New York becomes the first state to impose a data center moratorium

New York becomes the first state to impose a data center moratorium.

New York became the first U.S. state on Tuesday to halt construction of large new data centers, imposing a one-year moratorium as concerns grow that the facilities driving the artificial-intelligence boom are raising power costs, straining water supplies and burdening local communities.

"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," said New York Governor Kathy Hochul. She added that she would also pursue legislation to repeal sales tax exemptions for large data centers.

The construction ban will apply to data centers that use 50 megawatts or more of power, officials in the governor's office said. The ban will be lifted once the state finalizes those standards, according to Hochul's office.

New York's legislature last month passed a bill meant to impose guardrails on data centers, but it has not yet been sent to Hochul's desk for signing. The bill targets data centers that consume more than 20 megawatts of power, giving it a wider scope than Tuesday's executive order.

Data center operator Digital Realty told Reuters that the move will likely push investments outside of New York: "We're committed to working with policymakers on solutions that support responsible growth, but a one-year pause isn't the right approach."

Only one in three Americans approve of the fast pace of data-center construction and most would oppose building one in their own community, according to a recent Reuters/Ipsos poll. Dozens of state legislatures have introduced bills to rein in the effects of data centers on power bills and the environment. New York is the first to enact a full moratorium. In April, Maine Governor Janet Mills vetoed a bill that would have imposed a similar freeze on those facilities.

While the state's expensive land and tight power supplies have largely limited data center interest compared to states like Texas and Ohio, New York has attracted some interest from the server warehouses. The state currently has more than 130 data centers, according to Data Center Map, compared with more than 600 in Virginia and about 500 in Texas.