BISMARCK — North Dakota Gov. Kelly Armstrong issued his first veto since assuming office Friday, citing concerns over the constitutionality of Senate Bill 2261.

The legislation sought to establish a prison industries workforce development tax credit — a non-refundable tax credit equal to 10% of the cost of purchased components of final manufactured products or labor from prison industries.

In his statement on the veto, Armstrong said the credit would have potentially created an incentive to purchase components from Rough Rider Industries – a self-sustaining state agency at the State Penitentiary which qualifies as a prison industry providing final manufactured products.

He said the bill creates an “uneven playing field” by giving Rough Rider Industries an unfair competitive advantage over out-of-state manufacturers. That would potentially violate the Dormant Commerce Clause of the U.S. Constitution, which prohibits states from enacting laws that discriminate against or unduly burden interstate commerce.

“Tax credits, when given to micro-segments of the economy, decrease state revenue and further saddle those still paying taxes with a higher percentage of the tax burden,” Armstrong said in his statement. “Any tax policy that creates this type of carve-out must be tied to a significant outcome that benefits the state’s economic interests. This bill does not do that. Combined with the aforementioned legal concerns, the juice in this case is quite simply not worth the squeeze.”

The bill passed the Senate in a 43-3 vote and passed the House of Representatives on a 56-33 vote.

To override the veto, both chambers of the Legislature vote and both need to reach a two-thirds majority in favor of the override. A two-thirds majority is 63 votes for the House and 32 votes for the Senate.

ELLENDALE, N.D. — Applied Digital Corp. plans to expand its footprint in Ellendale, North Dakota, according to Nick Phillips, executive vice president of public affairs and real estate acquisitions for the company.

Applied Digital completed a blockchain facility in Ellendale in 2023, and its current 380,000-square-foot, high-performance computing facility is expected to begin operations later this year. That will be followed by two additional 900,000-square-foot expansions, Phillips said.

“The first building that’s going up right now is about a $1.3 billion investment for us, and we’re anticipating another $4 billion,” he said. “That’s our investment for the buildings, the transformers, the chillers, all of the mechanical equipment. We anticipate our customer will invest approximately another $15 billion, so this is about a $20 billion total capital investment on our 320-acre site.”

Applied Digital hosted Gov. Kelly Armstrong and officials from the state, the City of Ellendale and Dickey County on Wednesday, March 19, to learn about the company’s operations in North Dakota. The event included a tour of Applied Digital’s data center, which is currently under construction, and Ellendale Acres.

Ellendale Acres is a housing community that was developed with a partnership between Applied Digital, the City of Ellendale, the state of North Dakota and Headwaters Development to build 20 homes and a 38-unit apartment complex.

Armstrong also signed House Bill 1539 at the event in Ellendale. With the signing of HB 1539, on-site backup electric generation that exceeds 50 megawatts and is not connected to the power grid will no longer be subject to the North Dakota Public Service Commission’s Siting Act, according to a news release from the Office of the Governor. The change in law takes effect Aug. 1.

“This will allow data centers and other businesses to add on-site backup generation more easily with local approval while still complying with environmental protections,” the news release says. “In testimony on the bill, Applied Digital, which also has a facility in Jamestown, said backup power generation will protect workers and equipment from unintentional harm caused by unexpected disconnection from the power grid and will allow the data center’s large load to operate off-grid in emergency situations, improving the reliability of the grid for other customers and the grid’s operators.”

Applied Digital designs, develops and operates next-generation data centers across North America to provide digital infrastructure solutions to the high-performance computing industry, Phillips said.

In North Dakota, Applied Digital has blockchain sites that support cryptocurrency mining about 7 miles north of Jamestown and 1 mile west of Ellendale.

Armstrong told The Jamestown Sun that Applied Digital’s project in Ellendale can happen in North Dakota because of the state’s great fiber buildout, business environment and energy.

“When you have a town like Ellendale in this area of rural North Dakota that has really been struggling just to stay alive for the last 20 years, it’s a tremendous opportunity not just for this community but for the economy of south-central North Dakota,” he said.

Ellendale Mayor Don Flaherty said Applied Digital gives the City of Ellendale an ability to move forward and do things for the community that weren’t possible five to 10 years ago.

