City Council to hear AI Data Center Appeal on July 16, following new Idaho law on water usage

POCATELLO, Idaho (KIFI) – The proposed AI data center for unused land in Pocatello isn't a resolved case. After the conditional use permit was denied on May 19, Lex Developments filed an appeal. The City Council is set to hear the appeal on July 16 at 6 p.m.

The pushback against the data center has stemmed from issues like water usage, power availability, taxes, noise pollution, and more. As of July 1, a new Idaho law is in effect – House Bill 895— which is intended is to place restrictions on AI data centers' water usage rights, to ensure Idaho's limited water resources are continually available for other industries like agriculture.

The bill's purpose statement says in part, "The purpose of this legislation is to ensure that the cooling function of data centers built in the future is either designed for the non-consumptive use of water, or uses water for such purposes from a municipal water district, or water and sewer district system."

During the public hearing on the data center on May 14, Gus Shultz from Lex Developments claimed the company had already addressed these issues with local entities.

"I believe it does [qualify for a CUP]. The city can service it. Water can service it. We've talked to water, sewer, we've talked to power," Shultz said. "We have all these things in place to service it already."

However, the hearing examiner wasn't convinced. In her denial on May 19, she stated the company hadn't provided sufficient documentation and analysis that a data center of this size and caliber wouldn't disturb the health and safety of the community. Her findings state in part, "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 applicant should conduct studies/impact analysis for power, water, and wastewater capacity, air quality analysis prior to submitting another application."

Hearing examiner Kathleen Lewis added that additional studies should include information like wastewater discharge quantities, pretreatment systems if needed, potential chemical discharges from the center and exact water demand. When asked specific questions by the hearing examiner on May 14 regarding water and power usage, Shultz was unable to provide exact data.

Power usage and an increase in taxes were another major concern of Pocatello residents. Idaho Power was asked to comment during the public hearing, ensuring people that taxpayers wouldn't be affected by a new data center; rather, the applicant would front all costs.

"The applicant would be completely responsible for all costs incurred in the system for upgrades to substation, transmission, generation, all of that," said Matthew Stucki, customer relations manager with Idaho Power. "They would be responsible for those upgrades and they would not impact the ratepayers."

Several people spoke out in the hearing, arguing for the AI data center to be approved for the old Hoku plant land. They only expressed concerns about regulating this large business, claiming that issues occur when local governments don't take charge of their city codes and ensure company compliance.

Mayor Dahlquist agreed, stating that updating the current city codes with planning and land use is essential to being prepared for the future of technology in Pocatello.

"[we need to] take a look at our zoning codes, take a look at our land use codes, and make sure if a data center were to ever come in, that we have some strict codes in there and how we want it to be," Mayor Dahlquist said. "Like a closed-loop water system or power issues and things like that need to be addressed."

The mayor added the issue isn't over yet, and the city won't idly sit by and wait for another company like Lex Developments to propose a data center. Rather, by updating the city code, they won't be caught off guard.

For now, the city said it's premature to speculate what an AI data center could mean for water usage in Pocatello or if the city could sustainably service such a large development. If the conditional use permit is approved by the City Council later this month, Lex Developments will submit its proposed plans and move forward.

EDITOR'S NOTE: Lex Developments and their involved attorneys are refraining from comments at this time, but will continue their appeal process with the city. This is a developing story, and Local News 8 will update this information as more details become available following the appellate hearing on July 16.