New York Freezes New Data Center Builds

New York has become the pioneering state to implement a temporary suspension on data center construction, following Governor Kathy Hochul's signing of an executive order that prohibits the state from issuing new permits for significant projects.

Governor Hochul's directive specifically targets data centers with a capacity of 50 megawatts or more, a measure that could impact over a dozen prospective developments. Consequently, the state's Department of Environmental Conservation will cease issuing any permits that have not yet reached completion.

During a press conference held in Brooklyn, Governor Hochul articulated her stance, stating, "Progress shouldn’t arrive with a higher utility bill, deleted water supply, or noise pollution." She further emphasized the importance of community consent, asserting, "These data centers can only be built, should only be built in places that want them. So they will never be exempt from local zoning, local approvals."

This moratorium is slated for removal once the state concludes its environmental review process for data centers, a timeline Governor Hochul anticipates will span approximately one year. Furthermore, her administration is exploring proposals that would mandate data centers contribute to a fund aimed at bolstering the state's electrical grid and is also seeking to deny tax benefits to hyperscale data centers.

Governor Hochul's executive order aligns with ongoing legislative efforts in New York to enact more rigorous controls. Just last month, the legislature advanced a bill proposing a one-year pause on the construction of data centers exceeding 20 megawatts, while a separate bill still under committee review advocates for a three-year moratorium.

While the average data center constructed in recent years has typically been under 100 megawatts, projections indicate a significant increase in size for those currently under development. BloombergNEF reports that by 2030, almost a quarter of new data centers are expected to surpass 500 megawatts, largely fueled by escalating investments in artificial intelligence.

The concept of a data center moratorium has been a subject of considerable discussion across both state and federal jurisdictions, yet New York stands as the first to actively implement such a measure. In December, over 230 organizations advocated for a nationwide halt on new data center developments. Similarly, Vermont Senator Bernie Sanders has put forth a proposal for a national moratorium, though it has garnered limited support. Meanwhile, Maine's legislature recently approved a bill that would have paused new data center construction until November 1, 2027, only for it to be vetoed by Governor Janet Mills.

Only a few years prior, states actively courted data center projects, viewing them as desirable new developments. However, public opinion has recently shifted negatively as these projects have escalated in size. The sheer scale and rapid construction rate of data centers have begun to exert significant pressure on the electrical grid, alongside other regional resources such as water and agricultural land. A recent poll indicated that two-thirds of respondents expressed concern that data centers would inflate electricity prices. Furthermore, another survey revealed a preference among the public for an Amazon warehouse over a data center in their local vicinity.

Governor Hochul's executive order potentially sets the stage for a conflict with the Trump administration, which has historically shown support for data center expansion. Notably, last month, the Federal Energy Regulatory Commission, currently headed by a Trump appointee, directed grid operators to establish specialized "fast lanes" to expedite the interconnection process for data centers.