“Now I can stand in front of you today and I can say with the things that are happening right now, I see Ellendale being a shining light in this area of North Dakota well into the 22nd century because of the things that we’re going to do and the strength that we’re going to bring back to our community because of this,” he said.

Phillips said Applied Digital expects to be a top 10 property taxpayer in the state in the next year or two.

Applied Digital expects to employ 350 full-time employees at the Ellendale site, and those people will need places to live in the community, Phillips said.

“In terms of local infrastructure, one of the things that we’ve needed to do is we’re trying to convince folks to move here, to live here in Ellendale, and that’s very important for us,” he said. 

Currently, about 450 workers are in Ellendale for construction of the 380,000-square-foot, high-performance computing artificial intelligence data center, Phillips said.

“I’m told that number (of workers) is going to go up drastically as the next two buildings get farther underway,” he said.

Flaherty said Ellendale’s peak population was either 1,800 in the late 1950s or early ’60s or 1,500 in 2000, depending on what artificial intelligence Google search engine was used. Ellendale’s current population is over 1,100, according to the U.S. Census Bureau.

Flaherty said Applied Digital coming to Ellendale is the “first domino to fall.” As a result, he said more people will want to do business in Ellendale.

“We’re going to have spouses of people who are going to work at the data center who are going to say, ‘Hey, I want to start this kind of business,’ or ‘I’ve had this kind of experience and I want to bring that to here,’ ” he said.

To help the Ellendale community, Applied Digital partnered with Headwaters Development and the Bank of North Dakota to build 20 new homes — eight four-bedroom and 12 two-bedroom — and a 38-unit apartment complex utilizing the state’s Rural-Workforce Initiative to Support Housing (R-WISH) pilot program. The housing development is called Ellendale Acres and is located in south Ellendale.

The R-WISH pilot program utilizes up to $10 million of Bank of North Dakota capital to complement the work done by the North Dakota Housing Finance Agency and the North Dakota Housing Initiative Advisory Committee, according to Bank of North Dakota’s website. The maximum amount from the R-WISH fund is the lesser of 30% of the project costs, $3.5 million or the matching contribution from the company.

Applied Digital contributed $3.5 million toward the program to build housing in Ellendale. Headwaters Development will own the homes and apartment complex and rent them to Applied Digital employees.

Armstrong said Applied Digital’s project and helping with Ellendale’s housing challenge is a holistic view of economic development. He said a local community and its elected officials need to promote and welcome business.

“You need a company that wants to be there,” he said. “You get private equity and then you get the Bank of North Dakota to step in. It really is kind of an all-above approach. They (Applied Digital) can’t build that facility if anybody who works there has nowhere to live. So they’ve engaged in the community in a really meaningful way. I think it’s a model for how you would do a large-scale project in a place like Ellendale.”

Ryan Sailer, president of Headwaters Development, said Ellendale Acres is a big accomplishment that had great collaboration to make it happen. He talked about the challenges and hurdles to bring housing to rural communities.

He said construction costs have increased for housing in rural communities. He also said it’s difficult for rural communities to get contractors and subcontractors to build housing the magnitude of Ellendale Acres.

He said the rental prices are lower in rural areas compared to urban areas, which caps the mortgages.

“As developers, we’re bringing in more equity which often isn’t sustainable because we have investors that require a certain risk-adjusted rate of return, and they’re not willing to take the risk,” he said.

He said if employers want to expand or a city wants to bring in employers, housing is needed for their employees.

“You almost have to come up with a combined solution to figure out how to do it somewhat all at once, to make it sustainable and viable,” he said.

Armstrong said Senate Bill 2225, which establishes the Housing for Opportunity, Mobility and Empowerment (HOME) grant program in the North Dakota Department of Commerce, is a complementary program to the R-WISH pilot program.

“Not every community that has a housing need has an Applied Digital coming in,” he said. “The R-Wish program only works because Applied Digital has bought in, the financing guys, Headwaters has bought in, and the bank (Bank of North Dakota) has bought in. There are places across North Dakota whether it’s Richardton or Hillsboro and between that also need housing that don’t have something like this (Applied Digital) at scale.”

