New York orders moratorium on big data center permits

While several states have flirted with a data center hiatus, New York is now the first to impose a broad permitting moratorium on the rapidly expanding sector.

The governor’s executive order directs the state Department of Environmental Conservation to hold pending applications for permits, approvals and discretionary licenses that were not deemed complete by July 14 until the Department of Public Services completes a generic Environmental Impact Statement assessing the environmental effects of the construction and operation of the data center. The order does not affect permits issued by local governments.

“As data center development threatens to increase utility bills, deplete our natural resources and create uncertainty for New Yorkers, it is my responsibility to take action and lead,” Hochul said in announcing the order.

The action comes as New York faces a sharp increase in proposed data center projects driven by artificial intelligence and cloud computing. The executive order says nearly 12 GW of data center load requests were waiting for interconnection in New York’s independent system operator queue as of May, with more than 8 GW entering the queue through 2025 alone.

Statewide review begins

The environmental review process will examine the effects of data center construction and operation on electricity demand, water use and quality, air quality, disadvantaged communities and noise. the state Department of Public Service will solicit public comments and hold hearings during this period.

The order directs Empire State Development to release a Community Investment Framework within 60 days to help communities negotiate with developers about investments in public infrastructure, child care, schools and other local benefits, while prioritizing prevailing wage standards, project labor agreements, apprentices, workforce development and local hiring.

Hochul also directed regulators to develop proposals that would ensure large data centers shoulder the costs of power grid upgrades needed to support their operations rather than shifting those costs onto utility ratepayers. Among the options being considered are developer upfront contributions, participation in demand response, support for new clean energy resources and protections against stranded infrastructure investments.

For purposes of the executive order, a covered data center is defined as a facility (or group of facilities at the same or contiguous site) used for data storage, cloud computing, or related digital operations that consumes or may consume 50 MW or more of electricity. Facilities used primarily for manufacturing, research, education and medical care are excluded.

The executive order follows the passage last month of the Legislature’s Responsible Data Center Development Act, which would also impose a moratorium on certain permits for new large data centers while establishing utility cost allocation rules, community benefit requirements and labor standards.

The legislation applies to facilities with a peak electrical demand of 20 MW or more, capturing projects below the executive order’s 50 MW threshold.

Levi Barrett, co-chair of Peckar & Abramson’s data center practice, said the most immediate effect of the executive order may be the uncertainty it creates for an industry where speed to market is critical.

The industry warns of the loss of investment

“The costs of modernizing the grid don’t go away when the data centers do. They’re passed on to everyday New Yorkers, who will shoulder a larger share of the infrastructure modernization,” said Carlo A. Scissura, president and CEO of the New York Building Congress, arguing that specific regulation and fair cost allocation would better address the state’s concerns than a blanket pause would allow.

Scissura added that targeted regulation and fair cost allocation, not a blanket pause, would better address the state’s concerns.

New York Governor Kathy Hochul signs Executive Order no. 62 on July 14, which establishes a moratorium on certain state environmental permit applications for large data centers while agencies develop a state regulatory framework that addresses energy, water and community impacts.

Screenshot: Office of the Governor of New York, Kathy Hochul/Livestream

“Holding permits for up to a year in this fast-moving industry will not only delay projects, but permanently send them to Virginia, Texas, Georgia and other states that are actively competing for these investments,” Mike Elmendorf, president and CEO of the Associated General Contractors of New York State, told ENR.

He said New York already has one of the most rigorous environmental review processes in the country and argued that regulators should complete the statewide study while continuing to process permit applications instead of suspending them.

Builders and associated contractors also opposed the executive order, arguing that the pause could undermine US leadership in artificial intelligence and advanced manufacturing.

“Stopping its construction would not slow the global development of AI; it would simply shift investment, talent and innovation elsewhere,” said Kristen Swearingen, ABC’s vice president of government affairs.

Environmental groups generally welcomed the executive order, but argued that additional regulation may be needed to capture smaller projects below the order’s 50 MW threshold.

“The governor’s executive order addresses many of the concerns New Yorkers have about data centers, but several facilities are being proposed that use less than 50 MW of peak grid power,” said Eric Wood, senior environmental program coordinator at the New York Public Interest Research Group.

“The State must lead the way to regulate this rapidly expanding industry and consider strengthening the regulations to ensure that installations between 5 and 50 MW do not leave the public bill to pay, the environmental damage and the inconvenience these centers present,” added Wood.

Levi Barrett, co-chair of Peckar & Abramson’s data center practice at Peckar & Abramson, said the executive order introduces uncertainty in an industry where developers place a premium on speed to market.

“If this pipeline is disrupted, even if this process moves faster than expected, you don’t just turn the spigot back on,” Barrett said, adding that the uncertainty could cause property owners and developers to delay investment even if the permitting process resumes earlier than expected.