At a Glance

  • New York Governor Kathy Hochul (D) signed the nation's first state-level moratorium on new hyperscale data centers on July 14, pausing environmental permits for such facilities (which can consume 50 megawatts or more) for up to one year to allow policymakers to build a regulatory framework.
  • Hochul issued an executive order aimed at buying time for the administration to consider a broader bill passed by the state legislature but not yet signed, which could include requirements affecting existing facilities.
  • According to DLA Piper analysis, Hochul's executive order addresses many of the policy concerns in New York's proposed Responsible Data Center Development Act (A11560, passed June 4) but is narrower in scope.

Deep Dive

The New York Independent System Operator (the state's grid operator) reported that its large-load interconnection queue grew from 6 projects in 2022 (totaling about 1,045 MW) to 48 proposals (about 12 GW) as of December 31, according to Harris Beach Murtha analysis.

Although the executive order aims to regulate future data centers, it could affect projects already in the permitting process, according to Davis Wright Tremaine analysis. As of July 14, projects under review by the state Department of Environmental Conservation (DEC) could be affected, while projects going through local permitting only (without DEC approval) would not.

"For companies developing, financing, or operating data centers, the executive order is a reminder that successful projects increasingly require coordination across land use, environmental permitting, energy, technology transactions, commercial contracts, financing, and regulatory compliance," noted Davis Wright Tremaine's analysis.

DLA Piper said the key difference between the bill and the executive order is scope: the executive order uses a 50 MW threshold, while the bill uses lower, variable peak thresholds (1, 5, and 20 MW) and differs in timing and approach to existing facilities.

"Under A11560, key exemptions include modifications, renewals, reissuances, and recertifications of existing approvals, as well as projects that began construction before the effective date," DLA Piper analysis said. "The executive order has no such grandfather clause. Instead, its applicability depends on the [DEC] permitting status."

According to the state, the executive order moratorium will last until the New York Department of Public Service completes a generic environmental impact statement assessing the potential environmental impacts of data center construction and operation, including energy demand, water use and quality, air quality, and noise levels.

As part of the unsigned legislation, Empire State Development (the state agency providing grants and loans) has 60 days to issue a framework giving localities more say in data center projects. According to Davis Polk analysis, the framework would involve establishing community investment funds funded by data center companies and include guidance on local infrastructure investment, prevailing wages and project labor agreements, and economic indicator reporting.

According to Harris Beach Murtha analysis, the legislation would require data centers with at least 5 MW of peak load to source at least one-third of their electricity from renewable energy by 2030, with higher percentages in later years, and to meet energy efficiency targets set by the New York State Energy Research and Development Authority.

Davis Polk analysis said the legislation could also affect customers using water-intensive cooling designs. The DEC would also need to assess whether new regulations or revisions to existing ones are needed for water extraction plans at data centers and submit a report within 12 months, Davis Polk said.

Under A11560, large new data centers and any existing facilities adding 20 MW or more of load would also be required to fund a host community benefit program covering residential energy upgrades, community infrastructure, and measures to mitigate water and wastewater impacts, according to Harris Beach Murtha.