Proposals for data centers in SC: No lures for new, water reports from all

Data centers may be cut off from incentives intended to help lure them to South Carolina under a proposal inserted in the state Senate’s version of the budget.

The one-year budget item, proposed by state Sen. Ed Sutton, D-Charleston and backed by several other lawmakers, prohibits the state Department of Commerce and Coordinating Council for Economic Development from granting incentives to data centers, which power digital services and artificial intelligence. Only new projects would be impacted.

“Google or Facebook do not need state incentives to come here at all,” Sutton said on Tuesday. “So that’s what I’m shutting the door to. It’s these billion-dollar companies that will probably relocate here anyway. We should not be spending state taxpayer dollars to incentivize them to come here.”

As large companies look to ramp up their digital processing and artificial intelligence capabilities, they need to build physical warehouses of computers. Some of those data centers are coming to South Carolina. While they may bring jobs and tax revenue, data centers can also strain energy grids and natural resources. As a result, blowback against new data centers has grown in the state.

But efforts at regulations are ongoing in the State House, so senators attempted to insert provisions into the state budget curbing the impact of data centers.

Senate Majority Leader Shane Massey told reporters it was unlikely the General Assembly would get to a data center regulation this year, though separate committees have been working on comprehensive proposals for months. Lawmakers only have a couple weeks before the end of the regular legislative session, leaving very few days to discuss bills this year.

“Even though there’s been considerable public backlash to data centers’ locations in some places, I think there needs to be more pressure in the legislature before there’s a real will for the legislature to act on it,” Massey said April 15. “And my hope is that we’ve not allowed for too big of a problem to be created that we won’t be able to fix by the time we do act.”

The state Department of Commerce does not recruit data centers to South Carolina, Secretary Harry Lightsey told lawmakers in February.

The South Carolina Department of Commerce awarded two discretionary incentives associated with new data centers to York and Greenville counties. York County received a $200,000 grant associated with its QTS data center, and Greenville County received a $50,000 grant connected to a DC Blox data center, commerce department deputy director of communications Alex Clark wrote in an email to The State in February. Clark wrote Wednesday no new incentives had been awarded since.

Many counties still award incentives, like fee in lieu of taxes agreements, to bring in data centers. Those would still be allowed under Sutton’s amendment.

The Senate budget items still need approval from the House, and Gov. Henry McMaster could strike language he disagrees with.

Senate sets one-year transparency requirements

Data centers in South Carolina already use millions of gallons of water annually. As more move into the state, strain on South Carolina’s water resources could grow.

A one-year budget item the state Senate approved requires commercial data centers to tell the state Department of Environmental Services how much water is uses monthly. The reporting will be due Jan. 31.

“I don’t see how anybody can oppose not wanting to know how much water is being consumed by each data center that we have here in South Carolina,” said state Sen. Allen Blackmon, R-Lancaster. Blackmon sponsored the proviso, in addition to a bill requiring similar reporting.

Another budget item, sponsored by state Sen. Chip Campsen, R-Charleston, requires the Department of Revenue to report the amount claimed by data centers for a sales tax exemption. The report would also include how many companies took advantage of the exemption.

“These are the wealthiest companies in the history, most likely, and we’re taking money from Fred and Ethel, and we’re giving them that kind of benefit,” Campsen said.

Campsen initially attempted to suspend sales tax exemptions for data centers, but the proposal failed to gain support in the upper chamber. It was withdrawn and not included in the Senate version of the budget.

State Sen. Shane Martin, R-Spartanburg, also filed an amendment to prevent data centers from increasing energy demand after being permitted. The proposal failed 23-19.

Reporter Joseph Bustos contributed reporting to this article