New York State has imposed a one-year moratorium on the construction of large new hyperscale data centres amid concerns about rising costs and the impact on local water supplies, making it the first state in the United States to do so.

New York Governor Kathy Hochul announced the ban on Tuesday, saying the state’s efforts are aimed at building a “regulatory framework” to address concerns posed by data centres.

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“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 release.

During the pause, the state will not issue new discretionary permits for large data centre projects, which it defines as those that use 50 megawatts of power or more. The moratorium is intended to give the state time to assess electricity demand and the impact on local communities.

The order also shifts the burden of costs associated with data centre operations onto the centres themselves rather than the general public.

The state is requiring data centre developers to pay more for the power they use, contribute to upgrades of the state’s power grid, provide their own power, and invest in clean energy to operate these facilities.

The governor also said the state is looking to repeal sales tax exemptions for data centres.

Data centre construction has become a political flashpoint across the US ahead of the midterm elections, including in New York, which has 148 operational data centres — making it the state with the sixth-largest concentration of them.

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Progressives in the state legislature have called for a moratorium on data centres, including State Senator Kristen Gonzalez, who authored a bill last month that also called for a pause on construction.

Hochul is up for re-election in November, and her opponent has opposed a ban on data centre construction. Hochul leads Bruce Blakeman, a Republican, by 20 points in a recent Siena poll, with 52 percent support compared with 32 percent for Blakeman.

A national political flashpoint

Opposition to data centre construction appears to be a popular position among voters. A June Reuters/Ipsos poll found that only 14 percent of Americans would be comfortable with a data centre being built near them, while a Gallup poll from May found that 71 percent of Americans oppose data centre construction in their local communities, including 48 percent who strongly oppose it.

Moratoriums have been proposed in at least a dozen US states, including Vermont, Michigan, and Virginia. The Maine legislature also passed a measure, but Governor Janet Mills vetoed it in April.

Data centre construction has emerged as a key issue in some primary elections. In Utah, despite local opposition, construction of a data centre championed by Kevin O’Leary moved forward. Utah State Senate President J Stuart Adams, who supported the project, was voted out in the state’s primary election in June.

Among the concerns driving pushback on data centres are health impacts and the racial disparities that often accompany them.

According to a new analysis by the Reuters news agency, Elon Musk’s xAI Colossus 2 data centre project in Tennessee installed 59 natural gas turbines without securing clean air permits from the federal government. 

That particular development would exceed the threshold required for a permit, according to the Reuters analysis, which found that it would disproportionately impact nearby predominantly Black communities that already have higher rates of respiratory disease than the general population.

Overall, data centres are expected to contribute to 600,000 asthma-related symptom cases by the end of the decade, according to a 2024 paper published by the University of California-Riverside.