NY Enacts First-in-Nation Data Center Moratorium

New York has taken a pioneering step, becoming the first state nationwide to implement a statewide moratorium on new hyperscale data center development. Governor Kathy Hochul recently signed an executive order, pausing new facilities for up to a year. However, an even more expansive bill, already approved by state lawmakers and potentially imposing greater restrictions, currently awaits her signature.

Governor Hochul's executive order specifically halts the issuance of new environmental permits for data centers exceeding 50 megawatts. This measure, according to her office, is designed to provide the state with crucial time to formulate regulations that will safeguard residents from potential increases in energy costs and environmental degradation. Notably, this 50-megawatt threshold is higher than the 20-megawatt limit proposed in the legislative bill, which would impose stricter controls. While the number of proposals directly affected by the order remains to be determined by the Governor's office, the chosen threshold aims to avoid disrupting smaller data centers vital for institutions like hospitals. Though Governor Hochul has not yet indicated whether she will sign the legislature’s version of the moratorium, her executive action allows for an an immediate, first-of-its-kind statewide pause during the review process.

Emphasizing the urgency of the situation, Governor Hochul stated, “As data center development threatens to hike up utility bills, deplete our natural resources, and create uncertainty for New Yorkers, it’s my responsibility to take action and lead.” This moratorium is slated to last up to a year, during which the Department of Public Service (DPS) will be tasked with developing comprehensive standards to assess the environmental impacts of data center construction and operation, encompassing critical areas such as water usage and air quality. Furthermore, Governor Hochul has directed the DPS to explore mechanisms for data centers to contribute to the state’s energy infrastructure and has charged the state’s development agency with establishing a framework to assist local communities in negotiating benefits when new data centers propose development within their areas.

This move by New York comes as communities nationwide increasingly contend with a surge in infrastructure development, driven by accelerating AI demand, raising concerns about potential impacts on energy prices and the environment. Maine, for instance, nearly enacted a similar data center moratorium earlier this year before its governor vetoed the bill in April. Public discontent regarding government subsidies for data center development has also become a significant issue for many residents. Addressing this, Governor Hochul announced her intention to advocate for the legislature to repeal sales tax exemptions for large data centers in the state when they reconvene next year, signaling a broader strategy to manage the industry's growth and its implications.