Montgomery County, Maryland’s temporary restrictions on new data center approvals have introduced immediate permitting uncertainty for developers, property owners, investors, lenders, utilities, and technology companies evaluating projects in the county. The action comes amid increasing local scrutiny of energy demand, water usage, noise, land use, and the rapid expansion of artificial intelligence infrastructure, as county officials consider a broader regulatory framework for future facilities.
The County Executive first directed a six-month pause on the acceptance and review of certain data center permit applications. The Montgomery County Council subsequently approved an 18-month moratorium on new data center building permits and restrictions on large facilities exceeding 25 megawatts. Taken together, these measures indicate that future projects may be subject to revised zoning, environmental, utility, and operational requirements before moving forward.
For market participants, the moratorium underscores the importance of evaluating entitlement risk, permitting timelines, utility capacity, and potential regulatory change at the outset of any proposed data center transaction or development plan.
Background
In May 2026, members of the Montgomery County Council introduced legislation intended to establish a temporary halt on approvals for new data center development. The proposed legislation was designed both to define “data centers” under the Montgomery County Code and to provide county officials with additional time to study the potential effects of such facilities on infrastructure and surrounding communities.
Shortly thereafter, the county executive issued an order directing the Department of Permitting Services to suspend the acceptance and review of permit applications for certain projects meeting the county’s definition of a data center. County officials emphasized that the action was intended to create an opportunity for additional study and policymaking rather than to establish a permanent prohibition on data center development.
Why the County Acted
The county’s review process has centered on several concerns that have become increasingly prominent throughout the region and the country:
- The substantial electricity demands associated with hyperscale data centers;
- Potential effects on water supplies and cooling infrastructure;
- Noise and visual impacts on neighboring communities;
- Land-use compatibility and zoning considerations;
- Questions concerning tax revenues, economic development, and infrastructure investment; and
- The need for additional transmission, distribution, and other utility infrastructure.
The county’s approach is consistent with a broader regional trend, particularly in the Mid-Atlantic, where local governments are seeking to balance data center investment and economic development benefits against environmental impacts, infrastructure constraints, and community compatibility concerns.
Potential Long-Term Implications
County officials have indicated that any future regulatory framework may address issues such as:
- Zoning classifications and permitted uses;
- Environmental review requirements;
- Utility and interconnection obligations;
- Noise limitations and setback requirements;
- Landscaping, buffering, and screening standards;
- Building design requirements;
- Water usage and sustainability measures; and
- Procedures governing pending and future applications.
As the county evaluates potential new rules, developers, landowners, lenders, utilities, and technology companies should account for the possibility that project approvals may require additional review, conditions, or infrastructure commitments.
Looking Ahead
Montgomery County’s moratorium reflects the growing legal and regulatory complexity surrounding data center development nationwide. As demand for AI computing capacity accelerates, local governments are increasingly weighing land-use policy, energy infrastructure, environmental impacts, and economic development priorities in a rapidly evolving market.
Organizations considering data center projects in Montgomery County should review entitlement risk, permitting status, utility capacity, environmental requirements, financing contingencies, and contractual allocation of regulatory delay before proceeding with site acquisition, financing, or development plans.
During the moratorium period, stakeholders should continue to monitor county action and seek project-specific guidance before committing substantial resources to affected sites.
Should you have any questions about this matter, please contact Viktor V. Pregel (vvp@gdllaw.com).
