New York enacts a one-year ban on hyperscale data centers

New York Governor Kathy Hochul has signed an executive order implementing a one-year moratorium on new hyperscale data center projects, making New York the first state to take such a measure. The pause is intended to allow the state to develop a comprehensive regulatory framework for the rapidly expanding industry, addressing concerns about its substantial energy and water consumption, potential strain on the power grid, and impact on local communities.

The executive order directs the Department of Public Service to develop a Generic Environmental Impact Statement, a process expected to take up to a year. During this period, the Department of Environmental Conservation will not issue discretionary permits for new data center projects. The environmental review will specifically examine impacts related to energy demand, water use and quality, and air quality. Governor Hochul also emphasized the need to protect utility customers from rising electricity costs, instructing regulators to explore requirements for large data centers to either generate their own energy or pay a premium for drawing power from the state grid.

Upon the completion of the statewide standards, the moratorium will be lifted, allowing projects to proceed if they comply with the new state requirements and local zoning rules. Additionally, Empire State Development is tasked with creating a Community Investment Framework within 60 days to help local governments negotiate community benefits, such as infrastructure improvements and financial support, from large data center developments. The administration is also considering a New York Grid Acceleration Fund, which would require data centers to contribute to grid upgrades and new energy infrastructure, and is pursuing legislation to repeal statewide sales tax exemptions for these facilities.