Bismarck, ND – North Dakota Governor Kelly Armstrong joined representatives from private industry and economic development groups this week to speak against a bipartisan bill that seeks to place further restrictions on public officials and agencies regarding nondisclosure agreements with developers of data centers and other industrial projects. Senate Bill 2406, which would introduce new enforcement mechanisms for such agreements, was the subject of testimony before a legislative committee on Tuesday, ahead of a special session of the North Dakota Legislature commencing Wednesday.
Under Senate Bill 2406, if enacted, a project developer could face the revocation of an agency permit should a public official or agency agree to a nondisclosure agreement, often referred to as an NDA, with the company. The bill also states that a company entering an NDA with an agency would not be eligible to obtain permits or zoning changes from that agency.
Governor Armstrong testified in favor of an amendment proposed by Representative Jonathan Warrey, R-Casselton, one of the bill’s sponsors. This amendment clarifies that the law would not prevent an agency from entering an NDA to maintain the confidentiality of information already protected or exempt from disclosure under state law. Armstrong argued that without Warrey's amendment, the bill would place entities like the Bank of North Dakota in "an awkward position" when private companies provide project information during loan considerations. He illustrated this by noting the bill would allow the bank to enter a confidentiality agreement with a farm operation but not with an ethanol plant, classifying the latter as an industrial project. Armstrong also expressed concern that the bill could hinder the hiring of consultants needed to evaluate potential investments, as these consultants often require confidentiality agreements to protect their analysis from competitors.
While supporting Warrey's amendment, Armstrong also maintained that the state's existing public records laws already effectively prevent officials from signing nondisclosure agreements. "We have good open records law," Armstrong stated, though he acknowledged there's "debate about the enforcement side of it."
Opponents of the bill, including Governor Armstrong, also argued that it does not make sense to penalize a private company if a public official violates the law by signing an NDA. Terry Effertz, executive director of TechND, echoed this sentiment, suggesting the bill could "halt or unwind a project that a community and its workforce are ready for over a paperwork violation." Effertz was among several industry and economic development organization representatives who voiced opposition to Senate Bill 2406.
However, supporters of the bill, including its introducer, Senator Tim Mathern, D-Fargo, contend that it improves upon North Dakota’s current open records law by adding crucial enforcement. Mathern stated that there is "very little consequence" for violating existing open records and open meetings laws in North Dakota. David Tamisiea, executive director of the North Dakota Catholic Conference, agreed, emphasizing that "This new bill has teeth because you could lose your permitting." Mathern and other proponents assert that the bill would provide greater transparency for communities that report being caught off guard by large-scale projects, such as multibillion-dollar data centers. Mathern specifically cited the Applied Digital project near Harwood, noting that area residents reportedly learned about the development just six weeks before the company planned to break ground.
Representative Todd Porter, R-Mandan, questioned witnesses supporting the bill about how it would enhance North Dakota’s existing open records law. The enforcement mechanism, allowing for permit revocation, was presented as the key improvement.
During his testimony, Nick Phillips, executive vice president of external affairs for Applied Digital, clarified that his company has utilized NDAs in North Dakota but asserted that they did so in compliance with state laws. Phillips explained that an NDA was in place for approximately six weeks while Applied Digital evaluated the viability of a project, and the agreement was subsequently lifted once the company moved into the permitting phase. In a related development, Stark Power, a company considering Mandan for a proposed data center, recently promoted during a community town hall that it does not intend to use nondisclosure agreements for its local project.
Senator Mathern also outlined two additional proposed amendments to Senate Bill 2406. One amendment would introduce an exemption for public entities that also serve as energy providers, such as municipal utilities. This exemption would allow these public utility companies the flexibility to privately negotiate service agreements with large industrial users, mirroring the practices of electric cooperatives or investor-owned utilities. The second amendment Mathern proposed would eliminate a state sales tax exemption currently available to data center developers.
This comprehensive discussion highlights the ongoing debate within the North Dakota Legislature regarding balancing transparency and economic development, with implications for industrial projects across Burleigh and Morton counties and statewide.
