Developers appeal Pocatello’s denial of proposed AI data center
Developers Lex Developments LLC and Gus Schultz are appealing the City of Pocatello's denial of a Conditional Use Permit for a proposed AI data center. The denial followed a contentious public hearing where residents raised concerns about water usage, leading the Hearing Examiner to cite the project's potential detriment to public welfare. The appeal argues procedural errors, prior industrial zoning approvals for the site, and that the denial was arbitrary and unjust.
Developers Lex Developments LLC and Gus Schultz have formally appealed the City of Pocatello Hearing Examiner's denial of a Conditional Use Permit (CUP) for a proposed AI data center. The appeal, filed by attorney Jon Stenquist on June 1, 2026, seeks to overturn the decision that cited the developers' failure to demonstrate the project would not harm "public interests, health, safety, or welfare of the city" under the Pocatello Municipal Code Chapter 17.02.130 D. The denial followed a highly contested public hearing involving over 300 residents, who predominantly expressed concerns about the data center's potential water consumption impacts on state agriculture and local resources. Lex Development claims the project would utilize a "closed loop system," reducing water use by 80-95% compared to traditional data centers.
The appeal presents three main arguments: first, that the city did not follow proper procedure, contending the project should have been evaluated under Section 17.01.160.C for "Unlisted Use; Authorization of Similar Use," rather than a CUP. They also highlight that the former Hoku polysilicon plant site already had heavy industrial use approvals, implying its suitability for such electrical and utility demands. Second, the developers argue the denial was "arbitrary and capricious" as it contradicted the city's planning staff's recommendation for approval with minor conditions. Third, they assert the denial was "disproportionate and fundamentally unjust," arguing that the CUP process should not require full engineering and environmental studies at a preliminary stage.
The initial denial by the Hearing Examiner mandated comprehensive impact analyses for any future applications, including studies on wastewater, chemical discharge, water demand, electrical infrastructure, and environmental impacts. Gus Schultz had also previously sought $200,000 for a joint feasibility study with Idaho Power regarding 200 megawatts of power and $500,000 for site development, though these requests were later removed from a Pocatello Development Authority agenda. The City of Pocatello has not yet scheduled a date for the appeal hearing.