NY puts one-year moratorium on large-scale data centers

Governor seeks to repeal sales tax exemptions for projects

File photo by Tom Rivers: A massive data center, totaling 2.2 million square feet, has been proposed for the STAMP site off Route 63 in the town of Alabama. Stream US Data Centers is proposing a $19 billion center. Stream US Data Centers is seeking $1.43 billion in sales tax exemptions – $715,944,000 locally and $715,944,000 to the state.

Press Release, Gov. Kathy Hochul’s Office

Governor Kathy Hochul today signed an Executive Order to create the nation’s first moratorium on new hyperscale data centers, establishing the strongest standards for data center development and creating a blueprint to support localities.

The Governor is temporarily pausing State environmental permits for up to one year in order to build a nation-leading regulatory framework that protects ratepayers, the environment, the energy grid and communities across the state.

“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,” Governor 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.”

New York State is experiencing unprecedented growth in demand for data center development driven by artificial intelligence and other computing operations. The increase in demand has led to proposals across the state for the construction and operation of data centers that could require massive amounts of energy and water to run and cool thousands of computer servers.

Earlier this year, the Governor 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, allowing the state to keep energy more affordable for New Yorkers.

As part of that proceeding, the Governor 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.

Dr. Kirk Scirto, a family medicine specialist at Tonawanda Family Care Center, spoke at public hearings on Feb. 3, 2025 at the Alabama Fire Hall. He called data centers “parasitic centers.” He said the constant noise from the data centers is comparable to the sounds of jet engines. The impact from the noise and light will have negative impacts on neighbors and wildlife, he said.

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 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.

Finally, Governor Hochul is pursuing legislation to repeal sales tax exemptions for massive data centers across the state.

Since taking office, Governor Hochul has ensured New York is leading the nation in AI innovation and development. As part of her FY25 Budget, the Governor launched Empire AI, a nation-leading initiative to advance AI research for public good. This year, she launched the FutureWorks Commission to advise on policy and private sector actions to protect the security of workers while harnessing the economic benefits of AI for all New Yorkers. This blue ribbon Commission is composed of nation-leading experts, workers’ advocates, and business leaders, and will be charged with advising Governor Hochul on how to navigate the AI transition, so that the benefits of AI can be shared among New York’s families, workers, and small businesses — not just large corporations.