"A conditional use permit is a revocable permit." Mike Stanley, director of planning for Dream Design International, said that to the Rapid City Journal after the September Planning Commission meeting on the city's proposed data center rules. He was relaying a concern also raised by Eric Wolff, business development manager for Black Hills Energy: many data center companies may see a conditional use permit requirement and decide they cannot take that risk.
For anyone who owns, buys or is assembling industrial or edge acreage around Rapid City, that quote is the transaction issue in one sentence. Under the draft ordinance, two parcels of the same size in the same zoning district could carry very different data center potential. The difference would come from how much power the end user needs and how far the parcel sits from land that allows residential use. Acreage barely matters.
Three tiers, sorted by power and water
The proposal is Ordinance 6746, file 26OA006. It amends chapters 17.04, 17.22 and 17.24 of the municipal code. Under the current ordinance, adopted December 16, 2024, data centers are a permitted use in the Light Industrial and Heavy Industrial districts. The amendment adds standards for distance to residential districts, for power, water and sewer use, and for noise and vibration.
As drafted in September, and as presented again at the city's October 14 open house, the tiers look like this:
| Tier | Peak power | Cooling water | Light or Heavy Industrial status | Residential separation |
|---|---|---|---|---|
| Micro | Up to 10 MW | Up to 4,000 gallons per day | Allowed outright, with conditions | CUP required if within 500 feet of a district allowing residential use |
| Large-scale | More than 10 MW, less than 50 MW | Up to 10,000 gallons per day | Conditional use permit | 1,000 feet, variance required to go closer |
| Hyperscale | 50 MW or more | More than 10,000 gallons per day | Prohibited in city limits | Not applicable |
The water caps apply to cooling. They exclude the initial fill, irrigation and domestic water. No tier carries a minimum parcel size or an acreage threshold. Evaporative cooling would be prohibited outright. A large center using a closed-loop system would have to document an initial fill of no more than 9.6 gallons per kilowatt. Only one micro center could be permitted outright on a single lot or legally described property, and putting more than one on a property would require a CUP.
At Sequitor Edge, power sets the tier
Sequitor Edge is the publicly announced project. It plans to build on a 10-acre site at Dream Design's Black Hills Industrial Center, south of Old Folsom Road and east of Highway 79, near the Rapid City Landfill. That industrial park is zoned Heavy Industrial. When the project was announced, the Journal reported a 30,000-square-foot first building with a footprint of about one acre and an estimated $52 million cost. The company described 2 MW at the start, 10 MW at buildout and a one-time closed-loop fill of about 20,000 gallons.
Those numbers fit the micro tier. Later company handouts, reported by the Rapid City Sentinel, cite roughly 14.5 MW for the first phase, a 65,000-gallon one-time fill, about 110,000 gallons a year, air-cooled chillers with closed-loop chilled water, and a campus larger than 50,000 square feet. These are the company's own figures, not permit conditions.
Measured against the draft, the reported figures fall out this way.
- About 110,000 gallons a year works out to roughly 300 gallons a day. That is far below the 4,000-gallon micro cap.
- At the draft's 9.6 gallons per kilowatt, a 14.5 MW facility could document an initial fill of about 139,000 gallons. The reported 65,000-gallon fill is under half of that.
- At 14.5 MW, the facility crosses the 10 MW line. That moves it from "allowed outright" to "conditional use permit," even on Heavy Industrial land.
Power is the number that decides the tier. For a seller or a buyer, a parcel's data center ceiling inside the city is set by the size of the load the end user plans to bring, more than by the land. City documents cited by the Journal put the 10 to 50 MW range at enough to power 15,000 to 40,000 homes.
Micro and large-scale projects would both need power and water documentation. Each would need a utility "Will Serve" capacity letter. Large centers would also submit a load-ramp schedule and document required utility upgrades. On-site generators would be for emergencies, testing, maintenance and commissioning only, and would have to meet EPA Tier 4-equivalent standards.
Why the permit type matters at closing
The CUP is the friction a buyer's lender, investor or end user will weigh. According to the Journal's reading of Rapid City Municipal Code 17.08.030, a CUP can be revoked if the holder fails to maintain the standards it was approved under. A holder who shows a return to compliance within 30 days of written notice keeps the permit, and a permit operating in compliance cannot be revoked. A CUP also requires a public hearing, notice, mailing and a posted sign, plus an optional neighborhood meeting.
