The future of Applied Digital’s proposed 430 MW data center project in Deuel County, South Dakota, is contingent on a state-level sales tax exemption for equipment used within the facility.

The proposed project, only in preliminary stages with no official submission to the county as of yet, would be located in Scandinavia Township near an existing gas substation, and, if approved, would represent a peak energy load of up to 430 MW and include diesel backup generation with battery support, said Nick Phillips, Applied Digital’s executive vice president of public affairs and real estate acquisition, during a County Commissioners meeting last month.

The regional transmission organization MISO completed a favorable study, Phillips added, and Applied is working with Otter Tail Power Company, which has certified the available power.

The developer also plans to use excess wind energy from nearby turbines, allowing them to remain online during periods of overproduction. NPM Interconnections queue data is tracking three operational wind projects in Deuel County, including Southern Power’s 300 MW Deuel Harvest Wind Farm project.

For water, the site would employ a closed-loop cooling system with a water-glycerol mix, avoiding rural water sources.

The development is expected to generate USD 2–3m annually in property taxes and more than USD 160m in sales tax on energy consumption during its first 15 years, as well as creating roughly 200 jobs across five different shifts.

Phillips said there is a lot of discussion to be had before the project can start, according to the meeting minutes.

One of those discussions is regarding a sales tax exemption Applied Digital has requested with the state legislature.

The exemption was previously proposed under Senate Bill 177, which would remove state sales tax from computer and cooling equipment used in large-scale data centers.

The bill failed in February, but stakeholders including Applied Digital are hoping the exemption will pass during the next legislative session beginning in January.

Without the exemption, Phillips told NPM the project is impossible.

“If legislation doesn’t pass their exemption there will be no data centers in South Dakota,” Deuel County Commissioner Chairman Jay Grabow said during the June meeting.

Applied Digital is also developing a large-scale campus in Ellendale, North Dakota, where it recently announced a lease agreement with CoreWeave for the first two buildings, with an option for a third. The USD 5bn project includes three buildings totaling approximately 2.2 million square feet and 530 MW of planned capacity.

In related county business, commissioners voted to retain an attorney to begin drafting a data center development zoning ordinance to cover infrastructure, construction and workforce, as well as be tailored to the needs of Deuel County.