Data Center Boom Tested by Permitting Hurdles, Political Tension

Data center demand is outpacing supply, with some estimating demand could more than triple by 2030. Meeting this growing demand won’t be simple. Historically, the biggest hurdles to data center development have been land acquisition, tax incentives, and power availability.

However, a 2026 report from Foley & Lardner found that nearly 48% of US data center development breaks down or stalls at the zoning and permitting stage, due largely to misalignment among developers, utilities, and government authorities.

As data centers grow in number and size, these projects have surpassed what many local and state infrastructure systems can accommodate. There are some key dynamics behind regulatory and permitting issues affecting data center development, including state energy policies, local land use approvals, and environmental review requirements.

With public perception driving debate over data center energy consumption, state energy policies are being reshaped. Perhaps guided by perception rather than fact, data centers are often blamed by politicians and local groups for rising energy prices. Data centers use approximately 4% of total energy consumed in the US. However, it’s informative to note that chemical manufacturing accounts for 5% of total US energy consumption and the pulp and paper industry accounts for 9% of total US industrial energy consumption.

Despite this, several states, including Maryland, Virginia, Georgia, New York, and Maine, are looking into data center moratoriums, citing energy consumption as a central concern. In April, the Oklahoma City Council passed an emergency moratorium on new data center developments while they study water, power and zoning impacts to the city—something we haven’t traditionally seen with the development of a chemical manufacturing plant, for example.

As evidenced by the Oklahoma City moratorium, the actual impact data centers have on infrastructure is currently unknown. However, that isn’t stopping states and municipalities from imposing minimum load commitments, financial obligations related to grid and infrastructure improvements, and “bring your own power” policies on data center developers. Many states are proposing and/or adopting legislation requiring data center developers to pay for infrastructure and generation costs.

In January 2025, the Georgia Public Service Commission approved a new rule that would allow the state-regulated utility, Georgia Power, to charge data centers for electric service in a manner designed to protect Georgia’s retail ratepayers from cost-shifting. Under the GPSC rule, any new customers with more than 100 megawatts of demand can be billed using terms and conditions that deviate from those used by the utility’s other customers.

Similarly, the Public Utilities Commission of Ohio issued a decision allowing utility companies to impose enhanced financial obligations on data centers to protect residential customers from paying for the costs of grid improvements and increased energy demands. The Ohio decision also requires that data center customers pay 85% of the energy they are subscribed to use, regardless of whether it’s actually used. While these obligations may satisfy the concerns that localities have about power consumption, it remains unknown how these regulations will impact the cost of cloud computing and internet usage.

Local land use approvals are another rising concern, as data centers can be difficult to place in traditional zoning categories. Misclassification often leads to frustration and delay via hearings and rezoning requirements. While data centers are typically classified as industrial, office/technology, utility-like infrastructure, or mixed-use support facilities, every municipality is different and there is no one-size-fits-all zoning solution. Hyperscalers, owners, and financiers push for waivers and fast-tracking, but developers must remain cautious and calculated. Having dedicated zoning professionals involved with new data center projects is critical to identifying these issues and finding solutions.

Local land use issues aren’t confined to just zoning and use classifications. Environmental review requirements are seeing heightened scrutiny and can pose major site-selection and acquisition challenges. Environmental permitting evaluates more than just water usage, and developers must be cognizant of how environmental review expands the permitting footprint beyond the buildable pad or main campus.

Some states have proposed bills to combat actual or perceived environmental concerns with data center infrastructure. Illinois has proposed a bill called the POWER Act, which establishes comprehensive environmental, water, and energy regulations for hyperscale data centers. California has introduced SB 887, which would allow data centers to be eligible for Environmental Leadership Development Project certification if they meet certain criteria as well as some additional requirements specific to data centers regarding water use, clean energy, and paying full infrastructure costs.

As water consumption remains an environmental focus for legislators, it may be worth zooming out to look at other sources of water consumption that have even greater impacts on their localities. According to public sources, data centers consumed around 17 billion gallons of water in the US in 2023, which sounds like a staggering number. But let’s put that number in context. Golf courses in the US consume more than 500 billion gallons of water per year, while lawns consume more than 2 trillion gallons per year. To date, we haven’t seen moratoriums or other legislative measures designed to study or curtail these water uses across the US.

Regulatory and permitting issues are emerging as the primary risk for US data center development, perhaps unfairly and unnecessarily. Addressing state energy policy, local land use approvals, environmental review, and grid interconnection at the outset is paramount to meeting the ever-growing demand for US data centers, and navigating the patchwork of state regulations for data centers is an ever-evolving challenge.

Early data center diligence should include a survey of state regulatory requirements, required zoning approvals, environmental constraints, and a grid assessment. Now more than ever, development timelines need contingency scenarios that clearly allocate the risk of delay and potential remediation strategies.

The most effective legal strategy is proactive, coordinated, and rooted in the inevitability of shifting views related to energy, land use, environment, and local politics. However, lobbying on behalf of data center developers may become a useful legal strategy as the demand for cloud computing and artificial intelligence continues to grow and developers seek to assuage the current concerns of legislators and regulators.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Rachel Conrad is a corporate attorney of senior counsel in Foley & Lardner’s energy and infrastructure sector.

Daniel Farris is a partner and co-lead of Foley & Lardner’s data center and digital infrastructure team.

Meghan Tierney is an attorney in Foley & Lardner’s intellectual property and technology transactions, cybersecurity, and privacy practices.

Interested in writing? Review our author guidelines, and submit pitches to Insights@bloombergindustry.com.