So a parcel's contract price can depend on whether the end user's project fits under 10 MW and outside the 500-foot ring. It can also depend on whether the buyer is willing to go through a public hearing. Buyers price that difference in contingency periods and closing timelines. The ongoing obligations also run through a noise program. The draft sets property-line limits of 65 dBA and 65 dBC from 7 a.m. to 8 p.m. on weekdays, and 60 overnight and all weekend. It requires acoustical studies before and after construction, and the applicant pays for testing.
The county line runs the other way
The City of Rapid City is the stricter jurisdiction on scale. Unincorporated Pennington County adopted its own rules in Section 332 of the county zoning ordinance, effective October 22, 2025. Those rules contain no megawatt tier and no hyperscale prohibition.
| Rule | Rapid City draft, proposed | Pennington County §332, adopted |
|---|---|---|
| Where allowed | Light and Heavy Industrial | Industrial by CUP; modular centers by CUP in agriculture or industrial |
| Size limit | Hyperscale of 50 MW or more prohibited | No megawatt cap |
| Residential distance | 500 feet for micro outright; 1,000 feet for large | Buildings 100 feet from residential lot line; generators 75 feet |
| Noise | 60 to 65 dB at property line | 80 dBA at project fence; 55 dBA at an occupied residence |
| Cooling | No evaporative systems | Closed-loop required |
The county's noise limits apply only to sites within a quarter mile, or 1,320 feet, of a residential district, residence, church or school. Those sites must file a noise mitigation plan, and both decibel limits are measured above ambient sound. A full data center in the county needs at least 1 acre, 100 feet of frontage on a public right-of-way. Structures follow a general height rule of 35 feet, and a taller building must add one foot of setback for every foot above that. Lot coverage is capped at 60 percent. Data centers are prohibited in residential and commercial districts.
Agricultural ground within a mile of a substation
The county provision with the most direct effect on rural land values covers the modular data processing center. That is a containerized unit built into shipping containers or purpose-built enclosures. It is a conditional use in agriculture districts as well as industrial ones. The lot must be at least 1 acre and no more than 15 acres. It needs only 25 feet of width and access by a legally recorded easement or right-of-way, and it must be within one mile of an existing substation.
A small agricultural tract with easement access, near a substation in unincorporated Pennington County, can therefore apply for a use that Rapid City's own Light Industrial land would handle under tighter distance rules. The use still requires a conditional use permit and a utility "Will Serve" letter. The county's closed-loop cooling rule also applies, and the public water utility must confirm there is ample supply. Our earlier post on how jurisdiction sets acreage prices on Rapid City's edge traced the same pattern in platting. Here it shows up in use rights.
Box Elder is a third rulebook. Its land-use matrix, effective July 22, 2025, lists data centers as conditionally permitted in the Commercial Flex, General Light Industrial and Heavy Industrial districts. It sets no megawatt or water thresholds.
State law leaves all three local codes in place. According to the Sentinel, SB 135 was signed March 24, 2026. It requires data centers of 10 MW and larger to bear costs fairly tied to their electric service and to report water use. Bills for a statewide moratorium and for tax incentives failed.
What the October survey pushed toward
More than 150 people attended the city's October 14 open house. It was an information session with an anonymous survey, not a hearing or a vote. The Journal reported that a majority of respondents favored requiring a CUP even for micro centers in light industrial areas, and a majority favored prohibiting large centers in light industrial areas. Water was described as the top concern. Industry representatives asked for the opposite on Heavy Industrial land, where they wanted large centers allowed by right. The ordinance could still change in either direction before adoption.
The city's agenda item lists these upcoming dates:
- November 5: Planning Commission
- November 10: Legal & Finance Committee
- November 16: City Council first reading
- December 7: City Council second reading
FAQ
Is the Rapid City ordinance in effect? No. It is a proposal. Until council action, the December 2024 rules govern, and they allow data centers in Light and Heavy Industrial districts subject to conditions.
Does a bigger parcel qualify for a bigger tier? No. The draft's tiers are defined by peak megawatts and cooling water. Parcel size does not appear among the thresholds.
Can a modular center go on agricultural land anywhere in Pennington County? Only by conditional use permit, on a lot of 1 to 15 acres within one mile of an existing substation, with the utility and water confirmations in place.
This post is general information, not legal, tax or financial advice. Confirm how any rule applies to a specific parcel with your attorney, the planning office and the utility.
If you own industrial ground inside Rapid City or agricultural acreage near a substation in Pennington County, the new rules may change what your land can be used for. NorthStar Realty can map your parcel against both rulebooks, measure its distance from residential zoning and help you build a pricing and entitlement plan around the November and December hearings. Schedule a Land Consultation with Shana and Christian Morgan.
