New York becomes first state to freeze new AI data centers in move critics warn could drive away jobs
New York Governor Kathy Hochul issued the nation's first statewide temporary ban on new AI data centers for up to one year to develop environmental standards and address utility costs. This move, critics warn, could deter tech investment and job creation in New York. The state plans to require developers to fund infrastructure upgrades and may repeal sales tax exemptions for data centers.
New York Governor Kathy Hochul enacted a one-year statewide moratorium on new AI data centers, marking the first such ban in the U.S. Signed as an executive order on Tuesday, the initiative aims to protect New Yorkers from potential utility bill hikes, natural resource depletion, and financial risks associated with the rapid expansion of the data center industry. Gov. Hochul emphasized the state's responsibility to act and lead in this area.
Critics, including Dan Diorio, executive vice president of state policy and government affairs for the Data Center Coalition, strongly contend that the moratorium will divert significant AI infrastructure investments, construction jobs, and tax revenue away from New York to competing states. They cite examples like Pennsylvania, where rural landowners have recently garnered substantial profits from selling land for data center development.
Under Hochul's plan, future data center developers in New York will be required to either generate their own electricity or pay higher rates to prevent the costs of major electric grid upgrades from burdening residents. The state is also proposing a fund that would necessitate developers contributing to grid improvements, clean energy projects, or an insurance pool designed to protect consumers. Furthermore, Gov. Hochul is pursuing legislation to repeal existing sales tax exemptions for large data centers.
During the moratorium period, New York will prepare a Generic Environmental Impact Statement (GEIS) to establish comprehensive statewide standards for future AI data center development. This study will meticulously examine potential impacts on electricity demand, the power grid, water use and quality, and air quality. Once these standards are finalized, new AI data centers will be mandated to comply with them before receiving approval, with new discretionary environmental permits for covered projects halted until the review is complete.