Applied Digital pitches Deuel County AI facility as tax reform, national security issue
Company executives say South Dakota’s energy, climate, and workforce give it an edge in the global AI race — but current tax law puts the state at a disadvantage.
Northern Plains News, LLC
By Steve Jurrens \ Northeast Radio SD News
WATERTOWN, S.D.—The proposed Applied Digital AI factory in Deuel County aims to enhance local tax revenue and serve as a strategic effort to maintain American technological competitiveness globally.
In a recent interview, Nick Phillips, executive vice president of external affairs for Applied Digital, said South Dakota’s cold climate and energy surplus position it as a key player in the international AI competition.
A TOOL FOR LOCAL INDUSTRY
Phillips addressed common anxieties regarding artificial intelligence, characterizing it not as a replacement for human workers, but as a transformative tool.
He cited examples from the “Grand Farm” initiative near Fargo, where AI analyzes soil and imagery to help farmers increase yields while using fewer resources.
“If you’re still out there with a manual mower… you’re not paying your bills,” Phillips said. “Technology has changed. This is just an extra tool for us to utilize.”
Phillips also shared a personal account of how AI helped his family navigate a medical diagnosis, emphasizing that the technology’s benefits are already being felt in healthcare and energy production.
THE LEGISLATIVE LANDSCAPE
Despite the region’s operational benefits, Phillips said current state law makes South Dakota an outlier. Along with Colorado, South Dakota is one of the few Midwest states that charges sales tax on data center equipment.
Rep. Kent Roe has proposed legislation to eliminate what Phillips described as a “bricks and sticks” tax disadvantage. Phillips said the bill is essential to leveling the playing field with neighboring states such as Iowa and Nebraska.
“South Dakota energy is already powering these facilities in other locations,” Phillips said. “Why not bring home the benefits of having these facilities right in the state?”
Some local residents and lawmakers have raised broader questions about large-scale data centers, including long-term grid capacity, infrastructure strain, and whether projected tax benefits match public costs over time.
CONSUMER PROTECTIONS AND ACCOUNTABILITY
Phillips said the proposed law includes explicit protections designed to ensure that the arrival of a large-scale power user does not shift costs onto residential ratepayers.
He emphasized that Applied Digital is not seeking a “free ride,” but rather a tax structure that allows it to compete with other states for multi-billion-dollar investments.
COMMUNITY INVITATION
As the project moves forward, Phillips said Applied Digital plans to continue engaging with local residents.
He confirmed the company will host another town hall meeting in the third or fourth week of February.
“Spend the time to look at it,” Phillips said. “I don’t see any better economic development opportunity for the state of South Dakota right now than bringing folks in that are very compatible from a workforce standpoint.”
The facility is expected to bring 200 to 250 jobs to the area, primarily in mechanical, electrical, and facility maintenance roles.
“Energy Surplus Position.”