By Hank Russell
Local groups shared opposing views on the statewide one-year moratorium on data centers, with one organization saying the state will fall behind in the artificial intelligence (AI) race, while another said the state should wait it out until they can determine what the benefits are for local communities.
On July 14, Governor Kathy Hochul held a press conference in Brooklyn to sign an executive order issuing a ban on the construction and operation of hyperscale data centers throughout the state for one year. The governor cited the potential cost to taxpayers and the impact on the state’s water and air quality and electrical grid.
A hyperscale data center is usually 100,000 square feet in size and operates at least 5,000 servers, according to a report from the Rockefeller Institute. These facilities are used to support cloud providers and generative AI. The report also stated that New York currently has 134 data centers in operation.
Earlier this year, Hochul directed the Department of Public Service (DPS) to begin the Energize NY proceeding, which will require data centers to either pay more for their energy or supply their own. As part of that proceeding, she is now also directing DPS to develop a Generic Environmental Impact Statement (GEIS) for data centers to ensure new data centers coming online are being held to consistent standards.
During the development of this GEIS, which will take up to a year, a moratorium will be in place and the Department of Environmental Conservation (DEC) will not issue any discretionary permits not already deemed complete. The state will use the GEIS to assess the potential environmental impacts of the construction and operation of data centers in the state, including their effect on energy demand, water use and quality, and air quality. Once the state finalizes these standards, the moratorium will be lifted, allowing new data center projects to proceed as long as they follow state, zoning code and other local approvals.
The governor also directed Empire State Development (ESD) to issue a Community Investment Framework (CIF) within 60 days, which will provide clear guidance to local entities to help them negotiate community benefits as part of any large-scale data center deal, including local infrastructure improvements, child care investments, and direct financial support for their community.
The CIF will also establish frameworks that provide organized labor a seat at the table and prioritize prevailing wage standards and project labor agreements for data center construction, local hiring, apprenticeships and workforce development to maximize economic benefits. This framework will additionally include a formula to help communities assess where to begin investment negotiations. An outline of the CIF is currently available on ESD’s website, and the public is encouraged to submit feedback.
Additionally, the governor is directing DPS to consider creating a New York Grid Acceleration Fund to require data centers to invest in the state’s aging grid infrastructure and energy needs so all New Yorkers benefit from responsible development. The fund could support the procurement of new clean energy supply and the establishment of an insurance pool to which developers may need to contribute to protect against speculative large loads that create uncertainty and increase costs. DPS will also consider approaches to require data centers to fund new clean electric generation dedicated to their operations, including but not limited to customer-sited distributed energy resources and battery storage.
Hochul is also pursuing legislation to repeal sales tax exemptions for massive data centers across the state. Under the state’s tax law. New York provides a sales and use tax exemption for equipment used by data centers, according to the Rockefeller Institute. This equipment includes servers, storage, cooling systems, and power equipment. Additionally, other services such as the installation, maintenance, and repair of this equipment are exempt under New York Tax Law.
The Rockefeller Institute cited data that, in 2023, data centers accounted for 4.4% of total U.S. energy consumption. By 2028, that usage could increase to between 6.7% ans 12%.
“New York has always been at the forefront of innovation and change but we’ve also always guaranteed that New Yorkers benefit. 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. “New York will lead the way in creating the strongest standards in the nation for data center development, ensuring that when companies succeed because of New York, New Yorkers succeed too.”
In addition to the state, some local governments are taking up the issue of having data centers in their own backyards. One example is the Town of Brookhaven, which will have a public hearing on a proposed 18-month moratorium on these facilities on July 16.
Stacey Sikes, the interim president and CEO of the Long Island Association, said this temporary ban “sends the wrong signal at a time when our state should be continuing to lead in innovation, artificial intelligence, and advanced infrastructure.”
Sikes said that, if New York wants to lead the nation in AI, the state “must also support the infrastructure that enables it and create a pathway for responsible development. Rather than imposing a blanket statewide moratorium, New York should establish a balanced framework with clear standards to help guide communities that choose to pursue thoughtful data center development and evaluate projects on their individual merits so they can realize the jobs, tax revenue, private investment, and long-term economic benefits these facilities can generate.”
While she is in support of “guardrails that address energy, water, environmental, and community impacts while encouraging growth,” Sikes said she cannot support “a policy that risks sending investment, innovation, and high-quality jobs to neighboring states. The global race for artificial intelligence will not pause for New York, and the consequence will be that investment and innovation will locate elsewhere.”
But Eric Alexander, executive director of Vision Long Island, said the moratorium “makes sense,” adding, “I think it’s important to truly analyze what the impact of these proposals are, and what the benefit to the local community is. That’s the most important thing: What does the community benefit from this, if they take these on?”