Lex Developments appeals Pocatello’s denial of application to build controversial AI data center

POCATELLO – A company looking to bring an artificial intelligence data center to the Portneuf Valley has formally challenged the denial of their application.

The Idaho Falls-based law firm of Parsons, Behle & Latimer on Monday formally filed an Appeal and Request for Reconsideration of an application for a conditional-use permit. This was on behalf of Lex Developments LLC, an Arizona-based company that has purchased the former Hoku Materials Plant at 1800 River Park Way with the goal of building an AI data center in Pocatello.

“We respectfully submit that the decision should be reversed for at least three separate reasons, each of which independently supports reversal,” reads the appeal, which was submitted specifically by attorney Jon Stenquist, a board member and vice president of Parsons, Behle & Latimer.

This application was denied by Pocatello Hearing Examiner Kathleen Lewis after a public hearing with hundreds in attendance, and the majority of speakers taking a stance against it.

Now that Lewis’ decision has been formally challenged, the City Council will hear the challenge and decide whether to uphold it.

What criteria did the hearing examiner determine the application did not meet?

When EastIdahoNews.com originally reported on the hearing examiner’s denial of Lex Developments’ application, only one out of the seven sections of review criteria was marked as being non-compliant.

The amended version of the Findings of Fact and Decision document shows that Lewis found Lex Developments to be out of compliance with 3 of 7 sections, including:

• If the project could be adequately served by public facilities, which Lewis writes was not adequately addressed.

  “The applicant should conduct studies/impact analysis for power, water and wastewater capacity, air quality analysis prior to submitting another application,” the findings read.

• If the project would not adversely affect the environment to a greater degree than a use permitted outright by the ordinance.

  “Based on the limited information provided, the hearing examiner finds that the question of environmental impacts has not been adequately addressed. The applicant has failed to provide sufficient information necessary for meaningful review,” the findings read.

• If the project would be detrimental to the public interests, health, safety or welfare of the city. Lewis again writes that this isn’t adequately addressed and says that Lex Developments should conduct studies on the power, water and wastewater capacity and air quality before submitting another application.

  “The application does not adequately address that the project would not be detrimental to the public interests, health, safety or welfare of the city,” the findings read.

What has Lex Developments argued?

I. No conditional use permit is required

While the law firm is challenging the hearing examiner’s decision on the conditional-use permit application, it also asserts that an application for a permit should never have been required by city staff in the first place.

Stenquist argues that, because data centers are not directly addressed in the city code, Lex Developments should have been subject to the section of the code governing unlisted uses rather than go through the permit process. This section follows different rules, and they argue the planning director is “solely tasked” with determining whether the use would have been permitted had it been considered.

Critically, determining whether an unlisted use falls within the existing zoning framework would not have required a public hearing.

“The city improperly required the applicant to submit a CUP (conditional-use permit) application … to provide public input on this hot-button issue. That procedural error fundamentally altered the posture of the project and subjected the applicant to an entirely different review framework than the one mandated by the city code,” reads the reconsideration request.

Stenquist goes on to argue that because the property was approved for heavy industrial use for the Hoku plant, which he says would’ve been a “far more intensive use” than the proposed data center, it carries heavy industrial entitlements.

The Hoku plant was approved for that use at least 19 years ago, when the now-defunct company began construction of the facility in 2007.

“(The city) cannot conclude that a 110-megawatt chemical manufacturing facility satisfies (city code) while simultaneously concluding that a data center … fails those same standards,” the request reads.

II. Even if a CUP were require, the hearing examiner’s denial was arbitrary, capricious and legally deficient

In the firm’s second argument, it says that even if a conditional-use permit were required, Lewis’ denial of the application was “arbitrary and capricious.” Stenquist says that Lewis “failed to identify facts demonstrating that the proposed use would overburden public facilities, create unacceptable environmental impacts, or threaten public health and safety despite its heavy industrial zoning.”

Stenquist goes on to assert that the decision Lewis reached suggests that her denial of the application, “was driven less by the standards of the city code and more by external political pressure surrounding the project.”

“Rather than approve the application with reasonable conditions pending subsequent technical review, the hearing examiner denied it wholesale (ostensibly due solely to the fact that data centers are now the political hot button of the day and the hearing was days before a primary election),” reads the reconsideration request.

When making this argument, Stenquist asserts that city staff “recommended approval (of the application) subject to modest conditions,” and says that Lewis “rejected staff’s conclusions.”

Stenquist goes on to argue that the studies Lewis cites in her findings are not legally required until further on in the process, when securing final building permits. He adds that Lewis did not provide sufficient explanation as to why the conditions recommended by staff were insufficient to address concerns.

“Denying a CUP on the basis that studies not required had not yet been submitted improperly inverts the regulatory process and constitutes an abuse of discretion,” the request reads.

III. The city’s refusal to conditionally approve the Lex CUP application is fundamentally unjust

In the firm’s final argument, Stenquist asserts that rejecting the application entirely on the grounds that Lewis did is an economically unfair penalty on Lex Developments. Pocatello city code dictates that if a CUP application is denied, a similar application cannot be filed again for a year.

“The practical effect of the decision is to force applicant to spend potentially hundreds of thousands of dollars on additional technical studies and analyses with no assurance that the city will ultimately approve the project even if those studies satisfy every conceivable concern,” reads the reconsideration request.

Stenquist says that it’s routine for major industrial projects to go through a phased review process that starts with determining land use compatibility and then proceeds to a “more detailed engineering and technical review.” He argues that denying the application turned the permit process into “an open-ended and prohibitively expensive prerequisite regime.”

“The appropriate course was straightforward. That is, approve the application subject to conditions requiring completion of those studies before commencement of construction or issuance of final permits,” the request reads.

What happens now?

The City Council has not set a date for when it will hear Lex Developments’ request for reconsideration, reads Irby-Facer’s statement.

On May 18, Pocatello assistant planner Jennifer Flynn told EastIdahoNews.com that the original application cannot be revised, and when evaluating the request, council members are meant to only take into account the information in the public record.

The process of requesting reconsideration of a conditional-use permit does not include an additional public hearing before the City Council. “That’s primarily because the purpose of a reconsideration is to determine if something was done wrong, procedurally, in the CUP process,” Flynn explained.

At the time of this interview, Flynn said the city had received over 120 written emails on this subject, in addition to the comments made in the public hearing.

“So we’ve heard from probably the most citizens — or interested parties — on this topic than ever before,” Flynn said.

And while it hasn’t been determined when the City Council will hear this request, Irby-Facer said the public won’t have to wait until a later date to learn the council’s decision.

“When the council does hear the appeal, a decision will be made that night,” Irby-Facer said.