New York Gov. Kathy Hochul on Tuesday issued the nation’s first statewide temporary ban on new AI data centers in a sweeping move critics have long warned could drive tech investment and jobs out of New York.
The moratorium, which the Democrat signed as an executive order, will remain in effect for up to one year as demand for massive data centers has surged across the state.
Hochul said the initiative would require large data centers to shoulder more of the infrastructure costs they create and is intended to protect New Yorkers from rising utility bills and other financial risks associated with the industry’s rapid expansion.
“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 during Tuesday’s signing and news conference announcing the moratorium.
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Critics have long warned the move could divert billions in AI infrastructure investment to competing states, depriving New York communities of construction jobs, tax revenue and the type of land deals that have recently generated windfalls for rural landowners in places like Pennsylvania.
“Gov. Hochul’s statewide moratorium on data centers will ensure that those investments, jobs and economic activity flow elsewhere rather than to New York,” Dan Diorio, executive vice president of state policy and government affairs for the Data Center Coalition, said in a statement to Data Center Knowledge.
Under Hochul’s plan, future data center developers would be required to either generate their own electricity or pay higher rates to avoid shifting the cost of major grid upgrades onto residents.
The state is also proposing a fund that would require developers to help finance upgrades to New York’s aging electric grid, invest in clean energy projects or contribute to an insurance pool intended to protect consumers.
In addition, Hochul is pursuing legislation to repeal sales tax exemptions for large data centers.
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Local governments will also receive a state-developed playbook designed to help communities negotiate with technology companies seeking to build nearby.
However, the announcement comes as some communities have reportedly profited from the AI infrastructure boom.
According to The Wall Street Journal, 96 Pennsylvania households collectively received more than $500 million after selling roughly 17,000 acres of rural land to QTS, a data center developer owned by Blackstone. The families sold their land for an average of about $330,000 per acre, receiving roughly $5.5 million each on average.
During the one-year moratorium, New York will prepare a Generic Environmental Impact Statement (GEIS) to establish statewide standards for future AI data center development.
The study will examine issues including electricity demand, impacts on the power grid, water use and quality, air quality and other potential environmental impacts of the construction.
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Once completed, new AI data centers would be required to comply with those statewide environmental and community standards before receiving approval.
While the review is underway, the state will not issue new discretionary environmental permits for covered data center projects.
The Data Center Coalition did not immediately respond to FOX Business’ request for comment.
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