Rapid City SD – An ordinance rewriting how Rapid City regulates data centers — capping their water use, banning the largest of them outright, and imposing new noise and cooling standards — was supposed to get a recommendation from the Planning Commission on Sept. 10.
Instead, after roughly an hour and a half of public comment and commissioner debate, it didn’t get a vote at all. The Commission continued the item to its Nov. 5 meeting, giving city staff 60 days to rework it.
Where It Began
The city first defined “data center” and made it a permitted use in Light Industrial and Heavy Industrial districts on Dec. 16, 2024.
Under that ordinance, a data center of any size could be built in either district with no requirements around cooling systems, generator use, or noise — the same as any other industrial use.
According to a Sept. 4, 2026 memo from Jessica Olson, the city’s Current Planning Division Manager, that gap wasn’t an oversight so much as a timing problem.
Data centers, she wrote, have become “more prevalent around the nation” since 2024, and the industry’s water, sewer, electrical, and noise impacts have only become “well-researched” in the years since.
The memo frames the new ordinance as catching the code up to what’s now known.
Olson put it more plainly to the Commission in person, describing on-site power generation as a particular new concern: staff “knew they have high electrical usage, but in more recent years we’ve seen actual on-site power beyond the emergency generators” — data centers, in effect, “creating almost their own little power plants.”
Mayor Jason Salamun had previewed the effort in his July 20 budget address, telling Council his administration would bring data center regulations forward specifically to protect the city’s water supply.
The ordinance doesn’t name any specific project, but it lands squarely on questions raised earlier this summer about Sequitor Edge’s planned facility at the Black Hills Industrial Center, the only active data center proposal the city has right now.
What Ordinance 6746 would actually do
File #26OA006 (Ordinance 6746) creates three legal categories of data center where the code currently recognizes only one:
- Micro data center — peak demand up to 10 megawatts, capped at 4,000 gallons of water per day (not counting initial fill or irrigation). Permitted outright in Light Industrial and Heavy Industrial districts, provided it sits at least 500 feet from any residentially-zoned property line. Closer than that, it needs a conditional use permit instead. Only one micro data center is allowed per lot without triggering that review.
- Large-scale data center — peak demand between 10 and 50 megawatts, capped at 10,000 gallons per day. Allowed only as a conditional use, with a 1,000-foot residential buffer. It’s worth being precise here: the ordinance defines this tier by megawattage, with 10,000 gallons as a ceiling — not, as one shorthand summary of the meeting put it, a “4,000-to-10,000-gallon” range. A large-scale facility using a fraction of that water is still large-scale if its power draw clears 10 megawatts.
- Hyperscale data center — 50 megawatts or more, or more than 10,000 gallons of water a day. Banned outright, citywide, full stop.
Every tier, regardless of size, would be barred from evaporative cooling — the ordinance requires closed-loop or air-cooled systems instead, on the reasoning that evaporative systems consume significantly more water.
Backup generators are restricted to emergency use only, must meet EPA Tier 4 emissions standards, and can only be tested during the day for up to an hour at a time.
The noise standard is stricter than the shorthand version that circulated after the meeting suggests: operators must stay under 65 dB(A) and 65 dB(C) during the day (7 a.m.–8 p.m. weekdays) and 60 dB(A) and 60 dB(C) at night and on weekends — both weightings apply at both times, not one measurement for day and a different one for night.
Compliance is checked with acoustical studies both before construction and again before a certificate of occupancy is issued, measured at the property line.
The ordinance also gives the city and its utility providers standing authority they don’t clearly have today: the right to demand usage data from an operator at any time, and — if a facility’s water draw exceeds its allowed threshold — the right to restrict or shut off its domestic water supply.
The Case for the Noise Standard
Director of Community Development Vicki Fisher told commissioners the noise limits weren’t drawn up in a vacuum.
Staff looked at Cheyenne, Wyoming — a city with years of experience siting data centers — and found Rapid City’s proposed limits were “pretty in line,” running about five decibels stricter than Cheyenne’s.
She argued the comparison undersells the difference in practice: “there’s a lot of industrial uses that don’t persist 24/7. So that when the business day is done, that noise level drops drastically. For a data center, it’s 24/7.”
Fisher also defended regulating the low-frequency “bass” component of sound (dBC) that many communities don’t bother with, borrowing an analogy from a colleague on staff: two cars can drive by with radios at the same volume, but “you may not hear one, but you hear the one that’s got the big speakers and the bass turned way up high. You hear it, you feel it.” She acknowledged the science here is thin — “there just isn’t a lot of research” — but defended writing the standard in anyway.
