  We present a cosmological hydrodynamic simulation of the formation of dwarf
galaxies at redshifts z>~2.5 using a physically-motivated model for
H2-regulated star formation. Our simulation, performed using the Enzo code and
reaching a peak resolution of 109 proper parsecs at z=2.5, extends the results
of Kuhlen et al. (2012) to significantly lower redshifts. We show that a star
formation prescription regulated by the local H2 abundance leads to the
suppression of star formation in dwarf galaxy halos with M_h <~ 10^10 Msun and
to a large population of gas-rich "dark galaxies" at z=2.5 with low star
formation efficiencies and gas depletion timescales >20 Gyr. The fraction of
dark galaxies is 60% at M_h ~ 10^10 Msun and increases rapidly with decreasing
halo mass. Dark galaxies form late and their gaseous disks never reach the
surface densities, > ~5700 Msun / pc^2 (Z/10^-3 Zsun)^(-0.88), that are
required to build a substantial molecular fraction. Despite this large
population of dark galaxies, we show that our H2-regulated simulation is
consistent with both the observed luminosity function of galaxies and the
cosmological mass density of neutral gas at z>~2.5. Moreover, our results
provide a theoretical explanation for the recent detection in fluorescent
Ly-alpha emission of gaseous systems at high redshift with little or no
associated star formation. We further propose that H2-regulation may offer a
fresh solution to a number of outstanding "dwarf galaxy problems" in LambdaCDM.
In particular, H2-regulation leads galaxy formation to become effectively
stochastic on mass scales of M_h ~ 10^10 Msun, and thus these massive dwarfs
are not "too big to fail".
