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By Amanda Greenwood
Associate News Editor
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New York has become the first U.S. state to stop the construction of large new data centers, over concerns about their impact on energy use, the environment, and communities.
Governor Kathy Hochul announced a one-year pause on the building of new large-scale data center facilities, citing concerns about rising electricity demand, utility costs, environmental impacts, and pressure on 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," Hochul said, according to Reuters.
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The pause will apply to major projects while state regulators conduct a comprehensive review and develop new standards for future development. Officials will examine issues including energy use, water consumption, and impacts on local communities before determining how future data center projects should proceed.
The move places New York at the forefront of efforts to balance AI-driven economic growth with concerns about energy demand, water consumption and grid reliability.
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Trump Blasts New York Over Data Center Restrictions
President Donald Trump said Wednesday on Truth Social that data centers are among the biggest drivers of future job growth and accused Hochul of effectively shutting down projects in the state for political reasons. He claimed the facilities are "big, strong, bold, and Money Machines" that generate jobs and tax revenue, and warned that companies are instead looking to states such as Texas, Florida, Alabama, and Arizona.
Calling the economic benefits "LIQUID GOLD," Trump said New York is making a "terrible decision" by losing out on investment tied to artificial intelligence and other emerging technologies. He said that data centers are "tremendous WINS" for states and local communities because they fund their own water and power needs while creating jobs and boosting tax revenue. Trump urged New York to reverse course "IMMEDIATELY," arguing that the U.S. risks ceding leadership in AI and technology to China and other countries if such projects are driven elsewhere.
What Does the Moratorium Do?
The one-year moratorium applies to large data centers using 50 megawatts or more of electricity, according to officials in Hochul's office, as reported by Reuters.
During the pause, New York's Department of Environmental Conservation will not issue new discretionary permits for covered projects that have not already completed the approval process.
At the same time, state officials will undertake a broad environmental review intended to establish statewide standards for future developments. The review will examine the impact data centers have on electricity grids, water resources, land use, pollution, and nearby communities.
Hochul also plans to pursue legislation that would repeal certain sales tax exemptions for large-scale data centers, signaling a broader reassessment of how New York regulates and incentivizes the industry.
The announcement follows the passage of the Responsible Data Center Development Act in the New York Legislature, which seeks to establish new guardrails around large data center projects and require greater scrutiny of their environmental and economic impact.
What It Means for New York Residents
The rapid growth of AI has sparked an unprecedented demand for data centers, which house the servers needed to process and store vast amounts of information.
Supporters argue the facilities are essential for technological innovation, but critics warn that they can place significant strain on local infrastructure.
For New York residents, the state's concerns focus on whether large data centers could:
- Contribute to higher electricity costs
- Place additional pressure on water supplies
- Increase demands on an already aging power grid
State officials have said the review process will help determine how future projects can move forward while minimizing impacts on communities and ratepayers.
The decision comes as states across the country grapple with how to accommodate the infrastructure required to support AI while also protecting consumers from rising utility costs and other unintended consequences.
Which States Could Follow New York?
New York may be the first state to enact a statewide moratorium, but lawmakers elsewhere are considering similar measures.
According to the National Conference of State Legislatures, proposals to pause or restrict data center development have emerged in at least 14 states.
The following have introduced legislation, but it hasn’t been approved by lawmakers yet:
- Delaware — SB 353 would impose a moratorium on permits for data centers over 100 MW until January 2027.
- Georgia — HB 1059 would prevent local governments from permitting data centers until December 2028.
- Michigan — HB 5594/HB 5595 would prevent local governments and the Public Service Commission from approving new data centers until April 2027.
- Pennsylvania — SB 1359/HB 2533 would impose a three-year moratorium on new data centers and require impact studies, while another proposal would allow municipalities to prohibit data centers.
- South Carolina — H 5526 would prohibit local approval of data centers until a statewide oversight framework is adopted.
- Vermont — S 205 would impose a moratorium on data centers until 2030 and require impact studies.
This state considered but vetoed a proposed bill around data center development, meaning it successfully passed the legislature but was then rejected by the governor:
- Maine — LD 307 would impose a moratorium on data centers over 20 MW until November 2027.
These are the states where data center construction legislation has failed because the bill didn’t get enough support in the legislature:
- Maryland — HB 120 would prohibit data centers from being constructed or permitted.
- Minnesota — HB 4888/SB 4298 would ban new data center permits until the Public Utility Commission completes a comprehensive report, with the pause lasting until at least July 2027.
- New Hampshire — HB 1265 would establish a one-year moratorium on data center construction.
- Oklahoma — SB 1488 would impose a moratorium on data center construction until November 2029.
- South Dakota — SB 232 would establish a one-year moratorium on the construction or expansion of data centers.
- Wisconsin — SB 1061/AB 1099 would prohibit the operation of data centers until 14 conditions are satisfied.
Lawmakers in this state have postponed further action, but the proposal remains under consideration:
- Virginia — HB 1515 would prohibit final approval of new data centers until all interconnection requests are fulfilled or until July 2028.
As AI companies continue expanding across the country, New York's decision could provide a test case for other states weighing the economic benefits of data centers against concerns over energy demand, water use, and the potential impact on household utility bills.
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