She was candid, too, about how fast the ground is shifting under the whole effort: “It’s rare that we write an ordinance and then 24 months later we’re coming back with a complete rewrite. But this is one of those uses that, due to technical changes, the way these businesses are operating is drastically changing. Two years ago, the demand on water for a data center was extreme. Now, with the design and how they are cooling these, that has significantly dropped. In two more years, I think it’s going to change again.”
Industry’s Objection: The permit, Not The Rules
Three speakers representing data center development and utility interests told the Commission they didn’t have a problem with most of the ordinance.
Their objection was narrower and specific: making large-scale data centers a discretionary conditional use permit (CUP) rather than a use permitted by right.
Mike Stanley
Mike Stanley, with Dream Design International, said his firm has spent the last three to four years working with four or five different data center developers — projects ranging from 15 megawatts to, in his words, “sky’s the limit” — looking at Rapid City. Deals fall apart, he said, because purchase agreements and letters of intent for these projects almost always require irrevocable land use rights as a condition of financing. “We just had one that had that stated before, and that went away about three days ago,” he told the Commission. His ask: keep the CUP for Light Industrial zones, but make large-scale data centers a use by right in Heavy Industrial zones, where he argued a facility could sit close to a mile from the nearest house.
Eric Wolf
Eric Wolf, a business development manager for Black Hills Energy who has also worked with data center siting in Cheyenne since 2016, made a similar case from the utility side: “You’re not going to build a hundred million dollar project on a revocable CUP.” He argued Rapid City’s actual disadvantages relative to Cheyenne aren’t regulatory but physical — Cheyenne has a large natural gas hub 14 miles away and redundant fiber routes from two railroads and two interstates, while Rapid City’s providers run on a single fiber network — and that data centers have already been a use by right here for nearly two years without the city being “flooded by inquiries.”
Wolf also cited Black Hills Energy’s Lange II generating station, a 99-megawatt, $320 million natural gas plant now under construction north of the city — replacing an aging 1968-era plant on Deadwood Avenue that’s reaching the end of its life, not built in response to data center demand specifically.
His broader point was about cost allocation: that project’s fixed cost gets divided across every kilowatt-hour sold in the area, so adding a large new customer spreads that cost across more usage and can lower the per-unit rate for everyone else.
Pressed by Commissioner Vince Vidal on how the utility prioritizes customers if supply gets tight, Wolf said Black Hills Energy’s Wyoming contracts typically carve out a portion of a large customer’s load as “interruptible” — curtailed first, ahead of residential customers, during genuine capacity strain — and that in his six years overseeing those accounts, he’s seen that invoked exactly once, for four hours, during a peak-demand event.
Whether adding a data center actually lowers residential rates in practice is a genuinely disputed question in utility economics — worth reading as Wolf’s argument for why the industry believes it does, not as a settled fact.
The Fiscal Argument
Garth Wadsworth, public policy director for Elevate Rapid City — the public-private economic development partnership formed in 2019 from a merger of the Chamber of Commerce and two other development groups — made the fiscal case.
South Dakota is one of the few states that taxes electricity sales, he noted, and Pennington County adopted a half-cent sales tax this summer specifically dedicated to owner-occupied property tax relief.
Wadsworth also cited a second, larger tax change — a jump in the state sales tax rate from 4.2% to 4.5% — as something already in effect; that increase is real but doesn’t take effect until July 1, 2027, so he appears to have misspoken on the timing.
By his estimate, a modest 15-megawatt facility could generate $1 million to $1.1 million a year in electricity sales tax alone, plus another $2 million to $2.5 million in property tax revenue — figures that are his own projections, not independently verified here.
His warning: over-regulate within city limits, and developers will simply build across the line in unincorporated Meade County, which has no zoning at all. “We would absorb the low-frequency noise and the water draw while forfeiting” an estimated $3 million a year in tax revenue, he argued. “We want to preserve the ability for that property tax relief for our residents. We don’t want to shut the door on this completely.”
Where the Commission Split
Not everyone on the Commission was persuaded that loosening the permit requirement was the answer.
Ward 4 City Councilman John B. Roberts, the Council’s liaison to the Planning Commission, sided with industry on the CUP itself — “I’m not very pleased with the CUP. I wish that Rapid City had a planned industrial development that we could run this through instead” — but also pressed staff on whether the proposed noise limits were realistic anywhere near existing heavy industry: “I can think of three or four major industrial users that are way beyond that” already, he said, asking what happens when a required sound study simply finds the neighborhood already exceeds the new limit before a data center is even built.
Commissioner Pat Roseland focused on a different provision entirely. The ordinance, as written, only recommends that a data center operator “may hold” a neighborhood meeting before applying for a conditional use permit — it doesn’t require one.