If SB 2225 is approved, the Commerce Department would award grants to political subdivisions to build infrastructure to support affordable market-rate housing. The grant program would be funded one time and ends on June 30, 2027.

SB 2225 would appropriate $50 million to the program. The Commerce Department would allocate $10 million for communities with a population of 5,000 or less, $20 million for communities with a population of 5,001 to 20,000 and $5 million for rural metropolitan areas located within 20 miles of city limits of a community with more than 20,000 people.

The program provides grant dollars for one-third of the infrastructure costs for residential development projects. The local political subdivision and the developer of the residential lots would each provide one-third of the costs for residential development projects.

FARGO — The impacts of a highly controversial dairy operation planned for Abercrombie could hit home in Fargo.

The proposed 12,500-head dairy operation is cause for concern for Fargo residents, Dr. Madeline Luke told members of the city’s Sustainability Committee on March 18, because the waste and chemicals from the farm will flow into the Red River and straight into Fargo’s water supply.

“I’m here to give you a heads up on what may be coming,” Luke said.

She spoke on behalf of the Dakota Resource Council’s Agricultural Committee, a group that joined with residents in Abercrombie to petition the North Dakota Department of Environmental Quality to repeal the permit for the cattle operation.

The $90 million facility is planned for just south of Abercrombie in Richland County, about 34 miles south of Fargo. The facility would be 1.4 miles from the Wild Rice River and 1.8 miles from the Red River, on top of the Wahpeton Buried Valley Aquifer that supplies nearby communities.

In addition, another controversial new dairy farm farther north in Traill County plans to have 25,000 head of cattle.

“This vastly outnumbers the amount of dairy cattle in the whole state, and these are both projects of Riverview Dairy, which is a company out of Morris, Minnesota,” Luke said.

In those numbers, cattle will send large amounts of pollutants out into the water and air, she said, which can cause negative health impacts on North Dakotans.

Officials with Riverview were not at Tuesday’s meeting, but issued a statement to The Forum on Thursday night:

“The claims being made are not accurate. Our goal is to always be good neighbors, which includes farming in a manner that protects our shared water resources and the environment. Abercrombie Dairy will be designed, built, and operated for the protection of surface waters. All manure will be collected and stored on-site. This manure will then be tilled into the soil on surrounding farmland as an organic fertilizer. Manure application will occur at agronomic rates so that nutrients are used in crop production, which prevents run-off.”

The company also said it has been working with neighbors and other government agencies as the farm is being developed, and that all manure handling and application processes will be regulated.

“We are excited to grow dairy in North Dakota, and we encourage anyone with interest in our farms to contact us,” the statement said.

A retired internal medicine doctor, Luke said the cow manure contains nitrogen and phosphorus and creates a perfect breeding ground for green algae and other disease-causing organisms like E. coli.

The Red River already has more nitrogen than is advisable for community health, she said.

“North Dakota really hasn’t faced this kind of industrial farm operation before so they talk about nutrients and they talk about E. coli, but they don’t really mention things like hormones. All of these cows are making milk and excreting a lot of estrogen,” Luke said. “This is a lot of estrogen that is going into the urine, into the ground, and into your river.”

Anything the farm operators give the cows — vaccinations, disease treatments — can also flow into the water.

In addition, the state will face air pollution from the cattle, she said, with small particulates that cause inflammation of the circulatory system and increase the risk of heart attacks and strokes in people who live nearby.

While the city’s newly updated water treatment plant can filter pollutants out, Luke said, doing so would raise the cost of running the facility and, ultimately, impact Fargo taxpayers.

The amount of wastewater and manure from this farm will be massive, she said, and none of it will be treated as it leaves the farm before joining the river.

On Tuesday, Luke asked the sustainability committee to join the Dakota Resource Council in appealing the permit in court this month.

The committee did not take any action Tuesday.

Chairman and City Commissioner John Strand said Tuesday it was “important to hear from the people” but that the committee had to “wrap up” the meeting.

Neither Mayor Tim Mahoney nor other top city officials in attendance said anything further about the matter.

The sustainability committee only meets four times per year, meaning they would not be able to sign on to the appeal without calling a special meeting.

Reporter working the night shift 👻. I cover Fargo city government, Cass County government and underserved populations in the area.