New York pauses permits for new hyperscale data centers

New York became the first U.S. state to impose a statewide moratorium on new data centers Tuesday, as Gov. Kathy Hochul ordered a one-year pause on permits for large facilities that power artificial intelligence and other computing operations.

The executive order bars state approval of environmental permits for proposed “hyperscale” data centers, facilities defined as having more than 50 megawatts of electrical capacity and typically containing thousands of computer servers. Hochul said the pause will give state regulators time to craft standards for energy demand, water use, environmental impacts and other concerns tied to the fast-growing industry.

“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 in a social media post.

The governor’s office said New York is seeing unprecedented demand for data center development driven by AI and other computing operations. The facilities can require a steady supply of water to cool servers, and Hochul’s office said they can use “millions of gallons of water, draining the local supply.”

“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,” Hochul, a Democrat, said in a statement reported by The Guardian.

Hochul said New York still welcomes AI investments and businesses and wants to help them grow. But she said companies using the state’s talent and energy must also protect resources and contribute to communities.

“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.

Under the order, the state Department of Public Service will develop guidelines for new facilities. Hochul said New York will require data centers either to produce their own energy or pay a premium to access the state’s power grid. The process is expected to take up to a year, and the moratorium will be lifted once the standards are finalized.

The move follows action in the state legislature, which had approved a one-year statewide moratorium bill that also included an environmental impact report and new labor, energy efficiency and transparency standards. Hochul has not signed that legislation, according to The Guardian, but state Sen. Kristen Gonzalez, who authored it, welcomed the executive order.

“With this executive order, Governor Hochul is protecting everyday New Yorkers with a first in the nation moratorium on new large data centers,” Gonzalez said. “By giving our state time to plan, we can ensure that development and innovation do not come at the expense of all of us.”

Sen. Kirsten Gillibrand also praised the decision, calling the moratorium “fundamentally about trust.”

“Right now, New Yorkers aren’t convinced these massive facilities benefit them,” Gillibrand said. “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 broader federal rules are also needed for AI, including protections against harmful algorithms, scams and fraud, and job displacement.

Construction industry groups and unions criticized the order. Mark McManus, general president of the United Association of Union Plumbers and Pipefitters, said the moratorium “kills good-paying union jobs” and urged Hochul to work with workers and other parties on “common sense guardrails.”

The Associated General Contractors of New York State called the moratorium “the wrong policy for New York.” Mike Elmendorf, the group’s president and CEO, said delaying permits could send projects to Virginia, Texas, Georgia and other states competing for the investments, jobs and tax revenue. He called the order a “de facto ban that tells the marketplace New York is closed for business.”

Debate over data centers has widened nationally. The Guardian reported that more than a dozen states have considered moratoriums, Maine lawmakers approved one that was vetoed by the governor in April, and local moratoriums have been enacted in a small southern California city and in Seattle. A June Siena Research Institute poll found 46% of New Yorkers said a one-year moratorium on new permits for large data centers would be good for the state, while 21% said it would be bad.