New York Governor Kathy Hochul has officially signed an executive order on Tuesday morning, making New York the first state in the nation to impose a moratorium on data centre construction. According to multiple reports, the order blocks construction of any new large data centres for up to a year while the state creates comprehensive rules to protect the environment and energy grid from power-hungry facilities that fuel artificial intelligence technology. This historic decision represents a significant shift in how states approach hyperscale data centre development, with the moratorium taking effect immediately upon signing. The order applies to hyperscale data centres over 50 megawatts, a higher threshold than the 20 megawatts threshold approved by the state legislature, as reported by Syracuse.com. As 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."
The decision carries significant political implications for Hochul's reelection campaign and the state's competitive congressional races this fall. As reported by AP, Democrats are moving to address affordability concerns over high utility bills, with Hochul this year announcing plans to reduce greenhouse gases, citing rising energy costs for consumers. Hochul's Republican opponent in the governor's race, Nassau County Executive Bruce Blakeman, opposes a statewide moratorium and says local governments should be allowed to strike deals with tech companies for data center projects that promise enough economic benefits. In a statement Tuesday, Blakeman said the governor "doesn't work with local governments and business leaders to figure out how to get things done," while pledging to "modernize our economy to bring costs down and create good jobs." The state Legislature this year approved its own moratorium bill, but Hochul's office described the legislation as complex and said it needed additional work, opting instead for the immediate executive order.
According to the governor's office, the executive order will pause state permitting for new large data centres and direct state regulators to create standards that address environmental impacts, energy demand, water usage and other factors. The Department of Environmental Conservation has been ordered not to issue permits to new data centers until state officials develop a generic environmental impact statement to evaluate each project's impact on energy demand, water use and quality, and air quality. On the utility front, Hochul will direct the Public Service Commission to consider creating a "grid acceleration fund" to require data centers to invest in the state's aging electric infrastructure. The governor indicated that "one option for data centers might be to build their own 'clean' power generators and battery storage systems" to address grid strain concerns. Additionally, Hochul is exploring requirements for hyperscale data centres to either pay more for their energy or supply their own, which would help keep utility bills low for New Yorkers, as reported by Syracuse.com.
Governor Hochul announced plans to work with lawmakers to repeal sales tax exemptions for data centers that have become increasingly problematic. As reported by Syracuse.com, at least one massive new data center has claimed millions of dollars in sales tax exemptions based on state law adopted more than a quarter-century ago during the internet's dial-up era. The Genesee County economic development agency has proposed a sales tax exemption worth $1.4 billion for a planned data center at STAMP, the county's Science, Technology and Advanced Manufacturing Park near Batavia. Hochul's office described the current tax incentive as "badly outdated and did not anticipate the massive size and cost of today's data centers." The governor plans to work with state lawmakers on legislation banning sales tax exemptions stemming from both the state law and IDA incentives.
For host communities, Hochul is having Empire State Development craft a "community investment framework" to help municipalities negotiate benefit agreements with data center developers. The benefits could include infrastructure improvements, childcare investments or direct financial support for the community, among other options. The moratorium comes as New York faces a growing backlog of proposals for more than 30 hyperscale projects, each of which would use enough power for a small- or medium-sized city. Together, these projects would use more power than Ireland. While business development advocates have warned against moratoriums, saying New York could fall behind in the competition to build the economy of the future, the governor emphasized that "datacenters can only be built, should only be built in places that want them and so they will never be exempt from local zoning." Hochul stressed that "datacenters can only be built, should only be built in places that want them and so they will never be exempt from local zoning," while also touting the state's ability to lead in innovation and "harnessing AI as the technology of the future."
