Pocatello’s City Council has upheld a denial of a proposed $2.6 billion artificial intelligence data center on the west side of the city, but the developer behind the project says he intends to challenge the decision through the courts. The outcome marks a significant setback for Lex Developments, which sought to repurpose a former polysilicon manufacturing facility into a major tech hub that could reshape the regional economy.
Council Vote and Public Testimony
The City Council voted 4-1 on July 18 to affirm the hearing examiner’s earlier denial of the project. The vote followed more than 90 minutes of public testimony, during which approximately 90 speakers addressed the council. Of those who spoke, roughly 60 opposed the data center, 20 remained uncommitted, and only 3 voiced support for the proposal.
Council Member Dakota Bates cast the lone dissenting vote, expressing concern that upholding the denial would trigger a lengthy legal battle at taxpayer expense. “I’m very concerned about affirming the decision, which leads us down the path to Mr. Shultz (filing) exhausting appeals, taking the city to court, and dragging this out further and costing taxpayers money,” Bates said.
Project Details and Developer Response
Lex Developments proposes converting a 49-acre former Hoku Materials facility into a data center to serve artificial intelligence and computing workloads. The site sits near rail infrastructure on Pocatello’s west side, positioning it for efficient logistics and power distribution. Portneuf Capital sold the property to Lex Developments in spring 2026.
Gus Shultz, the developer, told the council that he has “multiple” potential users lined up and holds a signed letter of intent from an anchor tenant. When Mayor Mark Dahlquist questioned why the users were not present to testify, Shultz did not directly answer but reaffirmed his commitment to the project.
Shultz stated unequivocally that he “absolutely” plans to appeal the city council decision, signaling that the dispute will likely move into the courts rather than conclude at the local level.
Context and Concerns
Data center projects have become increasingly attractive to rural and mid-sized communities across the Mountain West, offering potential job creation, tax revenue, and economic diversification. However, large facilities also raise concerns about water usage, power consumption, noise, and land-use compatibility with residential or agricultural areas.
The scale of public opposition in Pocatello—with 60 speakers against the project compared to only 3 in favor—suggests significant community resistance to the data center as proposed. The council’s 4-1 vote aligns with that public sentiment, though Bates’ dissent indicates some council members view the legal and financial costs of prolonged litigation as a reason to reconsider.
What Comes Next
Shultz’s commitment to pursue appeals means Pocatello can expect months, or potentially years, of legal proceedings. The developer will likely file suit against the city, arguing that the denial was arbitrary, unsupported by law, or violated the developer’s property rights. The city will need to defend its decision in court, potentially at significant cost to municipal resources.
In similar large-development disputes across Idaho and the region, appeals have sometimes resulted in reversals, settlements, or modified project approvals. Whether Lex Developments can prevail in court or negotiate a compromise remains uncertain. For now, the former Hoku Materials site remains undeveloped, and the question of its future use remains unresolved.
Pocatello residents and stakeholders should monitor court filings and city council announcements for updates on any legal action. Those with concerns about the potential data center or interest in its outcome may also consider attending future council meetings or submitting written comments to the city planning department.