Roseland wanted that changed to “shall”: “I would like to see it shall or be required to hold the neighborhood meeting prior to them getting a conditional use permit, just because some of the neighbors who may not get letters — they should at least have the opportunity to speak on this, because it’s a brand new lifestyle, I guess, with the data centers.”
Whether that word changes from “may” to “shall” is one of the specific questions staff will bring back in November.
Water scarcity, separate from the ordinance’s specific gallon caps, ran through the rest of the commission’s questions. Commissioner Eirik Heikis framed it as the core issue for him: “My biggest concern in the data center consideration is the use of water and that we are already in sort of a droughty, difficult time with water here… I know that we either need to do a better job of making these data centers more efficient in their use of water, or bolstering the treatment and reuse of water and not just the waste of water.”
Later in the meeting, he asked whether the ordinance’s timeline should be weighed against the Western Dakota Regional Water System — the regional nonprofit currently pursuing a multi-billion-dollar pipeline to bring Missouri River water to western South Dakota — asking staff to consider “the timing and the alignment of this” given that, in his words, “we’re running out of water.”
Commissioner Karen Bulman raised a related but distinct concern: what happens to a data center’s water allocation if drought conditions force the city to cut back after a permit is already issued. “If we start out and authorize a data center that has so many gallons of water and then all of a sudden we’re in a drought and we have to cut them back… what does that do to them?”
She also asked staff to come back in November with more detail on a question the ordinance doesn’t yet answer: what happens to the water a closed-loop system discharges into the sewer system when it’s replenished, and “what harm that would do down the road.”
A Response Left Unanswered
One commenter who spoke against the ordinance argued the Commission was working off rushed paperwork, invoked several state transparency statutes, and asked that his remarks be entered into the record “word by word.” He left the room before the meeting moved into commissioner discussion.
Commissioner Eirik Heikes addressed the comments directly, noting first that the man was no longer there to hear it.
He then pushed back on the premise behind the citations: Planning Commissioners are appointed, not elected, giving them — in his words — “a little bit of an arm’s length” from the kind of political accountability the commenter had invoked.
Heikes said he wanted to go through the claims “point by point” for accuracy before letting them stand unchallenged in the record, then turned to planning staff instead. Asked whether the ordinance had been modeled on other cities’ rules, Olson said staff had reviewed noise regulations from 10 to 15 other communities in drafting it.
The point-by-point rebuttal Heikes had proposed never happened — there was no one left in the room to direct it at.
The Vote
With the room split — some arguing the rules didn’t go far enough, others arguing the CUP requirement alone would drive investment out of the city — Fisher told commissioners staff needed more time to align the acoustical standards and meet with stakeholders before this goes any further.
Commissioner Haven Stuck made the motion: “I’ve tried to follow this whole discussion on a national basis and it’s extremely complex… I don’t want to pass this on at this point to the city council. I think we need to really start here with something… So I would move that we continue this to the November 5 planning commission meeting.” The motion was seconded by Commissioner Vince Vidal and passed on a unanimous voice vote — no roll call was requested, and no opposition was voiced.
The Planning Commission only makes a recommendation on ordinance amendments like this one; final adoption requires a first and second reading before the full City Council. Continuing the item simply means that process hasn’t started yet.
What Happens Before November 5
City staff committed to four specific steps during the 60-day continuance:
- Roundtables with developers and utilities — Elevate Rapid City, Dream Design International, and Black Hills Energy — specifically to re-examine whether large-scale facilities should be allowed by right in Heavy Industrial zones rather than requiring a CUP.
- Re-benchmarking the acoustical standards against peer cities, given the gap Fisher identified with Cheyenne.
- A joint working session with the full City Council, with planning commissioners invited, to gauge political appetite before a final version comes back for a vote.
- A “Coffee with Planners” public open house, giving residents a chance to ask about noise mitigation, closed-loop cooling, and water protections outside the three-minute limit of a public comment podium.
Still needs Resolution
Left unresolved and pushed explicitly to the November meeting:
Whether neighborhood meetings become mandatory rather than optional
Whether the city can prohibit a data center from drilling its own well to bypass municipal water caps entirely, a live question given regional drought conditions
How the ordinance handles wastewater discharge standards for closed-loop systems using glycol-based coolants
What actual enforcement — monitoring and penalties — looks like, so a violation isn’t just treated as a minor cost of doing business.
Sourcing
This piece draws on File #26OA006 (Ordinance 6746) and the accompanying Sept. 4, 2026 staff memo from Jessica Olson, Current Planning Division Manager
The Sept. 10, 2026 Zoning Board of Adjustment/Planning Commission agenda;
Mayor Salamun’s July 20, 2026 budget address;
Review of the meeting’s transcript/recording.
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