Data centers house critical digital infrastructure including the physical servers, storage systems, switches, and routers used in public and private communications networks. Essential computing resources within data centers support the cloud, data analytics, AI, and the delivery of high traffic services including online payments and content streaming. Data centers interconnect network data relied on by people, commerce, and government with untold and extraordinary economic, social, innovation, and national security benefits.
At the end of its 2026 legislative session, the New York State Legislature passed the “Responsible Data Center Development Act” (S10642/A11560) incorporating numerous amendments to the New York State Environmental Conservation Law, Public Service Law, Public Authorities Law, Energy Law, and Labor Law (“RDCDA”) to regulate the development, construction, and operation of private data center infrastructure. While similar legislative efforts in other states have been vetoed by governors or simply not risen to the level of law, if signed by Governor Hochul, the RDCDA would impose several significant headwinds on the development of data centers in New York State.
Importantly, the RDCDA would regulate more than just the hyperscalers and AI large language learning model data centers getting news across the country. The act defines a “data center” as a facility that receives typical utility services (electric, gas, water) from a public utility with a peak demand of 1 MW and used for computing, data processing, web hosting or streaming services and excepting out research facilities. A “large data center” is defined as a facility with a peak demand of 20 MW or more (which includes mid-sized data centers for all types of industry use, not just hyperscaler AI data centers typically rated at 100 MW+).
The RCDA’s highlights include:
A One Year Moratorium on NYSDEC Permits for Large Data Centers with a NYSDEC Environmental Report Due in 18 Months
- The RCDA imposes a one-year moratorium on NYSDEC permits for any large data center project not yet in construction (NYS ECL § 31-0103)
- In the future, an in-person NYSDEC public hearing will be required for large data center NYSDEC permits at least three months prior to a decision with 30-day prior notice provided (NYS ECL § 31-0105)
- In the interim, and within 18 months of the RCDA’s passage into law, the NYSDEC must prepare an environmental impact report on data center development in New York, subject to public review and hearings, which report must include the number and projection of growth in data centers, amount of electricity used, water consumption, and assessing land use, climate, noise, and other potential impacts along with recommendations for additional legislation and regulations (NYS ECL § 31-0107)
Specialized Utility and Municipal Service Rate Tariffs for Large Data Centers
- The RCDA requires the NYS Public Service Commission to incorporate in its approved tariffs for utility companies and municipalities the supply electric, gas and water an independent classification of service for large data centers with costs of infrastructure upgrades, rate of return recovery and administrative costs to be borne by the data center developer (NYS PSL § 65)
- The RCDA authorizes the NYS PSC to promulgate regulations regarding financial surety requirements between utilities and municipalities and large data center operators
Energy Efficiency, Renewables, and On-Site Generation for Data Centers
- The RCDA requires the NYS PSC to adopt energy efficiency goals for the design and operation of any data centers within 1 year of adoption into law; implement standards and requirements benchmarked to the State’s Climate Leadership and Community Protection Act; and apply retroactive compliance to existing data center operators (NYS PSL § 1854)
- The RCDA requires every data center with a peak load of 5 MW or more to demonstrate, through annual third-party independent verification acceptable to the NYS PSC that it is procuring, whether through contract or on-site generation, at least one-third of its electricity consumption from renewable energy systems from 2032-2034, at least two-thirds 2035-2039 and ninety percent 2040 and thereafter (NYS PSL § 19-103)
- The RCDA requires every data center with a peak load of 5 MW or more to demonstrate, through annual third-party independent verification acceptable to the NYS PSC, that it is deriving as much of its energy needs as is technologically, environmentally, and practically feasible from on-site generation from renewable energy systems (NYS PSL § 19-105)
New Host Community Benefits Fund for Large Data Centers/Prevailing Wage Requirements For Most Data Centers
- The RCDA requires an impact fee on large data center operators to create a fund to benefit host communities with: (a) eligible residential technologies for host community residents; (b) community infrastructure in the host community; and (c) measures to prevent increased levels of water pollution, strains on wastewater infrastructure, water scarcity, and other adverse impacts including adoption of efficient large data center cooling technology, such as closed-loop cooling systems
- The NYS PSC shall commence a proceeding to establish the means, methods, and funding obligations for the community benefits program under which large data center owners would be required to establish and fund the costs and implement site specific community engagement
- Any data center with a peak demand of 5 MW or more will be subject to prevailing wage requirements in New York (“union labor”) for construction (NY Labor Law § 224-g)
Are the RCDA’s substantive goals ones that could be largely achieved administratively without a moratorium, and will it stimulate a new framework for responsible data center investment and development in New York as the act’s title suggests? Will this first of its kind state-wide moratorium and new requirements set New York back significantly in garnering its share of data center investments across the country that will be required for New York’s innovation and competitive growth in the years to come? Only time will tell, but one thing is for certain, the RCDA would set the stage for an extraordinarily difficult siting and construction environment for most backbone data center infrastructure development in New York.
