New York Governor Kathy Hochul on Tuesday paused incomplete state environmental permit applications for large datacenters while officials work out new rules, a process expected to take up to a year.

The order makes New York the first state to enact such a moratorium amid growing concerns over AI datacenters' impact on utility rates and public health.

“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 in a canned statement.

The order specifically targets large hyperscale datacenters capable of consuming at least 50 MW, subject to exemptions for manufacturing, research, education, and medical facilities. Prior to the AI boom, 50 megawatts would have been considered a large cloud campus. 

While datacenter campuses now often demand gigawatts of power, the moratorium doesn't preclude all AI bit barns. Fifty megawatts is still enough power for roughly 20,000-30,000 modern GPUs.

The moratorium won’t last and is instead aimed at providing state officials time to develop and enact rules designed to ensure large-scale buildouts don't hurt New Yorkers.

The portable generator units used while bit barn builders wait for grid connections and improvements have come under fire due to their impact on air quality. Elon Musk's Colossus 2 DC is now facing legal challenges over alleged Clean Air Act violations tied to the use of these generators.

Over the next year, the executive order directs New York's Department of Public Service (DPS) to develop a generic environmental impact statement (GEIS). Officials will use this to evaluate proposed datacenter projects' environmental, public health, and grid impacts.

The order directs the state's economic development agency, Empire State Development, to develop a framework to help local communities negotiate benefits like infrastructure improvements or financial support for community programs in exchange for letting bit barns in their backyards.

Finally, DPS will consider establishing a fund that datacenter operators may be required to pay into, including a possible insurance pool to protect ratepayers from stranded grid costs tied to projects that are delayed, scaled back, or never materialize. The effect of datacenters on utility bills has become a national issue as several US states launched an inquiry into why, despite claims to the contrary, ratepayers are still paying more.

US President Donald Trump isn’t keen on AI infrastructure making life more expensive for voters either — at least not any more than his infatuation with tariffs and the US war with Iran already have. In January, the president demanded Big Tech take responsibility for the power their datacenters consume. 

Alongside the moratorium, Hochul has promised legislation to end sales tax exemptions for datacenter.

New York isn't the first to pursue a moratorium on new datacenters. Earlier this year, Maine became the first to pass a statewide moratorium on new bit barns, only for the measure to be vetoed by Governor Janet Mills.

Going forward, New York's moratorium may now serve as a blueprint for other states to push back against the spread of datacenters.

Having said that, capping datacenter campuses at 50 megawatts may not stop developers from pursuing multiple smaller sites across the state. While massive datacenters are needed to train frontier models, once they have been trained, those models can be served by much smaller facilities.

There is also the potential for multiple smaller, but physically disparate datacenters to be stitched together using high speed, low latency interconnects like Nvidia’s Spectrum-XGS switches. These devices are designed exactly for this purpose. ®