New York becomes the first state to impose a data centre moratorium

New York on July 14 became the first US state to halt construction of large new data centres, imposing a one-year moratorium as concerns grow that the facilities driving the artificial-intelligence (AI) boom are raising power costs, straining water supplies and burdening local communities.

The moratorium positions New York at the forefront of a growing national debate in the US over how to manage the infrastructure needed to suppor AI.

While technology companies are racing to build new data centres, lawmakers and regulators in dozens of states are weighing measures to limit their effect on electricity grids, utility bills and local communities.

“As data centre 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,” said New York Governor Kathy Hochul, who said she will also pursue legislation to repeal sales tax exemptions for large data centres.

The construction ban will apply to data centres that use 50 megawatts or more of power, officials in the governor’s office said.

During the moratorium, the state’s Department of Environmental Conservation will not issue any discretionary permits not already deemed complete, the governor’s office said.

Instead, Hochul directed state officials to develop a generic environmental impact statement to ensure that new data centres coming online are being held to “consistent standards”, as well as examine the potential environmental impacts of the construction and operation of data centres in the state.

The ban will be lifted once the state finalises those standards, according to Hochul’s office.

Data centres spark backlash

New York’s legislature in June passed a bill meant to impose guardrails on data centres, but it has not yet been sent to Hochul’s desk for signing.

Officials in her office described the bill as complicated, adding that “it’s going to take some time to work through” with the state legislature.

The expansion of data centres in the US is driving up power demand – and electricity bills – in large parts of the country, drawing local and political backlash.

Only one in three Americans approves of the fast pace of ​data centre construction and most would oppose building one in their own community, according to a recent Reuters/Ipsos poll.

Dozens of state legislatures have introduced bills to rein in the effects of data centres on power bills and the environment.

New York is the first to enact a full moratorium.

In April, Maine Governor Janet Mills vetoed a bill that would have imposed a similar freeze on those facilities.

As at May, there were more than 12 gigawatts of very large electricity loads, including data centres, in line to connect to the state’s grid, according to a recent report by the New York independent grid operator.

The state has the eighth-most expensive retail price for residential electricity in the country, according to US Energy Department data. REUTERS