Developers appeal Pocatello’s denial of proposed AI data center
Seth Ratliff
POCATELLO, Idaho (KIFI) — A controversial proposal to develop an AI Data Center in the Gate City could gain a second life as the applicant petitions the City of Pocatello for reconsideration.
The Arizona-based Lex Developments LLC and Gus Schultz have officially appealed the City of Pocatello Hearing Examiner’s recent denial of their Conditional Use Permit (CUP) for a proposed AI data center.
The appeal, filed on June 1, 2026, by attorney Jon Stenquist, seeks to reverse the decision that blocked development of the facility at the former Hoku polysilicon plant site.
Why the Permit Was Denied
The Hearing Examiner’s initial ruling denied the CUP, citing that the developers failed to prove the project would not be “detrimental to the public interests, health, safety, or welfare of the city,” as required under Chapter 17.02.130 D of the Pocatello Municipal Code.
Related: Pocatello denies Conditional Use Permit for AI Data Center at Former Hoku Plant
The decision came on the heels of a highly contentious public hearing, which saw more than 300 residents gather to voice their opinions on the project, primarily due to concerns that the data center would pull water from state agriculture and Pocatello’s resources.
Lex Development, however, has claimed the project would operate on a “closed loop system,” which they state would use 80-95% less water than traditional data centers.
The Grounds for Appeal
The appeal outlines three primary arguments for why the City should reverse the Hearing Examiner’s decision.
First, the applicants argue that the City did not follow proper procedure, contending the project should have been evaluated under Section 17.01.160.C, which governs “Unlisted Use; Authorization of Similar Use,” rather than requiring a Conditional Use Permit. The section establishes a procedure for determining whether an unlisted or unanticipated use would have been permitted in a zoning district or is compatible with or similar to uses outlined in the City Code.
In addition, the appeal argues that the former Hoku polysilicon manufacturing plant already received approvals for “heavy industrial use at a scale and intensity that encompasses the proposed data center.”
According to the appeal document, “In approving that prior use, the City necessarily determined that this particular property could support extraordinary electrical demand, industrial-scale utility infrastructure, water and wastewater impacts, significant and problematic environmental impacts, and serious public safety considerations.”
Secondly, the applicants argue the Hearing Examiner’s outright denial was “arbitrary and capricious” and not in line with the City’s planning staff review, which had “recommended approval with modest conditions.”
The document states, “The Hearing Examiner nevertheless rejected staff’s conclusions…with nothing more than conclusory statements.”
It further argues the Hearing Examiner “did not sufficiently explain the criteria and standards considered relevant, state the relevant contested facts relied upon, or explain the rationale for the decision based on the applicable provisions of the comprehensive plan, relevant ordinance and statutory provisions, pertinent constitutional principles and factual information contained in the record.”
Finally, developers claim the Hearing Examiner’s denial was “disproportionate and fundamentally unjust,” arguing that “The CUP process is not intended to require applicants to incur the full cost of final engineering, utility design, environmental analysis, and construction-level studies before obtaining preliminary and conditional land use authorization.”
What the Initial Denial Requires of the Applicant
Under the initial denial of the CUP, the Hearing Examiner stated that Lex Developments must conduct comprehensive impact analyses before submitting any future applications.
“These studies should include at a minimum: wastewater discharge quantities; identification of pretreatment systems if needed; potential chemical discharge; water demand calculations; long-term electrical infrastructure requirements and environmental impacts related to emissions, water utilization and wastewater discharge,” state the meeting minutes.
Schultz was originally scheduled to present two funding requests to the Pocatello Development Authority on May 20, but both items were later pulled from the agenda. The requests included $200,000 for a joint feasibility study with Idaho Power to evaluate re-energizing the existing building for 200 megawatts of power, and an additional $500,000 intended to remove additional concrete for site development.
The City of Pocatello has not yet announced a date for the appeal hearing.
Editor’s Note: AI tools were utilized in the initial research and structural development of this article. All content is thoroughly reviewed and verified for accuracy by the Local News 8 editorial team.
2026-06-01 – Request for Reconsideration-Appeal of CUPDownload