while some large data centers can benefit electricity consumers, ratepayers need protection in instances where that is not the case. The bill also seeks to ensure ratepayers receive clear information regarding the reasons behind any proposed utility rate increases, allowing them to understand why their costs are going up.
Regarding water use, the legislation would mandate that all data centers implement closed-loop water cooling systems. Novak stated this is a direct response to citizen concerns, particularly after recent drought conditions, as these systems use less water than open-loop alternatives. She described it as a "valid concern of citizens."
For decommissioning, the bill proposes requiring data centers to have a plan for repurposing their structures when they are ready to be shut down, likely including a bonding requirement for the developer. This aspect drew discussion among lawmakers. Rep. Mike Nathe, R-Bismarck, expressed reservations about singling out a specific industry for decommissioning plans when other facilities, such as ethanol plants or large distribution centers, do not have similar requirements. However, Rep. Jonathan Warrey, R-Casselton, chair of the interim Artificial Intelligence and Data Centers Committee, supported the need for such plans. Warrey cited the rapid changes in the industry's economics and common 15-year lease agreements for data centers, questioning "what do we do in year 16?" Novak noted that county commissioners are "asking for the most help on" the long-term decommissioning problem and warned that state inaction could lead to more stringent requirements at the local level.
Beyond Novak's proposals, other lawmakers are exploring additional policy changes. Sen. Dean Rummel, R-Dickinson, suggested narrowing the sales tax exemption currently used by data centers to apply only to computing equipment, rather than including items like fiber optics, racking, or cooling systems. Rummel estimated this change could reduce the exemption's value from tens of millions of dollars to a few million.
Sen. Jose Castaneda, R-Minot, proposed requiring every county to develop a local data center ordinance that addresses specific topics, such as setbacks or noise limitations. He believes this would provide clarity for both the public and developers by ensuring everyone operates on the "same sheet of music" while still allowing local control. Sen. Janne Myrdal, R-Edinburg, agreed, stating state rules should facilitate local control without overriding local ordinances. Senate Majority Leader David Hogue, R-Minot, further suggested that all data center zoning decisions should be made at the county level to avoid a "multi-tiered structure" of competing local jurisdictions.
Some lawmakers have voiced concerns that the proposed electricity protections in Novak’s bill could have unintended consequences for other industries that are also large electricity consumers, such as oil refineries. Others cautioned against legislation that specifically targets data centers, warning against attempting to "pick winners and losers" among various industries. Castaneda suggested that lawmakers should consider regulating industry as a whole, rather than focusing on individual factories, given their collective impact on the power grid.
Novak's bill is still in development, with final language not yet determined. She is working with various agencies and stakeholders to refine the approach before the legislative session begins in January.
