New York enacts nation’s first statewide temporary ban on new data centers

New York is the first state in the nation to enact a moratorium on data centers, pausing construction on new facilities for one year.

An executive order by Gov. Kathy Hochul bans state lawmakers from approving environmental permits for hyperscale data centers. Hochul said Tuesday the pause will give lawmakers time to create a framework to protect residents and the environment. 

Hyperscale data centers contain thousands of computer servers and typically use 50 or more megawatts of power to operate. They also require a steady supply of water to keep cool.

The moratorium only applies to new projects, so ones that were previously approved will still go forward.   

Hochul’s reason for the temporary ban

“Massive data centers are being built across our state and our country. The scale and speed of this development has put unprecedented demand on energy and water resources, and threatens to drive up utility costs. Before it goes any further, I need safeguards in place to protect New Yorkers,” Hochul said. 

Hochul said the state still welcomes AI investments and businesses, and looks forward to helping them grow and thrive. 

“But when you benefit from the talent and energy of New York, we expect you to protect our resources and give back to our communities,” Hochul said. 

The order comes as the state is experiencing unprecedented growth in the demand for data center development driven by AI and other computing operations, according to the governor’s office. In addition to energy needs, the data centers require “millions of gallons of water, draining the local supply.” 

“The bottom line is progress shouldn’t arrive with a higher utility bill, depleted water supplies, or noise pollution. So we have no choice but to address these challenges created by these massive facilities,” Hochul said. 

Hochul said New York will require data centers to either produce their own energy or pay a premium for accessing New York’s grid. Hochul also said she opposes any tax subsidies for AI data centers as well. 

“We’ve seen parts of our country collect millions, even hundreds of millions of dollars from these centers to go from everything for new roads, water supply, infrastructure, schools, community centers, playgrounds, fire departments, medical centers, even farm preservation,” Hochul said. “The bigger the data center, the bigger the investments that communities can and should expect.”  

The Department of Public Service will create the guidelines for centers to ensure new facilities meet consistent standards. 

Hochul said the process will take up to a year, prompting the moratorium.

Once state officials finalize the standards, the ban will be lifted. 

A call for “clear, reliable rules of the road”

Sen. Kirsten Gillibrand applauded the move. 

“This one-year moratorium is fundamentally about trust. Right now, New Yorkers aren’t convinced these massive facilities benefit them. Before we move forward, our communities need ironclad guarantees that their energy bills won’t spike, their water will be protected, and their air will remain clean,” Gillibrand said.   

Gillibrand described the need for federal action regarding AI as well. 

“That requires establishing clear, reliable rules of the road. We must build a framework that protects our kids from harmful algorithms and social media tools; shields seniors and consumers from AI-driven scams and fraud; and safeguards American jobs and livelihoods from displacement,” she said. 

“It kills good-paying union jobs”

Not everyone is pleased with the moratorium. 

“A shortsighted moratorium only accomplishes one thing: it kills good-paying union jobs. Rather than implementing guardrails to build the future of American ingenuity, Governor Hochul is taking her ball and going home. We urge the governor to work with all parties, including the hardworking New Yorkers whose jobs are at stake, to implement common sense guardrails,” United Association of Union Plumbers and Pipefitters general president Mark McManus said. 

The  Associated General Contractors of New York State also objected to the moratorium, calling it “the wrong policy for New York.” 

“Halting permits for as much as a year in this fast-moving sector will not simply delay projects—it will send them permanently to Virginia, Texas, Georgia and other states actively competing for these investments and the construction and other jobs that come with them. Once a developer breaks ground somewhere else, that project—and the opportunities and tax revenue that come with it—are not coming back,” AGS NYS president and CEO Mike Elmendorf said. “Data center construction is the strongest-performing segment in an otherwise uncertain construction market nationwide, and New York’s construction industry—which still has not recovered to pre-pandemic employment levels—cannot afford to forfeit it.”

Elmendorf called the moratorium a “de facto ban that tells the marketplace New York is closed for business.”