New York has become the first state to issue a moratorium on new hyperscale data centers as localities across the country grapple with how to regulate the proliferation of energy-hungry facilities.

Gov. Kathy Hochul (D) on Tuesday announced a pause for up to one year on state environmental permits for building more data centers, which require copious amounts of energy, water, and land for their infrastructure. The executive order applies to large data centers that use 50 megawatts or more of power — enough to provide electricity for roughly 9,000 and 40,000 homes.

Hochul’s action comes as states and the federal government are trying to remain competitive on artificial intelligence and generate jobs for communities, while also ensuring data centers don’t drain natural resources, the energy grid, or consumers’ wallets.

The governor’s move is designed to give New York State more time to put in place a regulatory framework for data center construction and figure out how big facilities will affect the environment and utility costs for ratepayers, according to a press briefing from members of the governor’s office. The pause is not intended to disrupt data center operations that benefit, for example, hospitals, education, or research, the governor’s aides said.

The New York State legislature in June passed legislation that would impose a one-year moratorium on certain permits for large data centers, among other provisions. Implementing the Responsible Data Center Development Act will take time, and the governor felt she needed to take immediate urgent action because of New Yorkers’ concerns, a Hochul aide told reporters.

Sen. Ed Markey (D-Mass.) on Monday released a discussion draft that would create a national blueprint to prevent increased energy costs, pollution, and adverse effects on health related to data center buildout.

Hochul’s executive order directs the state’s Department of Public Service to conduct a generic environmental impact statement on the effects of new data centers on energy, water, and air quality. The governor also wants DPS to look at creating a state grid acceleration fund to require data centers to invest in New York’s grid infrastructure.

“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 in a statement.

Hochul also plans to work the state legislature when it returns to eliminate sales tax subsidies for data centers, which would require legislative action, one of the aides said.

States, including New Jersey and Virginia, have been moving faster than the federal government to put more guardrails around data centers in response to cost and environment concerns from communities. Lawmakers including Reps. Frank Pallone (D-N.J.), Alexandria Ocasio-Cortez (D-N.Y.), and Sen. Bernie Sanders (I-Vt.) have called for a national moratorium on AI data centers until Congress passes comprehensive legislation on the issue.

Data centers are creating jobs and attracting other investments, Dan Diorio, executive vice president of state policy and government affairs for the Data Center Coalition, said in a statment.

“As hundreds of billions of dollars are being deployed to build out the nation’s digital infrastructure, Gov. Hochul’s statewide moratorium on data centers will ensure that those investments, jobs, and economic activity flow elsewhere rather than to New York — with impacts far beyond the data center industry,” Dorio said.

— By Kellie Lunney (Bloomberg News)