New York state lawmakers used their last scheduled days of the 2026 legislative session to approve what could soon become a first-in-the-nation moratorium on large data-center construction. The effort is an amalgamation of various regulatory proposals that bubbled up in recent months as lawmakers aimed to respond to anti-data-center public sentiment. But the resulting bill is far more than just a 12-month pause on the biggest projects. The postponement would be open-ended, and even when lifted, would permanently increase the cost of deploying even relatively small facilities in New York.
Albany pols are in dire need of an energy boogeyman. New York’s residential electricity rates rose considerably faster than the national average between 2019 and 2025 and are expected to keep climbing faster than inflation for several more years.
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State policymakers, not data centers, played a significant role in rising electricity prices. Most notably, the state’s 2019 climate law slammed ratepayers with still-mounting costs for grid upgrades and renewable energy subsidies and is responsible for between 5 and 10 percent of customers’ monthly bills. Meantime, state regulators since 2021 have blocked new, more efficient gas plants from opening to boost electricity supply.
But in data centers, Albany found a useful villain that could take the blame for rising costs. Generalizations around what constitutes a “data center” made that scapegoating process even easier. Hyperscalers, the massive, gigawatt-scale data centers being built for artificial-intelligence developers and major enterprise-level customers, are the projects most likely to distort regional electricity markets. These behemoths are often grouped with the smaller, more common type of data center: “edge” facilities, which process customer data like input from voice commands closer to the data’s origins to reduce latency. (For a sober take on the tradeoffs around data-center development, see Judge Glock’s feature in City Journal’s Spring 2026 issue.) And New York already has a “beneficiary pays” doctrine when it comes to the cost of connecting new large customers, such as data centers, to the electric grid.
New York’s relatively high costs for land, manpower, and electricity, coupled with a hostile regulatory environment, make it an unattractive locale for hyperscalers. Some of these would, individually, use the equivalent of all the Empire State’s four remaining commercial nuclear reactors (more than 3,300 megawatts) and then some.
But edge processors are essential to meeting rising data demands for everything from home communications devices to autonomous vehicles. The need for these relatively smaller facilities is expected to grow enormously. In this respect, the data-center discourse echoes New York’s housing fights: localities can stifle development for their own political purposes, but the public will pay the ultimate price.
Meantime, data centers embody popular anxieties about artificial intelligence as a job killer. It’s no coincidence that one of the main drivers behind New York’s data-center bill, Senator Kristen Gonzalez, also shepherded New York’s 2024 law ostensibly regulating automated decision-making in government. One of its main purposes was to make it harder, if not impossible, for government agencies to take jobs away from dues-paying public employees.
If Governor Kathy Hochul signs the data-center bill, its one-year moratorium would take effect immediately—and the slowdown would almost certainly extend beyond 12 months. The law creates a three-month waiting period before the state Department of Environmental Conservation (DEC) will issue “any permit, certificate, registration license or other form of approval.” It’s unlikely that developers would get the all-clear after 365 days, or even after the waiting period is done—because the law also calls for an “environmental impact” report. DEC, in consultation with other public bodies, would have 18 months to deliver its findings.
In the past, Albany has treated these sorts of deadlines more like guidelines. For instance, the 2019 climate law required the issuance of sweeping regulations by January 2024, but they still haven’t been published. The just-enacted state budget gave the state an extra four years to issue the regulations, mooting a lawsuit by environmental groups that wanted the draconian suite of bans, taxes, and restrictions enacted. Data-center developers could find themselves in a holding pattern well into 2028, waiting first for the report, and then to see how opponents will wield the findings.
New York already hinders private development with its process-intensive State Environmental Quality Review Act (SEQR), which can drag would-be builders through a years-long, open-ended process to address subjective concerns like “community character.” A 2010 data-center project meant for the Niagara County town of Somerset was scotched after a lone opponent accused the town, without merit, of failing to adhere to SEQR. Besides the added local investment and tax revenue, the facility would have brought almost 200 jobs. The uncertainty of SEQR, intensified by an official environmental-impact finding, could be procedurally toxic for data-center construction.
Beyond the moratorium, the bill also lards on extra data-center construction costs. Albany would require builders of facilities using at least five megawatts to sign agreements with construction unions and match union pay and benefit levels, via the state’s “prevailing wage.” The building trades, adhering to inflexible work rules, represent less than a quarter of private construction workers, meaning that almost 80 percent of New York’s construction workforce would be ineligible for these jobs.
Data-center builders would also have to comply with union-crafted apprenticeship requirements, meet “Buy American” mandates for iron and steel, and agree to “host community” deals, which would further slow the siting process and increase expenses.
One could chalk up these added costs as part of the premium businesses ordinarily pay to open their doors in New York, but the law also permanently boosts operating costs.
Arguably the bill’s most cynical cost-increasing measure is the requirement for data centers, which rely on uninterrupted electricity supplies, to get “as much of [their] energy needs as is technologically, environmentally, and practically feasible through on-site renewable energy generation.” New York’s definition of “renewable” excludes nuclear power, and the state has separately barred construction of new hydroelectric dams. That would leave data centers relying on intermittent sources such as wind and solar, presumably backed by costly amounts of battery storage. If that isn’t “feasible,” the state would settle for having them pay cash to renewable-energy generators elsewhere.
The political class isn’t wrong to be concerned about potential negative effects like noise pollution, but it should regulate those concerns generally, not just when they come from a specific subset of buildings. Before doing anything else, they should determine how much state and local economic development agencies are subsidizing or giving tax incentives to the very things they’re hurrying to ban.
Notably, the data-center bill would exempt “public research institutions” from the moratorium and related rules. This would absolve the state government of any concern for its 15-megawatt Empire AI project. Albany lawmakers might be less worried about data centers than they would have you believe.