New York Becomes the First State To Ban New Data Centers

On Tuesday, New York Democratic Gov. Kathy Hochul signed an executive order instituting a one-year moratorium on new environmental permits for hyperscale data centers that “consume or can consume” 50 or more megawatts of energy.

The order is intended to give lawmakers in the state time to “build a nation-leading regulatory framework” to rein in data center development, which Hochul says “threatens to hike up utility bills, deplete our natural resources, and create uncertainty for New Yorkers.”

It tasks the Department of Public Service with examining the impact of data centers connecting to New York’s electric grid, including “energy demand, water use and quality, air quality, disproportionate impacts on disadvantaged communities, and noise levels.” Until its environmental impact statement is completed, the department is “directed to hold” all applications for the “construction or expansion” of any pending data centers.

Hochul’s order also directs Empire State Development—the state’s economic development agency—to assist local governments with “analyzing and attaining” economic benefits from prospective developers by drafting a Community Investment Framework.

As part of its framework, the agency “shall include” guidance for the “creation and maintenance of a community investment fund” paid for by data center developers or operators, to finance lawmakers’ pet projects related to energy affordability, childcare, school programming, or public infrastructure. The framework will also carve out a “seat at the table” for unions to influence the hiring and wage negotiations of any data center development.

Communities are encouraged to use the framework to “negotiate terms and conditions” for direct benefits with data center developers.

However, those benefits would be separate from the benefits gained through the New York Grid Acceleration Fund, a slush fund that may be created under the Tuesday order and managed by the Department of Public Service. The fund would require developers to make “upfront capital contributions” for “grid improvements,” “participate in demand response programs,” and “support the procurement of new clean energy supply.” It would also force them to contribute to an “insurance pool.”

As part of the acceleration fund, data centers may be required to bankroll new energy generation, but it must be “consistent with the State’s clean energy goals.” That means data center operators or developers would be required to meet New York’s Clean Energy Standard, which requires 70 percent of the state’s electricity to come from renewable energy by 2030. The state has also set an ambitious target of 100 percent zero-emission electricity by 2040, though state officials have admitted it’s unlikely the Empire State will hit those projections. In an acknowledgment of this reality, Hochul signed legislation in May to delay the implementation of the state’s aggressive greenhouse gas reduction goals.

New York is home to 148 data centers, with six more in the planning stages as of February, according to the Pew Research Center. Hochul’s order is the first state-level ban on data centers in the country, though several localities, including Oneonta, New York, have instituted municipal bans on data center construction.

In April, Maine became the first state to pass a data center moratorium, but Democratic Gov. Janet Mills later vetoed the legislation. Nationwide, 15 states are currently considering bans on new data centers, as polls continue to show that data centers are unpopular with the public. In March, a Gallup poll found that 71 percent of Americans opposed constructing data centers in their communities.

Public opinion aside, many of the arguments against data centers build on the same disproven fears about water and energy usage. Hochul may score political points for her ban, but it’s unlikely to do anything more than drive prospective business out of New York and into more welcoming states.