New York becomes first US state to halt new data center construction

New York has become the first US state to halt data center construction after Governor Kathy Hochul signed an executive order on July 14 that temporarily bars the state from approving new permits for large projects.

The order applies to data centers 50 megawatts or larger, potentially affecting more than a dozen projects under development. The state's Department of Environmental Conservation will not issue any permits that have not already been completed.

"Progress shouldn't arrive with a higher utility bill, deleted water supply, or noise pollution," Hochul said at a press conference in Brooklyn. "These data centers can only be built, should only be built in places that want them. So they will never be exempt from local zoning, local approvals."

The governor's move reflects growing public backlash against the rapid expansion of AI infrastructure. A recent Pew Research report found only 10% of Americans were more excited than concerned about AI use in daily life, and two-thirds of respondents expressed concern about data centers driving up electricity prices.

The moratorium will be lifted once the state finalizes an environmental review process for data centers, which Hochul expects will take about a year. Her office is also considering requiring data centers to pay into a fund supporting the state's electrical grid and preventing hyperscale data centers from receiving tax benefits.

The executive order arrives as more stringent measures move through New York's legislature. Last month, the legislature advanced a bill pausing construction of data centers larger than 20 megawatts for one year, while another bill in committee would institute a three-year moratorium.

The average data center built in recent years has been smaller than 100 megawatts, but those in development are expected to be much larger as AI drives computing demand higher. Through 2030, nearly a quarter of new data centers will exceed 500 megawatts, according to BloombergNEF.

Hochul's order could set up a clash with the Trump administration, which has supported data center development. Last month, the Federal Energy Regulatory Commission told grid operators to develop special fast lanes for data center interconnections, highlighting growing tension between state and federal approaches to AI infrastructure policy.

In December, more than 230 organizations called for a nationwide pause on new data centers. New York's action may set a precedent for other states grappling with the tension between AI-driven economic development and local resource constraints.